<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 18, 1999
REGISTRATION NO. 333-90403
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MILLENNIUM PHARMACEUTICALS, INC.
(Exact name of Registrant as Specified in Its Charter)
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<S> <C> <C>
DELAWARE 8731 04-3177038
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification No.)
Incorporation or Organization)
</TABLE>
75 SIDNEY STREET
CAMBRIDGE, MA 02139
(617) 679-7000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
MARK J. LEVIN
CHIEF EXECUTIVE OFFICER
MILLENNIUM PHARMACEUTICALS, INC.
75 SIDNEY STREET
CAMBRIDGE, MA 02139
(617) 679-7000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
------------------------------
With copies to:
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DAVID E. REDLICK, ESQ. JOHN B. DOUGLAS III, ESQ. JULIO E. VEGA, ESQ.
JEFFREY A. STEIN, ESQ. GENERAL COUNSEL MEERIE M. JOUNG, ESQ.
HALE AND DORR LLP MILLENNIUM PHARMACEUTICALS, INC. BINGHAM DANA LLP
60 STATE STREET 75 SIDNEY STREET 150 FEDERAL STREET
BOSTON, MA 02109 CAMBRIDGE, MA 02139 BOSTON, MA 02110
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: At the
effective time of the merger (the "Merger") of a wholly owned subsidiary of the
Registrant with LeukoSite, Inc., which shall occur as soon as practicable after
the effective date of this Registration Statement and the satisfaction of all
conditions to the closing of such merger.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
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<PAGE>
LEUKOSITE, INC.
----------------
NOTICE OF SPECIAL STOCKHOLDERS' MEETING
DATE: DECEMBER 22, 1999
TIME: 10:00 A.M.
PLACE: 215 FIRST STREET, CAMBRIDGE, MA 02142
------------------------
To the Stockholders of LeukoSite, Inc.:
Notice is hereby given that a special meeting of stockholders of
LeukoSite, Inc. will be held on December 22, 1999 at our corporate offices
located at 215 First Street, Cambridge, MA 02142. At the meeting you will
consider and vote on a proposal to approve the merger agreement among LeukoSite,
Millennium Pharmaceuticals, Inc. and a wholly owned subsidiary of Millennium,
and the merger described therein. If the merger agreement and the merger are
approved, LeukoSite will become a wholly owned subsidiary of Millennium and each
outstanding share of LeukoSite common stock will convert into the right to
receive 0.4296 shares of Millennium common stock.
The board of directors has carefully considered the terms of the proposed
merger and has determined that the merger agreement and the merger are in the
best interests of LeukoSite and its stockholders. The LeukoSite board of
directors has approved the merger agreement and the merger and unanimously
recommends that you vote FOR the approval of the merger agreement and the
merger.
We will transact no other business at the special meeting, except business
which may be properly brought before the special meeting or any adjournment or
postponement of the special meeting.
Only holders of record of shares of LeukoSite common stock at the close of
business on November 16, 1999, the record date for the special meeting, are
entitled to notice of, and to vote at, the special meeting and any adjournment
or postponement of the special meeting.
Whether or not you plan to attend the special meeting, please complete, sign
and date the enclosed proxy and return it promptly in the enclosed postage-paid
envelope. You may vote in person at the special meeting, even if you have
returned a proxy. If you do not vote by proxy or in person at the special
meeting, it will count as a vote against the merger agreement and the merger.
Please do not send any stock certificates with your proxy cards at this
time.
By Order of the Board of Directors,
/s/ Justin P. Morreale
<PAGE>
LEUKOSITE, INC.
PROXY STATEMENT
----------------
MILLENNIUM PHARMACEUTICALS, INC.
PROSPECTUS
We are sending you this proxy statement/prospectus to describe the proposed
acquisition of LeukoSite, Inc. by Millennium Pharmaceuticals, Inc. If we
complete this acquisition, LeukoSite will become a wholly owned subsidiary of
Millennium and your shares of LeukoSite common stock will be converted into
shares of Millennium common stock. For each of your shares of LeukoSite common
stock, you will receive 0.4296 shares of Millennium common stock. Millennium's
common stock is traded on the Nasdaq National Market under the trading symbol
"MLNM", and on November 16, 1999, the price of Millennium common stock closed at
$79.6875 per share. Based on shares outstanding as of November 3, 1999,
following the merger, assuming no exercise of presently outstanding LeukoSite or
Millennium stock options, rights or warrants, the shares of Millennium common
stock owned by LeukoSite stockholders will represent approximately 14.8% of the
outstanding stock of Millennium.
A special meeting of LeukoSite stockholders will be held on December 22,
1999 at 10:00 a.m. local time at LeukoSite's executive offices, 215 First
Street, Cambridge, Massachusetts 02142. At the special meeting, stockholders
will be asked to approve the merger agreement and the merger with Millennium. We
cannot complete the merger unless LeukoSite stockholders approve the merger.
This proxy statement/prospectus provides you with detailed information about the
merger. Only stockholders who hold common stock of LeukoSite at the close of
business on November 16, 1999, the record date, will be entitled to vote at the
special meeting. In addition, you may obtain information about LeukoSite and
Millennium from documents that we have filed with the Securities and Exchange
Commission. We encourage you to read this entire document carefully. IN
PARTICULAR, PLEASE CONSIDER THE MATTERS DISCUSSED UNDER "RISK FACTORS" ON
PAGE 10 OF THE ENCLOSED PROXY STATEMENT/ PROSPECTUS.
Whether or not you plan to attend the meeting, please take time to vote by
completing and mailing the enclosed proxy card to us. Your vote is very
important.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE MERGER OR THE SECURITIES TO BE
ISSUED UNDER THIS PROXY STATEMENT/ PROSPECTUS OR DETERMINED IF THIS PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
This proxy statement/prospectus is dated November 18, 1999, and was first
mailed to stockholders of LeukoSite on or about November 22, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
DOCUMENTS INCORPORATED BY REFERENCE......................... vi
WHERE YOU CAN FIND MORE INFORMATION......................... vii
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE
MERGER.................................................... viii
SUMMARY..................................................... 1
The Companies............................................. 1
Reasons for the Merger.................................... 1
The Special Meeting....................................... 1
Recommendation to Stockholders............................ 2
The Merger................................................ 2
The Merger Agreement...................................... 2
What You Will Receive in the Merger....................... 2
Ownership of Millennium Following the Merger.............. 2
Interests of LeukoSite Directors and Management in the
Merger.................................................. 2
Conditions to the Merger.................................. 2
Termination of the Merger Agreement....................... 3
Termination Fees.......................................... 3
Regulatory Approvals...................................... 4
Fairness Opinions of Financial Advisors................... 4
Certain Federal Income Tax Consequences................... 4
Accounting Treatment...................................... 4
Appraisal Rights of Dissenting Stockholders of
LeukoSite............................................... 4
The Voting Agreements..................................... 4
Comparison of Stockholder Rights.......................... 4
SELECTED FINANCIAL DATA..................................... 5
Millennium Selected Financial Data........................ 6
LeukoSite Selected Financial Data......................... 7
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL
INFORMATION............................................... 8
RISK FACTORS................................................ 10
Risks relating to the merger.............................. 10
Millennium may not be able to successfully integrate
LeukoSite and achieve the benefits expected to result
from the merger........................................ 10
Because the exchange ratio in the merger is fixed,
LeukoSite stockholders are exposed to the risk that the
market price of Millennium's stock will drop........... 10
The price of Millennium common stock may be affected by
factors different from those affecting the price of
LeukoSite common stock................................. 10
The loss of key LeukoSite personnel could make it
difficult to complete existing projects and undertake
new projects........................................... 11
Risks relating to LeukoSite as an independent entity...... 11
If CAMPATH-Registered Trademark- is not approved for
sale or if Schering AG does not successfully market
CAMPATH-Registered Trademark- on LeukoSite's behalf,
LeukoSite's anticipated future revenue targets will not
be achieved............................................ 11
LeukoSite relies on Boehringer Ingleheim as its sole
source manufacturer of CAMPATH-Registered Trademark-
and LeukoSite's ability to generate revenues in the
future will be adversely affected if it is unable to
obtain sufficient quantities of CAMPATH-Registered
Trademark- from them................................... 12
LeukoSite's drug candidates may not prove to be safe and
effective in human clinical trials..................... 12
LeukoSite's drug candidates are subject to governmental
regulation and product approvals....................... 12
LeukoSite is in the early stages of product
development............................................ 13
</TABLE>
i
<PAGE>
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If LeukoSite's collaborative partners do not actively
seek to commercialize drug candidates resulting from
their collaboration with it, LeukoSite's revenues will
suffer................................................. 13
If LeukoSite's collaborative partners terminate their
agreements with LeukoSite, LeukoSite's ability to fund
its research operations and clinical trials will
suffer................................................. 14
LeukoSite's significant expenses may cause it to
continue to incur future losses........................ 14
LeukoSite has significant development costs and it is
uncertain as to the availability of future funding..... 15
LeukoSite cannot be certain that it will obtain
sufficient patent protection, or that any such patents
so obtained will provide sufficient protection against
competitive products or processes...................... 15
There is significant and widespread litigation in the
pharmaceutical and biotechnology industry regarding
patents and proprietary rights and LeukoSite's business
and results of operations could be adversely affected
if it becomes involved in such litigation.............. 16
If LeukoSite's competitors succeed in developing or
licensing technologies or future drug products, its
technology and future drug products could become
obsolete and noncompetitive............................ 16
LeukoSite relies on contract manufacturers and lacks
manufacturing experience............................... 17
Rapid technological change could render LeukoSite's
products obsolete...................................... 17
LeukoSite depends on its key personnel.................. 17
Risks relating to Millennium.............................. 17
Risks relating to Millennium's industry, business and
strategy................................................ 18
The genomics industry is new; Millennium has not
developed or commercialized any products............... 18
Millennium plans to expand rapidly; if Millennium cannot
manage its growth successfully, its growth may slow or
stop................................................... 18
The acquisitions Millennium makes may not be
scientifically or commercially successful.............. 18
Millennium's growth could be limited if it is unable to
attract and retain key personnel....................... 19
Millennium faces substantial competition, which may
result in others discovering, developing or
commercializing products and services before or more
successfully than it does.............................. 19
Risks relating to financing............................... 19
Millennium has incurred substantial losses, it expects
to continue to incur losses and it will not be
successful unless it reverses this trend............... 19
Millennium may need additional financing, which may be
difficult to obtain and may dilute your ownership
interest............................................... 19
Risks related to development of technology and products... 20
If Millennium's technological approaches are not
successful, it will not be able to develop and
commercialize any products and services................ 20
Millennium may not be able to obtain DNA samples of
families and populations required for its genetic
studies................................................ 20
Risks relating to strategic alliance partners............. 21
Millennium depends on strategic alliance partners; its
business will suffer if any of its strategic alliance
partners breaches its agreement or fails to support or
terminates its alliance with Millennium................ 21
Millennium may not be successful in establishing
additional strategic alliances......................... 22
Conflicts may arise between Millennium and its
subsidiaries........................................... 22
Risks relating to intellectual property................... 22
Millennium may not be able to obtain patent protection
for its discoveries and may infringe patent rights of
third parties.......................................... 22
Millennium may not be able to keep its trade secrets
confidential........................................... 23
</TABLE>
ii
<PAGE>
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Millennium may become involved in expensive patent
litigation or other intellectual property proceedings
which could result in liability for damages or stop its
development and commercialization efforts.............. 23
Millennium could lose important license rights in
certain circumstances.................................. 24
Risks relating to preclinical testing and clinical
trials.................................................. 24
Clinical trials of Millennium's product candidates may
not be successful...................................... 24
Regulatory risks.......................................... 24
Millennium may not obtain regulatory approvals; the
approval process is costly and lengthy................. 24
Even if Millennium obtains marketing approval, its
products will be subject to ongoing regulatory
review................................................. 25
Risks relating to product marketing, manufacturing and
sales................................................... 25
The market may not be receptive to Millennium's products
and services upon their introduction................... 25
Millennium has no sales and marketing experience and
capabilities........................................... 25
Millennium has limited manufacturing capabilities and
will be dependent on third party manufacturers......... 26
If Millennium fails to obtain an adequate level of
reimbursement for its future products or services by
third party payors, there may be no commercially viable
markets for its products or services................... 26
Ethical, legal and social issues related to genetic
testing may cause Millennium's diagnostic products to
be rejected by customers or prohibited or curtailed by
governmental authorities............................... 27
Risks relating to ongoing operations...................... 27
Millennium will be exposed to product liability claims
and may not be able to obtain adequate product
liability insurance.................................... 27
Millennium could incur liabilities relating to hazardous
materials that it uses in its research and development
activities............................................. 27
Risks relating to Millennium stock........................ 27
Millennium's stock price could be volatile, which could
cause you to lose part or all of your
investment............................................ 27
Millennium has antitakeover defenses that could delay or
prevent an acquisition and could adversely affect the
price of its common stock.............................. 28
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS........... 28
COMPARATIVE PER SHARE DATA.................................. 29
MARKET PRICE AND DIVIDEND DATA.............................. 30
THE SPECIAL MEETING......................................... 31
Purpose................................................... 31
Date, Time and Place...................................... 31
Record Date............................................... 31
Vote Required; Voting at the Special Meeting.............. 31
Proxies................................................... 31
Revocability of Proxies................................... 32
Solicitation of Proxies................................... 32
Do Not Send Stock Certificates With Your Proxy............ 32
Voting Agreements......................................... 32
Recommendation of LeukoSite Board......................... 32
THE MERGER.................................................. 33
Background of the Merger.................................. 33
</TABLE>
iii
<PAGE>
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Reasons for the Merger; Recommendation of the LeukoSite
Board................................................... 35
Joint reasons for the merger............................ 35
Millennium's reasons for the merger..................... 35
LeukoSite's reasons for the merger...................... 37
Opinion of Financial Advisor to Millennium................ 38
Opinion of Financial Advisor to LeukoSite................. 44
Interests of LeukoSite's Directors and Officers in the
Merger.................................................. 51
General................................................. 51
Indemnification and Insurance........................... 51
Options................................................. 51
Directors and Executive Officers........................ 51
Effective Time of the Merger.............................. 52
Certain Federal Income Tax Consequences................... 52
Accounting Treatment...................................... 54
Regulatory Approvals...................................... 54
Listing of Shares of Millennium Common Stock on the Nasdaq
Stock Market............................................ 54
No Appraisal Rights....................................... 54
Resale Restrictions....................................... 54
THE MERGER AGREEMENT........................................ 55
The Merger................................................ 55
Conversion of Securities.................................. 55
Exchange of Shares........................................ 55
Surrender of Shares of LeukoSite Common Stock........... 55
Distributions with Respect to Unexchanged Shares........ 55
No Further Ownership Rights in LeukoSite Common Stock... 56
Fractional Shares....................................... 56
Treatment of Stock Plans and Warrants..................... 56
Representations and Warranties............................ 56
Covenants................................................. 58
Additional Agreements..................................... 59
No Solicitation......................................... 59
Employee Benefit Plans.................................. 59
Severance............................................... 59
Board Representation.................................... 59
Conditions................................................ 60
Additional Conditions to the Obligations of Millennium.... 60
Additional Conditions to the Obligations of LeukoSite..... 60
Termination............................................... 61
Termination Generally................................... 61
Effect of Termination; Fees and Expenses................ 61
Amendment................................................. 63
INFORMATION CONCERNING MILLENNIUM........................... 64
Recent transactions....................................... 64
Additional information.................................... 65
Stock ownership by management and principal stockholders
of Millennium........................................... 65
INFORMATION CONCERNING LEUKOSITE............................ 68
Additional information.................................... 68
Stock ownership by management and principal stockholders
of LeukoSite............................................ 68
COMPARISON OF STOCKHOLDER RIGHTS............................ 72
</TABLE>
iv
<PAGE>
<TABLE>
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UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.......... 76
MILLENNIUM PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEETS AS OF
SEPTEMBER 30, 1999........................................ 77
MILLENNIUM PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1999.................. 78
MILLENNIUM PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS FOR
THE YEAR ENDED DECEMBER 31, 1998.......................... 79
MILLENNIUM PHARMACEUTICALS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL
STATEMENTS................................................ 80
EXPERTS..................................................... 83
LEGAL MATTERS............................................... 83
STOCKHOLDER PROPOSALS....................................... 83
APPENDICES
Appendix A Merger Agreement
Appendix B BancBoston Robertson Stephens Fairness Opinion
Appendix C PaineWebber Incorporated Fairness Opinion
</TABLE>
v
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
This document includes information relating to Millennium and LeukoSite that
has not been delivered or presented to you, but is "incorporated by reference,"
which means that we disclose information to you by referring you to another
document filed separately with the SEC. The information incorporated by
reference is considered a part of this proxy statement/prospectus, except for
any information superseded by information provided in this proxy
statement/prospectus. This proxy statement/prospectus incorporates by reference
the documents listed below, which contain important information about
Millennium, LeukoSite and their finances.
<TABLE>
<CAPTION>
MILLENNIUM SEC FILINGS (FILE NO. 000-28494) PERIOD
- ------------------------------------------- ------
<S> <C>
Annual Report on Form 10-K................... Year ended December 31, 1998
Quarterly Reports on Form 10-Q............... Quarters ended March 31, 1999, June 30, 1999
and September 30, 1999
Current Reports on Form 8-K.................. Filed on March 11, 1999, October 21, 1999 and
October 29, 1999
Description of our capital stock............. Contained in Millennium's registration
statement on Form 8-A dated April 26, 1996
<CAPTION>
LEUKOSITE SEC FILINGS (FILE NO. 000-22769) PERIOD
- ------------------------------------------ ------
<S> <C>
Annual Report on Form 10-K................... Year ended December 31, 1998
Quarterly Reports on Form 10-Q............... Quarters ended March 31, 1999, June 30, 1999
and September 30, 1999
Current Reports on Form 8-K.................. Filed on January 5, 1999, February 26, 1999,
April 6, 1999, April 27, 1999, June 24, 1999,
August 3, 1999, September 3, 1999 and
October 21, 1999
</TABLE>
LeukoSite and Millennium are also incorporating by reference any additional
documents that they file with the SEC as required by the Exchange Act between
the date of this proxy statement/prospectus and the date of the special meeting
of stockholders.
LeukoSite stockholders should rely only on the information contained or
incorporated by reference in this proxy statement/prospectus to vote on the
approval of the merger agreement and the merger. We have not authorized anyone
to provide you with information that is different.
Millennium has supplied all information contained or incorporated by
reference in this proxy statement/prospectus relating to Millennium, and
LeukoSite has supplied all information contained in this proxy
statement/prospectus relating to LeukoSite.
vi
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
You can obtain documents incorporated by reference in this proxy
statement/prospectus without charge by requesting them in writing or by
telephone from Millennium or LeukoSite at the following address and telephone
numbers:
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Millennium Pharmaceuticals, Inc. LeukoSite, Inc.
75 Sidney Street 215 First Street
Cambridge, MA 02139 Cambridge, MA 02142
Attention: Clare Midgley Attention: Gina Brazier
Investor Relations Investor Relations
Telephone: (617) 679-7000 Telephone: (617) 621-9350
</TABLE>
If you would like to request documents from either company, please do so by
December 15, 1999 to receive them before the special meeting of LeukoSite
stockholders.
Both Millennium and LeukoSite file annual, quarterly and other reports and
proxy statements with the SEC. You may read and copy any reports, statements or
other information filed by Millennium or LeukoSite at the SEC's public reference
rooms in Washington, D.C. at 450 5(th) Street, N.W., and in New York, New York
and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Millennium's and LeukoSite's SEC
filings are also available to the public from commercial document retrieval
services and at the web site maintained by the SEC at "http://www.sec.gov."
Millennium filed a registration statement on Form S-4 to register with the
SEC the Millennium common stock to be issued to LeukoSite stockholders in the
merger. This proxy statement/prospectus is a part of that registration statement
and constitutes a prospectus of Millennium in addition to being a proxy
statement of LeukoSite for the special meeting. As allowed by SEC rules, this
proxy statement/ prospectus does not contain all the information you can find in
the registration statement or the exhibits to the registration statement. You
can obtain the additional information in the registration statement by
contacting Millennium at the address and telephone number listed above.
vii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
Q: What do I need to do now?
A: After carefully reading and considering the information contained in this
proxy statement/prospectus, please complete and sign your proxy and return it
in the enclosed return envelope as soon as possible, so that your shares may
be represented and voted at the LeukoSite special meeting of stockholders. If
you sign and send in your proxy and do not indicate how you want to vote, we
will count your proxy as a vote for the proposal to approve the merger
agreement and the merger with Millennium.
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: Your broker will vote your shares only if you provide instructions on how to
vote. You should follow the directions provided by your broker regarding how
to instruct your broker to vote your shares. If you do not instruct your
broker, your shares will not be voted.
Q: Can I change my vote after I have mailed my signed proxy?
A: Yes. You can change your vote at any time before your proxy is voted at the
special meeting. If you hold your shares in your own name, you can do this in
one of three ways. First, you can send a written notice stating that you
would like to revoke your proxy. Second, you can complete and submit a new
proxy. If you choose either of these two methods, you must submit your notice
of revocation or your new proxy to the Secretary of LeukoSite at the address
set forth in the answer to the last question below. Third, you can attend the
special meeting and vote in person. If you hold your shares in "street name,"
you should follow the directions provided by your broker regarding how to
change your vote.
Q: Should LeukoSite stockholders send in their stock certificates now?
A: No. After the merger is completed, LeukoSite stockholders will receive
written instructions for exchanging LeukoSite stock certificates. Please do
not send in your stock certificates with your proxy.
Q: When do you expect the merger to be completed?
A: We expect to complete the merger in December, 1999.
Q: Who can help answer my questions?
A: If you have any questions about the merger or if you need additional copies
of this proxy statement/prospectus or the enclosed proxy, you should contact:
LeukoSite, Inc.
215 First Street
Cambridge, MA 02142
Attention: Gina Brazier
Investor Relations
Telephone: (617) 621-9350
viii
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO BETTER UNDERSTAND
THE MERGER AND THE ISSUANCE OF SHARES OF MILLENNIUM COMMON STOCK, YOU SHOULD
READ CAREFULLY THIS ENTIRE DOCUMENT AND THE DOCUMENTS TO WHICH WE HAVE REFERRED
YOU. SEE "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." WE HAVE SOMETIMES
INCLUDED PAGE REFERENCES OR SECTION REFERENCES TO DIRECT YOU TO MORE COMPLETE
DESCRIPTIONS OF THE TOPICS PRESENTED IN THIS SUMMARY.
THE COMPANIES
LEUKOSITE, INC.
215 First Street
Cambridge, MA 02142
(617) 621-9350
LeukoSite is a biotechnology company developing proprietary monoclonal
antibody and small molecule drugs to treat patients with cancer and
inflammatory, autoimmune and viral diseases. LeukoSite is preparing to complete
the filing of the biologics license application for its lead drug, the
CAMPATH-Registered Trademark- monoclonal antibody. LeukoSite is a party to a
joint venture with ILEX Oncology, Inc. for CAMPATH-Registered Trademark-, and
Schering AG and its U.S. affiliate, Berlex Laboratories, expect to market,
distribute and sell CAMPATH-Registered Trademark- in Europe and the United
States. Including CAMPATH-Registered Trademark-, LeukoSite has six drug
candidates in clinical development and nine partnered small molecule research
and development programs. LeukoSite's collaborators include Schering AG,
Warner-Lambert Company, Roche Bioscience, Kyowa Hakko Kogyo Co., Ltd.,
Genentech, Inc., Hoechst Marion Roussel, ILEX Oncology, Inc., MorphoSys AG and
Medarex, Inc.
LeukoSite was organized as a Delaware corporation in 1992. LeukoSite's World
Wide Web site address is www.leukosite.com. The information in our web site is
not incorporated by reference into this proxy statement/ prospectus.
MILLENNIUM PHARMACEUTICALS, INC.
75 Sidney Street
Cambridge, MA 02139
(617) 679-7000
Millennium seeks to discover and develop proprietary therapeutic and
diagnostic human healthcare products and services based on the discovery and
understanding of the medical usefulness of genes. Millennium employs genetics
and genetic analysis, also called genomics, and uses computer-based information
systems to assist in the identification, analysis and elucidation of the
biological function of genes. Millennium is applying its technology across the
entire healthcare sector, from gene identification through patient management.
Millennium is pursuing business opportunities in small molecule drugs and
predictive medicine through operating divisions and its subsidiaries, Millennium
BioTherapeutics, Inc. and Millennium Predictive Medicine, Inc. As part of its
strategy, it has formed strategic alliances with major companies in the
pharmaceutical and life science industries. To date, Millennium has formed
eleven alliances, nine by Millennium itself, one by Millennium BioTherapeutics
and one by Millennium Predictive Medicine.
Millennium was organized as a Delaware corporation in 1993. Millennium's
World Wide Web site address is www.mlnm.com. The information in our web site is
not incorporated by reference into this proxy statement/ prospectus.
REASONS FOR THE MERGER (SEE PAGE 35)
The LeukoSite board of directors and the Millennium board of directors each
considered a number of factors in determining to approve the merger. These
considerations are described below under "The Merger--Reasons for the Merger;
Recommendations of the LeukoSite Board."
THE SPECIAL MEETING (SEE PAGE 31)
The special meeting of LeukoSite stockholders will take place on
December 22, 1999. At that meeting, LeukoSite stockholders will be asked to vote
on the proposal to approve
1
<PAGE>
the merger agreement and the merger. To approve the merger, the holders of a
majority of the outstanding shares of LeukoSite common stock must vote in favor
of the merger.
RECOMMENDATION TO STOCKHOLDERS (SEE PAGE 32)
The LeukoSite board of directors believes that the merger is in your best
interests and unanimously recommends that you vote in favor of the merger.
Certain LeukoSite stockholders have entered into voting agreements in which they
promised to vote shares representing approximately 20% of LeukoSite common stock
outstanding as of October 14, 1999 in favor of the merger.
THE MERGER (SEE PAGE 33)
Millennium and LeukoSite have entered into a merger agreement which provides
that a wholly owned subsidiary of Millennium will merge with and into LeukoSite.
As a result of the merger, LeukoSite will become a wholly owned subsidiary of
Millennium. As soon as practicable after the closing and subject to obtaining
any required third party consents, Millennium intends to merge LeukoSite with
and into Millennium.
WHAT YOU WILL RECEIVE IN THE MERGER (SEE PAGE 55)
Each shareholder of LeukoSite common stock will receive 0.4296 shares of
Millennium common stock for each share of LeukoSite common stock that he or she
owns. LeukoSite stockholders will receive cash for any fractional share which
they would otherwise receive in the merger.
OWNERSHIP OF MILLENNIUM FOLLOWING THE MERGER (SEE PAGE 68)
Based on the number, as of November 3, 1999, of outstanding shares of
LeukoSite Common Stock (including shares issuable after November 3, 1999 in
connection with an Acquisition previously made by LeukoSite), we anticipate that
LeukoSite stockholders will receive approximately 6,577,110 shares of Millennium
common stock in the merger, assuming that no LeukoSite stock options, rights or
warrants are exercised, and approximately 7,600,178 shares of Millennium common
stock assuming that all presently outstanding LeukoSite stock options, rights
and warrants are exercised. Based on these numbers, following the merger former
LeukoSite stockholders will own approximately 14.8% of the outstanding shares of
Millennium common stock, assuming no exercise of presently outstanding LeukoSite
or Millennium stock options, rights and warrants, and approximately 16.8% of the
outstanding shares of Millennium common stock, assuming exercise of all
presently outstanding LeukoSite stock options, rights and warrants and no
exercise of presently outstanding Millennium stock options, rights or warrants.
INTERESTS OF LEUKOSITE DIRECTORS AND MANAGEMENT IN THE MERGER (SEE PAGE 51)
Certain directors and officers of LeukoSite have interests in the merger
that differ from those of stockholders generally.
CONDITIONS TO THE MERGER (SEE PAGE 60)
Millennium and LeukoSite are not obligated to complete the merger unless a
number of conditions are satisfied. These conditions include the following:
- - the requisite majority of LeukoSite's stockholders must have voted for the
merger;
- - any applicable waiting periods under antitrust laws must expire or be
terminated and any other required government approvals must have been
obtained;
- - the registration statement on Form S-4, of which this proxy
statement/prospectus forms a part, must have become effective under the
Securities Act and must not be the subject of any stop order or proceedings
seeking a stop order;
- - no governmental orders or statutes, rules or regulations may have been enacted
which has the effect of making the merger illegal or otherwise prohibiting
consummation of the merger;
2
<PAGE>
- - the Millennium common stock to be issued in the merger must have been approved
for listing on the Nasdaq National Market;
- - the representations and warranties of LeukoSite and Millennium contained in
the merger agreement must be true and correct at the time made and at the time
of closing, except where the failures would not have a material adverse
effect;
- - both LeukoSite and Millennium must have performed their obligations under the
merger agreement in all material respects;
- - Millennium must have received an opinion of its counsel, Hale and Dorr LLP,
and LeukoSite must have received an opinion of its counsel, Bingham Dana LLP,
in each case to the effect that the merger will be treated for federal income
tax purposes as a tax-free reorganization within the meaning of the Internal
Revenue Code; and
- - the employment agreements between Millennium and each of Dr. Christopher K.
Mirabelli (currently Chief Executive Officer and Chairman of the Board of
Directors of LeukoSite) and Mr. Augustine Lawlor (currently Chief Operating
and Financial Officer of LeukoSite) shall be in full force and effect.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 61)
Millennium and LeukoSite can jointly agree to terminate the merger agreement
at any time. Either Millennium or LeukoSite can individually terminate the
merger agreement before its completion under the following circumstances:
- - the merger is not completed by April 30, 2000;
- - action by a governmental entity which has the effect of permanently
restraining, enjoining or otherwise prohibiting the merger;
- - the LeukoSite stockholders do not vote to approve the merger;
- - the other party materially breaches any of the representations, warranties or
obligations under the merger agreement and the breach is not or cannot be
cured within 15 days.
In addition, Millennium can terminate the merger agreement if the LeukoSite
board of directors fails to recommend the approval of the merger agreement in
this proxy statement/ prospectus; if the LeukoSite board approves and recommends
to LeukoSite stockholders an alternative acquisition proposal; a tender offer or
exchange offer is made for LeukoSite shares and the LeukoSite board fails to
recommend against acceptance of the offer or takes no position with respect to
the acceptance of the offer; LeukoSite breaches the non-solicitation provisions
of the merger agreement; or for any reason LeukoSite fails to call the special
meeting of stockholders as required.
TERMINATION FEES (SEE PAGE 61)
LeukoSite must pay Millennium a termination fee of $25.6 million if:
- - Millennium terminates the merger agreement because the LeukoSite board of
directors fails to recommend the approval of the merger agreement in this
proxy statement/prospectus; the LeukoSite board approves and recommends to
LeukoSite stockholders an alternative acquisition proposal; a tender offer or
exchange offer is made for LeukoSite shares and the LeukoSite board fails to
recommend against acceptance of the offer or takes no position with respect to
the acceptance of the offer; LeukoSite breaches the non-solicitation
provisions of the merger agreement; or for any reason LeukoSite fails to call
the special meeting of stockholders as required;
- - Millennium terminates the merger agreement due to a material breach of a
representation or warranty by LeukoSite; or
- - Millennium terminates the merger agreement as a result of LeukoSite's failure
to obtain the requisite stockholder vote, if at the time of the failure, an
alternative transaction has been announced and not withdrawn; provided that in
the case of certain tender or exchange offers, the fee is payable only if an
alternative transaction is closed within one year after the termination of the
merger agreement.
3
<PAGE>
Millennium must pay LeukoSite a termination fee of $25.6 million if
LeukoSite terminates the merger agreement due to a material breach of a
representation or warranty by Millennium.
REGULATORY APPROVALS (SEE PAGE 54)
United States antitrust laws prohibit Millennium and LeukoSite from
completing the merger until after they have furnished information and materials
to the Antitrust Division of the Department of Justice and the Federal Trade
Commission and a required waiting period has ended or been terminated early.
Millennium and LeukoSite each filed the required notification and report forms
with the Antitrust Division and the Federal Trade Commission on October 29,
1999.
FAIRNESS OPINIONS OF FINANCIAL ADVISORS
(SEE PAGE 38)
On October 14, 1999, BancBoston Robertson Stephens delivered to the
Millennium board of directors its oral opinion (which was subsequently confirmed
in writing) that, as of that date and based upon and subject to the matters
described in the opinion, the exchange ratio of LeukoSite common stock for
Millennium common stock was fair to Millennium from a financial point of view.
The full text of this opinion, which sets forth the assumptions made, matters
considered and the scope of review undertaken, is attached as Appendix B to this
proxy statement/prospectus.
In deciding to approve the merger agreement, the LeukoSite board of
directors considered the opinion of its financial advisor, PaineWebber
Incorporated. On October 14, 1999, PaineWebber delivered to the LeukoSite board
of directors its opinion that based upon and subject to the various
considerations in its letter, the exchange ratio of LeukoSite common stock for
Millennium common stock, pursuant to the merger agreement, was fair to the
holders of LeukoSite common stock from a financial point of view. This opinion
is attached as Appendix C to this proxy statement/prospectus. The opinion of
PaineWebber does not constitute a recommendation as to how any LeukoSite
stockholder should vote on the merger agreement.
We urge stockholders to read these opinions carefully and in their entirety.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 52)
Millennium and LeukoSite expect the merger to be tax-free to LeukoSite's
stockholders for federal income tax purposes (except for tax payable on cash
received by LeukoSite stockholders instead of fractional shares of Millennium
common stock). Millennium and LeukoSite will each receive an opinion of legal
counsel that the merger will qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code.
ACCOUNTING TREATMENT (SEE PAGE 54)
We expect the merger to be accounted for using purchase accounting, with
Millennium being deemed to have acquired LeukoSite.
APPRAISAL RIGHTS OF DISSENTING STOCKHOLDERS OF LEUKOSITE (SEE PAGE 54)
LeukoSite stockholders are not entitled under Delaware law to appraisal
rights with respect to the merger.
THE VOTING AGREEMENTS (SEE PAGE 32)
Certain LeukoSite stockholders have signed voting agreements in which they
promised to vote shares representing approximately 20% of LeukoSite's common
stock outstanding as of October 14, 1999 in favor of the merger. Such
stockholders have also signed an irrevocable proxy to that effect and have
agreed to hold their shares until the merger closes or the merger agreement is
terminated.
COMPARISON OF STOCKHOLDER RIGHTS (SEE PAGE 72)
If you own LeukoSite common stock, you will become a stockholder of
Millennium upon completion of the merger. Your rights will then be governed by
Millennium's certificate of incorporation and bylaws, rather than LeukoSite's
certificate of incorporation and bylaws. Your rights as a stockholder of
Millennium will differ from your rights as a stockholder of LeukoSite. To review
these differences in more detail, see "Comparison of Stockholder Rights" on
page 72.
4
<PAGE>
SELECTED FINANCIAL DATA
Millennium and LeukoSite are providing you the following information to aid
you in your analysis of the financial aspects of the merger. The following
selected financial data of Millennium and LeukoSite has been derived from their
audited and unaudited historical financial statements, and you should read it in
conjunction with those financial statements which are incorporated by reference
in this proxy statement/prospectus. The unaudited historical financial
information as of September 30, 1998 and 1999 and for the nine-month periods
then ended for Millennium and LeukoSite is derived from the unaudited
consolidated financial statements of Millennium and LeukoSite as of and for
those periods. In the opinion of Millennium's and LeukoSite's respective
management, those unaudited consolidated financial statements reflect all
adjustments necessary for the fair presentation of this unaudited interim
financial information. The results of operations for the interim periods do not
necessarily indicate the results to be expected for the entire fiscal year or
future periods.
5
<PAGE>
MILLENNIUM SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following selected financial data for the five year period ended
December 31, 1998 are derived from the audited consolidated financial statements
of Millennium Pharmaceuticals. The financial data for the nine month periods
ended September 30, 1998 and 1999 are derived from unaudited financial
statements. Operating results for the nine months ended September 30, 1999 are
not necessarily indicative of the results that may be expected for the entire
year ending December 31, 1999. The data should be read in conjunction with the
financial statements, related notes, and other financial information
incorporated by reference or included herein. See "Where You Can Find More
Information" on page vii.
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS ENDED
ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenue under strategic
alliances.................... $ 7,963 $22,880 $ 31,764 $ 89,933 $133,682 $ 75,719 $128,581
Costs and expenses:
Research and development....... 10,990 17,838 34,803 74,828 114,190 80,479 113,276
General and administrative..... 3,240 3,292 7,973 16,517 24,419 17,928 23,907
Acquired in-process R&D........ 83,800
Amortization of intangible
asset........................ 2,397 2,702 2,027 2,027
------- ------- -------- -------- -------- -------- --------
14,230 21,130 42,776 177,542 141,311 100,434 139,210
------- ------- -------- -------- -------- -------- --------
Income (loss from
operations).................. (6,267) 1,750 (11,012) (87,609) (7,629) (24,715) (10,629)
Interest income (expense),
net.......................... (105) (466) 2,244 2,977 3,788 2,371 7,032
Minority interest.............. 3,410 14,179 9,504 2,204
------- ------- -------- -------- -------- -------- --------
Net income (loss).............. $(6,372) $ 1,284 $ (8,768) $(81,222) $ 10,338 $(12,840) $ (1,393)
======= ======= ======== ======== ======== ======== ========
Basic net income (loss) per
share (pro forma in 1995 and
1996)........................ $ 0.09 $ (0.40) $ (2.87) $ 0.34 $ (0.44) $ (0.04)
======= ======== ======== ======== ======== ========
Shares used in computing basic
net income (loss) per
share........................ 13,852 21,697 28,323 30,319 29,434 35,817
======= ======== ======== ======== ======== ========
Diluted net income (loss) per
share (pro forma in 1995 and
1996)........................ $ 0.07 $ (0.40) $ (2.87) $ 0.33 $ (0.44) $ (0.04)
======= ======== ======== ======== ======== ========
Shares used in computing
diluted net income (loss) per
share........................ 17,854 21,697 28,323 31,508 29,434 35,817
======= ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
---------------------------------------------------- SEPTEMBER 30,
1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and marketable
securities.......................... $ 6,105 $17,847 $ 63,848 $96,557 $190,964 $225,180
Total assets.......................... 10,101 25,105 87,744 144,513 257,954 308,873
Long-term debt, net of current
portion............................. 3,067 1,467
Capital lease obligation, net of
current portion..................... 2,359 2,499 9,308 19,809 24,827 25,984
Stockholders' equity.................. 1,559 13,096 66,639 91,755 206,362 229,202
</TABLE>
6
<PAGE>
LEUKOSITE SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following selected financial data for the five year period ended
December 31, 1998 are derived from the audited consolidated financial statements
of LeukoSite. The financial data for the nine month periods ended September 30,
1998 and 1999 are derived from unaudited financial statements. Operating results
for the nine months ended September 30, 1999 are not necessarily indicative of
the results that may be expected for the entire year ending December 31, 1999.
The data should be read in conjunction with the financial statements, related
notes, and other financial information incorporated by reference or included
herein. See "Where You Can Find More Information" on page vii.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenues......................... $ 450 $ 3,674 $ 5,726 $ 12,072 $ 7,070 $ 10,929
Costs and expenses:
Research and development......... $ 5,056 7,051 8,502 11,980 21,141 14,998 22,807
General and administrative....... 726 866 1,371 1,758 2,625 1,872 2,567
Acquired in-process R&D.......... 4,249
------- ------- ------- -------- -------- -------- --------
5,782 7,917 9,873 13,738 23,766 16,870 29,623
------- ------- ------- -------- -------- -------- --------
Loss from operations............. (5,782) (7,467) (6,199) (8,012) (11,694) (9,800) (18,694)
Interest income (expense), net... 148 (10) 177 719 1,205 926 910
Equity in operations of joint
venture........................ (3,358) (3,858) (2,922) (3,900)
------- ------- ------- -------- -------- -------- --------
Net loss......................... $(5,634) $(7,477) $(6,022) $(10,651) $(14,347) $(11,796) $(21,684)
======= ======= ======= ======== ======== ======== ========
Basic and diluted net loss per
share.......................... $ (6.06) $ (7.25) $ (5.65) $ (2.62) $ (1.32) $ (1.12) $ (1.69)
======= ======= ======= ======== ======== ======== ========
Shares used in computing basic
and diluted net loss per
share.......................... 929 1,031 1,066 4,299 10,895 10,554 12,860
======= ======= ======= ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
---------------------------------------------------- SEPTEMBER 30,
1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and marketable
securities........................... $ 7,504 $ 1,734 $ 9,384 $25,157 $23,332 $27,135
Total assets........................... 10,932 4,538 11,874 28,032 27,503 39,321
Long-term obligations, net of current
portion.............................. 1,319 1,583 1,230 1,119 1,316 975
Redeemable convertible preferred
stock................................ 11,782 13,733 20,913
Stockholders' equity (deficit)......... (4,776) (12,161) (12,581) 20,808 18,467 29,124
</TABLE>
7
<PAGE>
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial statements have been
prepared to give effect to the merger using the purchase method of accounting.
The unaudited pro forma combined balance sheet as of September 30, 1999
gives effect to the merger as if it had occurred on such date, and reflects the
allocation of the purchase price to the LeukoSite assets acquired, including
in-process research and development and liabilities assumed. The unaudited pro
forma combined statements of operations combine the historical statements of
operations of Millennium and LeukoSite as if the merger had occurred at
January 1, 1998. The historical financial statements of LeukoSite included
herein have been adjusted on a pro forma basis to reflect the February 1999
acquisition of CytoMed, Inc. by LeukoSite as if such acquisition had occurred on
January 1, 1998. Information with respect to the 1998 Historical LeukoSite
Financial Statements Assuming the CytoMed Acquisition is derived from and can be
found in the LeukoSite Form 8-K filed on April 27, 1999 in conjunction with the
CytoMed acquisition and incorporated by reference herein. The unaudited pro
forma combined statement of operations for the nine-month period ended
September 30, 1999 combines the historical unaudited statements of operations of
Millennium and LeukoSite, as adjusted, for such period. It is expected that
following the merger, Millennium will incur additional costs, which are not
expected to be significant to the combined results of operations, in connection
with integrating the operations of the two companies. Integration-related costs
are not included in the accompanying unaudited pro forma combined financial
statements.
The Millennium statement of operations for the period in which the merger
occurs will include a significant charge for acquired in-process research and
development, currently estimated to be approximately $327.6 million, or 59.2% of
the purchase price. This amount represents the values determined by management,
using a discounted cash flow methodology, to be attributable to the in-process
research and development programs of LeukoSite based on a preliminary valuation
of such programs. Such amount is subject to significant change pending
completion of the final independent valuation analysis. The charge relates to
specific on-going research and development programs and preclinical projects.
Assuming each of these research programs continues through all stages of
clinical development, the projected future research and development expenditures
related to these programs, excluding the cost of research and development which
may be performed by corporate collaborators, is approximately $139.3 million.
The programs are forecasted to be completed at various times between 2000 and
2006. If Millennium would have allocated less of the purchase price to these
programs, the value would have been recorded as goodwill on the balance sheet
and amortized over the expected benefit period, resulting in increased
amortization expense during that period. Millennium believes that the allocation
of the purchase price to these programs is appropriate given the future
potential of these programs to contribute to the operations of Millennium.
Unaudited pro forma combined financial information is presented for
illustrative purposes only and is not necessarily indicative of the financial
position or results of operations that would have actually been reported had the
merger occurred at the beginning of the periods presented, nor is it necessarily
indicative of future financial position or results of operations. These
unaudited pro forma combined financial statements are based upon the respective
historical financial statements of Millennium and LeukoSite, as adjusted, and do
not incorporate, nor do they assume, any benefits from cost savings or synergies
of operations of the combined company.
For a description of the adjustments made in connection with the preparation
of the unaudited pro forma information, see "Unaudited Pro Forma Combined
Financial Information" on page 79, and "Where You Can Find More Information" on
page vii.
8
<PAGE>
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1998 SEPTEMBER 30, 1999
------------------ -------------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues.................................................. $147,266 $139,510
Costs and expenses........................................ 203,532 198,714
-------- --------
Net loss.................................................. $(56,266) $(59,204)
======== ========
Basic and diluted net loss per share...................... $ (1.52) $ (1.40)
======== ========
Shares used in computing basic and diluted net loss per
share................................................... 36,896 42,394
======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1999
-------------------
<S> <C>
BALANCE SHEET DATA
Cash, cash equivalents and marketable securities.......... $247,561
Total assets.............................................. 545,060
Current liabilities....................................... 54,345
Noncurrent liabilities.................................... 42,523
Stockholders' equity...................................... 448,192
</TABLE>
9
<PAGE>
RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING RISKS, ALONG WITH THE OTHER
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE
ONLY ONES AFFECTING MILLENNIUM AND LEUKOSITE. ADDITIONAL RISKS AND UNCERTAINTIES
MAY ALSO ADVERSELY AFFECT MILLENNIUM'S AND LEUKOSITE'S BUSINESS AND OPERATIONS.
IF ANY OF THE FOLLOWING EVENTS ACTUALLY OCCURS, MILLENNIUM'S AND/OR LEUKOSITE'S
BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS WOULD LIKELY SUFFER,
POSSIBLY MATERIALLY. THE TERMS "WE," "OUR" AND "US" WHEN USED IN THIS SECTION
UNDER THE HEADING "RISKS RELATING TO LEUKOSITE" MEAN LEUKOSITE AS AN INDEPENDENT
ENTITY, AND SUCH TERMS, WHEN USED IN THIS SECTION UNDER THE HEADING "RISKS
RELATING TO MILLENNIUM" MEAN MILLENNIUM BOTH PRIOR TO AND FOLLOWING THE MERGER.
CERTAIN OF THE RISKS RELATING TO LEUKOSITE MAY ALSO BE APPLICABLE TO MILLENNIUM
FOLLOWING THE MERGER.
RISKS RELATING TO THE MERGER
MILLENNIUM MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE LEUKOSITE AND ACHIEVE
THE BENEFITS EXPECTED TO RESULT FROM THE MERGER
The merger will present challenges to management, including the integration
of the operations, technologies and personnel of Millennium and LeukoSite, and
special risks, including possible unanticipated liabilities, unanticipated costs
and diversion of management attention.
Millennium cannot assure you that it will successfully integrate or
profitably manage LeukoSite's businesses. In addition, Millennium cannot assure
you that, following the transaction, its businesses will achieve revenues, net
income or loss levels, efficiencies or synergies that justify the merger or that
the merger will result in increased earnings for the combined companies in any
future period. Also, the combined company may experience slower rates of growth
as compared to historical rates of growth of Millennium and LeukoSite
independently.
BECAUSE THE EXCHANGE RATIO IN THE MERGER IS FIXED, LEUKOSITE STOCKHOLDERS
ARE EXPOSED TO THE RISK THAT THE MARKET PRICE OF MILLENNIUM'S STOCK WILL
DROP
Under the merger agreement, each share of LeukoSite common stock will
convert into the right to receive 0.4296 shares of Millennium common stock. This
exchange ratio is a fixed number and will not be adjusted if the price of
Millennium common stock or LeukoSite common stock increases or decreases. The
prices of Millennium common stock and LeukoSite common stock at the closing of
the merger may vary from their prices on the date of this proxy
statement/prospectus and on the date of the special meeting. These prices may
vary because of changes in the business, operations or prospects of Millennium
or LeukoSite, market assessments of the likelihood that the merger will be
completed, the timing of the completion of the merger, the prospects of
post-merger operations, regulatory considerations, general market and economic
conditions and other factors. Because the date that the merger is completed may
be later than the date of the special meeting, the prices of Millennium common
stock and LeukoSite common stock on the date of the special meeting may not be
indicative of their respective prices on the date the merger is completed. We
urge LeukoSite stockholders to obtain current market quotations for Millennium
common stock and LeukoSite common stock, and to be aware that the relative
prices of Millennium and LeukoSite common stock may change dramatically after
the special meeting.
THE PRICE OF MILLENNIUM COMMON STOCK MAY BE AFFECTED BY FACTORS DIFFERENT
FROM THOSE AFFECTING THE PRICE OF LEUKOSITE COMMON STOCK
When the merger is completed, holders of LeukoSite common stock will become
holders of Millennium common stock. Millennium's business differs from that of
LeukoSite, and Millennium's results of operations, as well as the price of
Millennium common stock, may be affected by factors
10
<PAGE>
different from those affecting LeukoSite's results of operations and the price
of LeukoSite common stock before the merger.
THE LOSS OF KEY LEUKOSITE PERSONNEL COULD MAKE IT DIFFICULT TO COMPLETE
EXISTING PROJECTS AND UNDERTAKE NEW PROJECTS
Millennium's success depends on its ability to identify, hire and retain its
employees, and a significant component of the value of the merger to Millennium
is in the know-how and experience of LeukoSite employees that Millennium expects
to employ following the merger. If key LeukoSite employees were to leave after
the merger, Millennium may be unable to complete existing LeukoSite projects or
to undertake certain new projects. Under the terms of LeukoSite's stock
incentive plan, the vesting of all stock options held by LeukoSite employees
automatically accelerates as a result of the merger. These options have
substantial value to the LeukoSite employees. We cannot assure you that
LeukoSite employees will not leave following the merger. The success of the
merger could be adversely affected by the departure of key LeukoSite employees.
RISKS RELATING TO LEUKOSITE AS AN INDEPENDENT ENTITY
IF CAMPATH-REGISTERED TRADEMARK- IS NOT APPROVED FOR SALE OR IF SCHERING AG
DOES NOT SUCCESSFULLY MARKET CAMPATH-REGISTERED TRADEMARK- ON LEUKOSITE'S
BEHALF, LEUKOSITE'S ANTICIPATED FUTURE REVENUE TARGETS WILL NOT BE ACHIEVED
LeukoSite has only one product in the process of being reviewed by the FDA
for approval, our CAMPATH-Registered Trademark- monoclonal antibody, and that
review is in the early stages. There can be no assurance that the FDA or any
foreign governmental agency will approve CAMPATH-Registered Trademark- for
commercial sale on a timely basis or at all. The failure of CAMPATH-Registered
Trademark- to be approved by FDA and foreign governmental agencies on a timely
basis would have a material adverse effect on our business, financial condition
and results of operations.
We have no experience with commercial sales and marketing. We will rely
solely upon Schering AG and its U.S. affiliate, Berlex Laboratories, for the
marketing, distribution and sale of CAMPATH-Registered Trademark-in Europe and
the United States. We have no plans to directly market CAMPATH-Registered
Trademark-. Our right to share in the profits for U.S. sales of
CAMPATH-Registered Trademark- or to receive a royalty on sales of
CAMPATH-Registered Trademark- outside the U.S. is dependent upon the marketing
and sales activities of Schering and Berlex. We can make no assurances that
there will be any profits on sales of CAMPATH-Registered Trademark- in the U.S.
In the event that there are losses resulting from the marketing of
CAMPATH-Registered Trademark- in the U.S., LeukoSite will bear one-third of
those losses.
LeukoSite's only source of revenues from product sales, if any, for the next
several years is likely to be from sales of CAMPATH-Registered Trademark-;
however, we cannot be certain that CAMPATH-Registered Trademark- will be
approved for commercial sale or accepted in the United States or in any foreign
markets. A number of factors may affect the rate and level of market acceptance
of CAMPATH-Registered Trademark-, including:
- the perception by physicians and other members of the health care
community of its safety and efficacy or that of competing products, if any
- the effectiveness of Berlex's sales and marketing efforts in the United
States and the effectiveness of Schering's sales and marketing efforts in
Europe
- the marketing and continued development of competing drugs
- unfavorable publicity concerning CAMPATH-Registered Trademark- or
comparable drugs
- its price relative to other drugs or competing treatments
- the availability of third party reimbursement
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- regulatory developments related to the manufacture or continued use of
CAMPATH-Registered Trademark-
LEUKOSITE RELIES ON BOEHRINGER INGLEHEIM AS ITS SOLE SOURCE MANUFACTURER OF
CAMPATH-REGISTERED TRADEMARK- AND LEUKOSITE'S ABILITY TO GENERATE REVENUES
IN THE FUTURE WILL BE ADVERSELY AFFECTED IF IT IS UNABLE TO OBTAIN
SUFFICIENT QUANTITIES OF CAMPATH-REGISTERED TRADEMARK- FROM THEM
LeukoSite has an agreement with Boehringer Ingleheim for the production of
CAMPATH-Registered Trademark- for our clinical trials and for any commercial
sales. If Boehringer Ingleheim were not able to produce sufficient quantities of
CAMPATH-Registered Trademark- or if we were required to transfer manufacturing
processes of CAMPATH-Registered Trademark-to other third-party manufacturers,
then we could experience significant delays in supply. We have no experience in
manufacturing and we lack the facilities and personnel to manufacture
CAMPATH-Registered Trademark- and to produce an adequate supply to meet future
requirements. The loss of Boehringer Ingleheim as our contract manufacturer for
CAMPATH-Registered Trademark- or its inability to meet our requirements of
supply of CAMPATH-Registered Trademark- would have a material adverse effect on
our business, financial condition or results of operations.
LEUKOSITE'S DRUG CANDIDATES MAY NOT PROVE TO BE SAFE AND EFFECTIVE IN HUMAN
CLINICAL TRIALS
LeukoSite currently is testing three monoclonal antibodies and three small
molecule products in human clinical trials. Clinical trials of drug candidates
involve the testing of potential therapeutic agents in humans to determine
whether the drug candidates are safe and effective and, if so, to what degree.
Many drugs in human clinical trials fail to demonstrate the desired safety and
efficacy characteristics. Drugs in later stages of clinical development may fail
to show the desired safety and efficacy traits despite having progressed through
initial human testing. The clinical trials of any of our drug candidates may not
be successful which may prevent us from commercializing the drug, substantially
impairing our business, financial condition and results of operations.
LEUKOSITE'S DRUG CANDIDATES ARE SUBJECT TO GOVERNMENTAL REGULATION AND
PRODUCT APPROVALS
LeukoSite's products currently under development are subject to extensive
and rigorous regulation by the federal government, principally the FDA, and by
state and local governments. If we market these products abroad, foreign
governments may also impose export/import requirements and other restrictive
regulations. We must complete all appropriate regulatory clearance processes
before commercializing a product, which is lengthy and expensive. We cannot be
sure that we can obtain necessary regulatory approvals on a timely basis, if at
all, for any of the products we are currently developing, and all of the
following could have a material adverse effect on our business, financial
condition and results of operations:
- significant delays in obtaining or failing to obtain required approvals
- loss of previously obtained approvals
- failing to comply with existing or future regulatory requirements
Complying with FDA regulatory requirements applicable to product development
and obtaining FDA approval can take a number of years, involves the expenditure
of substantial resources and is uncertain. Many products that initially appear
promising ultimately do not reach the market because they are found to be unsafe
or ineffective or cannot meet the FDA's other regulatory requirements. Moreover,
it is possible that the current regulatory framework could change or additional
regulations could arise at any stage during our product development, which may
affect our ability to obtain approval as anticipated, delay the submission or
review of an application, or require additional expenditures by LeukoSite.
All of LeukoSite's product candidates will require FDA and foreign
government approvals for commercialization, none of which have been obtained.
LeukoSite and ILEX Oncology, Inc.,
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LeukoSite's joint venture partner for the development of CAMPATH-Registered
Trademark-, are required to file a Biologics Licensing Application with the FDA
before beginning commercialization of CAMPATH-Registered Trademark- in the
United States and must also file for marketing approval from other
jurisdictions. We are not certain when, independently or with our collaborative
partners, we will submit any marketing applications for our other monoclonal
antibodies or small molecule antagonists under development. We cannot guarantee
that any studies will demonstrate that the products are safe and effective for
their intended uses, or that the FDA will grant required approval on a timely
basis, or at all, for CAMPATH-Registered Trademark- or other products for any
studied indications.
Government regulations may cause delays in LeukoSite's marketing of products
for a considerable or indefinite time, which could impose costly procedural
requirements upon LeukoSite's activities. While we attempt to comply with such
applicable government regulations, larger companies or companies more
experienced in regulatory affairs may obtain a competitive advantage over us.
Delays in obtaining governmental regulatory approval could adversely affect our
marketing strategy as well as our ability to generate revenue from commercial
sales. Our inability to obtain marketing approval of our products on a timely
basis, or at all, would have a material adverse effect on our business,
financial condition and results of operations.
LEUKOSITE IS IN THE EARLY STAGES OF PRODUCT DEVELOPMENT
Many of LeukoSite's research and development programs are at an early stage
of development. The FDA has not approved any of our product candidates. We have
limited experience in conducting preclinical and clinical trials. Furthermore,
even if we receive initially positive preclinical trial results, such results do
not mean that similar results will be obtained in the later stages of drug
development, such as additional preclinical trials or human clinical testing.
All of our potential drug candidates are prone to the risks of failure inherent
in pharmaceutical product development, including the possibility that none of
our drug candidates will or can
- be safe and effective
- otherwise meet applicable regulatory standards
- receive the necessary regulatory marketing approvals
- develop into commercially viable drugs
- be manufactured or produced economically and on a large scale
- be successfully marketed
- be eligible for reimbursement by government or private consumers
- achieve customer acceptance
In addition, third parties may preclude us from marketing our drugs through
enforcement of their proprietary rights. Or, third parties may succeed in
marketing equivalent or superior drug products. Our failure to develop safe,
commercially viable drugs would have a material adverse effect on our business,
financial condition and results of operations.
IF LEUKOSITE'S COLLABORATIVE PARTNERS DO NOT ACTIVELY SEEK TO COMMERCIALIZE
DRUG CANDIDATES RESULTING FROM THEIR COLLABORATION WITH IT, LEUKOSITE'S
REVENUES WILL SUFFER
A key element of LeukoSite's strategy is to accelerate certain of its drug
discovery and development programs and to fund its capital requirements, in
part, through collaboration agreements with major pharmaceutical companies. We
currently have collaboration agreements with Warner-Lambert Company, Roche
Bioscience, Kyowa Hakko Kogyo, Ltd., Genentech, Inc., Schering AG and Hoechst
Marion Roussel. Warner-Lambert, Roche, Kyowa and Hoechst Marion Roussel have
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the right, but not the obligation, to conduct preclinical and clinical trials of
the compounds developed during their collaboration with us and to commercialize
any drug candidates resulting from their collaboration with us. Genentech has
the right, but not the obligation, to conduct Phase III clinical trials of and
to commercialize our LDP-02 monoclonal antibody product. Thus, the collaboration
agreements allow our collaborative partners significant discretion in electing
whether to pursue the development of any potential drug candidates. As a result,
we cannot control the amount and timing of the resources dedicated by our
collaborative partners to their respective collaborations with us.
This also means that LeukoSite's right to receive revenues under the
collaboration agreements for drug development milestones or royalties,
co-promotion rights or profit-sharing on sales is dependent largely upon the
activities and the development, manufacturing and marketing resources and
abilities of its collaborative partners. As such,
- our partners may not pursue the development and commercialization of
compounds resulting from their collaboration with us
- any development or commercialization may not be successful even if our
partners pursued such efforts
- we may not derive substantial or any royalty or product sales revenue from
our collaborations
Moreover, certain drug candidates discovered by LeukoSite may be competitive
with our partners' drugs or drug candidates. Accordingly, it is possible that
our collaborative partners will choose not to proceed with the development of
our drug candidates or that they will pursue their existing or alternative
technologies in preference to our drug candidates. We advise you that
- our interests may not always coincide with those of our collaborative
partners
- some of our collaborative partners could independently develop or develop
with third parties drugs which compete with ours
- disagreements with our partners over rights to technology or other
proprietary interests might occur, leading to delays in research or in the
development and commercialization of certain product candidates (such
disputes could also require or result in litigation or arbitration, which
is time-consuming and expensive)
IF LEUKOSITE'S COLLABORATIVE PARTNERS TERMINATE THEIR AGREEMENTS WITH
LEUKOSITE, LEUKOSITE'S ABILITY TO FUND ITS RESEARCH OPERATIONS AND CLINICAL
TRIALS WILL SUFFER
LeukoSite relies on its collaborative partners to fund a substantial portion
of its research operations and clinical trials. Although each of the
collaboration agreements may be extended past its current term, we cannot be
sure that these contracts will be extended or renewed, or that any renewal, if
made, will be on terms favorable to us. LeukoSite cannot guarantee that any of
the collaboration agreements will remain in effect for its expected term. If any
of the collaborative partners terminates or breaches its agreement with
LeukoSite, or fails to conduct its collaborative activities in a timely manner,
then the development or commercialization of any drug candidate or research
program with such partner could be delayed or terminated. Alternatively, we may
have to devote unexpected and unbudgeted additional resources to such
development or commercialization, all of which could have a material adverse
effect on our business, financial condition and results of operations.
LEUKOSITE'S SIGNIFICANT EXPENSES MAY CAUSE IT TO CONTINUE TO INCUR FUTURE
LOSSES
LeukoSite has incurred a net operating loss every year since it was
incorporated in May 1992, and had an accumulated deficit of approximately
$68.6 million through September 30, 1999. LeukoSite expects to incur significant
additional operating losses over the next several years and expects cumulative
losses to increase substantially due to expanded research and development
efforts,
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preclinical and clinical trials and commercialization expenses. In 2000, we
expect that our only revenues will come primarily from milestone payments and
any other amounts received under existing and future collaboration agreements,
if any. It is possible that we may not be able to
- successfully commercialize any of our products
- establish any additional collaborative relationships on terms acceptable
to us
- maintain the current collaboration agreements in effect
- achieve the milestones that are required for us to receive funds from our
current collaborative partners
LeukoSite's ability to generate revenue or achieve profitability is
dependent in part on its and its collaborative partners' ability to complete the
development of drug candidates successfully, to obtain regulatory approvals for
drug candidates and to manufacture and commercialize any resulting drugs. We
cannot provide assurance that we will successfully identify, develop,
commercialize, manufacture and market any products, obtain required regulatory
approvals or achieve profitability.
LEUKOSITE HAS SIGNIFICANT DEVELOPMENT COSTS AND IT IS UNCERTAIN AS TO THE
AVAILABILITY OF FUTURE FUNDING
LeukoSite will require substantial additional funds in order to finance its
drug discovery and development programs, fund operating expenses, pursue
regulatory clearances, and prosecute and defend its intellectual property
rights. We depend heavily upon our collaborative partners for research and
clinical trials funding and we cannot be sure that revenues from product sales
or our existing collaboration agreements will provide the necessary funding to
meet our operating expenses. In the event that the merger of LeukoSite and
Millennium is not consummated, LeukoSite will have to seek additional funding
through public or private financing or collaboration or other arrangements with
collaborative partners. The raising of additional funds through the issuance of
equity securities may result in further dilution to our existing stockholders.
We cannot be sure that additional financing will be available or, if available,
that such funds will be available on acceptable terms.
LEUKOSITE CANNOT BE CERTAIN THAT IT WILL OBTAIN SUFFICIENT PATENT
PROTECTION, OR THAT ANY SUCH PATENTS SO OBTAINED WILL PROVIDE SUFFICIENT
PROTECTION AGAINST COMPETITIVE PRODUCTS OR PROCESSES
LeukoSite's success will depend in part on its ability to obtain United
States and foreign patent protection for its drug candidates and processes,
preserve its trade secrets, and operate without infringing the proprietary
rights of third parties. We place considerable importance on obtaining patent
protection for significant new technologies, products and processes. Legal
standards relating to the validity of patents covering pharmaceutical and
biotechnological inventions, and the scope of claims made under such patents,
are still developing. Our patent position is highly uncertain and involves
complex legal and factual questions. We cannot be certain that the named
applicants or inventors of the subject matter covered by our patent applications
or patents (whether directly owned by us or licensed to us) were the first to
invent or the first to file patent applications for such inventions. Third
parties may challenge, infringe upon, circumvent or seek to invalidate existing
or future patents owned by or licensed to us. A court or other agency with
jurisdiction may find our patents unenforceable. Even if we have valid patents,
these patents still may not provide sufficient protection against competitive
products or other commercially valuable products or processes.
If a third party claims the same or overlapping subject matter as we have
claimed in a United States patent application or patent, then we may decide or
be required to participate in interference proceedings in the United States
Patent and Trademark Office (PTO) in order to determine who invented the subject
matter first. If we lost such an interference proceeding, then we would be
deprived
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of the patent protection we previously sought or obtained. Indeed, regardless of
whether we win or lose in such proceedings, we would still incur substantial
costs.
In addition to patent protection, LeukoSite relies on trade secrets,
proprietary know-how, and confidentiality provisions in agreements with our
collaborative partners, employees and consultants to protect our intellectual
property. We also rely on invention assignment provisions in agreements with
employees and certain consultants. It is possible that these agreements could be
breached or that we might not have adequate remedies for any such breaches.
Third parties may learn of or independently discover our trade secrets,
proprietary know-how and intellectual property, which could have a material
adverse effect on our business, financial condition and results of operations.
LeukoSite's product candidates LDP-01, LDP-02 and CAMPATH-Registered
Trademark- are humanized monoclonal antibodies. We are aware that both the PTO
and certain foreign governments have issued patents to third parties which
relate to certain humanized antibodies, products useful for making humanized
antibodies, and processes for making and using humanized antibodies. We may
choose to seek or be required to seek licenses under certain of these patents.
We are also aware of third party applications in the United States and
abroad relating to certain humanized monoclonal antibodies, products useful for
making humanized antibodies, and processes for making and using humanized
antibodies. LeukoSite may choose to seek or be required to seek licenses under
some or all of the patents which might issue from these patent applications.
THERE IS SIGNIFICANT AND WIDESPREAD LITIGATION IN THE PHARMACEUTICAL AND
BIOTECHNOLOGY INDUSTRY REGARDING PATENTS AND PROPRIETARY RIGHTS AND
LEUKOSITE'S BUSINESS AND RESULTS OF OPERATIONS COULD BE ADVERSELY AFFECTED
IF IT BECOMES INVOLVED IN SUCH LITIGATION
There is significant and widespread litigation in the pharmaceutical and
biotechnology industry regarding patents and proprietary rights. LeukoSite may
need to assert claims of infringement, enforce its patents, protect trade
secrets, know-how or other intellectual property rights, or determine the scope
or validity of proprietary rights of third parties. Conversely, we may need to
defend against claims of infringement by third parties. We cannot guarantee that
any of our patents will ultimately be held valid or that our efforts to assert
or defend any patents, trade secrets, know-how or other intellectual property
rights would be successful. Similarly, we cannot guarantee that our products or
processes will not be held to infringe the patents or other intellectual
property rights of others. Uncertainties emanating from the initiation and
continuation of any patent or related litigation could have a material adverse
effect on our business, financial condition and results of operations.
The expenses of intellectual property litigation or other similar
proceedings would be likely to be substantial, and could have a material adverse
effect on LeukoSite's business, financial condition and results of operations.
An adverse outcome in such litigation or proceeding could subject LeukoSite to
significant liabilities or require LeukoSite to cease certain activities. If any
of our present or future products or processes is alleged or determined to
infringe upon the patents or impermissibly use the intellectual property of
others, we may choose or be required to obtain licenses from third parties under
their patents or proprietary rights. We cannot guarantee that we will be able to
obtain those licenses on acceptable terms, if at all. In such event, we would be
severely restricted or prohibited from the development, manufacture and sale of
our drug candidates.
IF LEUKOSITE'S COMPETITORS SUCCEED IN DEVELOPING OR LICENSING TECHNOLOGIES
OR FUTURE DRUG PRODUCTS, ITS TECHNOLOGY AND FUTURE DRUG PRODUCTS COULD
BECOME OBSOLETE AND NONCOMPETITIVE
The biotechnology and pharmaceutical industries are intensely competitive.
LeukoSite has many competitors both in the United States and abroad, including
major multinational pharmaceutical and chemical companies, specialized
biotechnology firms and universities and other research institutions. Many of
our competitors have greater financial and other resources, such as larger
research and
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development staffs and more effective marketing and manufacturing organizations.
Our competitors may succeed in developing or licensing on an exclusive basis
technologies and drugs that are more effective or less costly than any which we
are currently developing, which could render our technology and future drug
products obsolete and noncompetitive. It is possible for our competitors to
obtain FDA or other regulatory approvals for drug candidates before we can. In
general, companies that begin commercial sale of their drugs before their
competitors have a significant competitive advantage in the marketplace,
including the ability to obtain certain patent and FDA marketing exclusivity
rights that would delay our ability to market certain products. Even if our
drugs or drug products are approved for sale, we cannot assure our ability to
compete successfully with competitors' existing products or products under
development.
LEUKOSITE RELIES ON CONTRACT MANUFACTURERS AND LACKS MANUFACTURING
EXPERIENCE
In addition to relying on Boehringer Ingleheim as the sole source
manufacturer of CAMPATH-Registered Trademark-, LeukoSite depends on third
parties to manufacture its product candidates and is aware of only a limited
number of manufacturers which it believes have the ability and capability to
manufacture its drug candidates for preclinical and clinical trials. If we were
required to transfer manufacturing processes to other third-party manufacturers,
then we could experience significant delays in supply. If, at any time, we are
unable to maintain, develop or contract for manufacturing capabilities on
acceptable terms, then our ability to conduct preclinical and clinical trials
with our drug candidates will be adversely affected, resulting in delays in the
submission of drug candidates for regulatory approvals. We have no experience in
manufacturing and we currently lack the facilities and personnel to manufacture
products in accordance with Good Manufacturing Practices as prescribed by the
FDA or to produce an adequate supply of compounds to meet future requirements
for preclinical and clinical trials.
RAPID TECHNOLOGICAL CHANGE COULD RENDER LEUKOSITE'S PRODUCTS OBSOLETE
Biotechnology and related pharmaceutical technology have undergone and are
subject to rapid and significant change. LeukoSite expects that the technologies
associated with biotechnology research and development will continue along this
rapid path. Our success will depend in large part on our ability to maintain a
competitive position in the rapidly changing environment. Because of the rapid
changes in technology, our compounds, products or processes may become obsolete
before we can recover the expenses incurred in developing such compounds,
products or processes. We cannot assure that we can maintain our technological
competitiveness.
LEUKOSITE DEPENDS ON ITS KEY PERSONNEL
LeukoSite believes that its ability to successfully implement its business
strategy is highly dependent on its management and scientific team. None of its
executive officers has employment agreements. Losing the services of one or more
of these individuals might hinder our ability to achieve our development
objectives. We are highly dependent on our ability to hire and retain qualified
scientific and technical personnel. The competition for these employees is
intense. We cannot be sure that we can continue to hire and retain the qualified
personnel needed for our business. Loss of the services of or the failure to
recruit key scientific and technical personnel could adversely affect our
business, operating results and financial condition.
RISKS RELATING TO MILLENNIUM
THE TERMS "MILLENNIUM," "WE," "OUR" AND "US" WHEN USED IN THIS SECTION MEAN
MILLENNIUM BOTH PRIOR TO AND FOLLOWING THE MERGER. CERTAIN OF THE RISKS RELATING
TO LEUKOSITE AS AN INDEPENDENT ENTITY MAY ALSO BE APPLICABLE TO MILLENNIUM
FOLLOWING THE MERGER.
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RISKS RELATING TO MILLENNIUM'S INDUSTRY, BUSINESS AND STRATEGY
THE GENOMICS INDUSTRY IS NEW; MILLENNIUM HAS NOT DEVELOPED OR COMMERCIALIZED
ANY PRODUCTS
The genomics industry is new and evolving rapidly. To date, Millennium has
not developed or commercialized any products based on our genomics and related
technologies. In addition, relatively few products based on gene discoveries
have been developed and commercialized by others. Rapid technological
development by either company or others may result in compounds, products or
processes becoming obsolete before we recover our development expenses.
The products that Millennium is developing will require additional research
and development, extensive preclinical studies and clinical trials and
regulatory approval prior to any commercial sales. Millennium may need to
successfully address a number of technological challenges in order to complete
development of any our products. Moreover, these products may not be effective
in treating any disease or may prove to have undesirable or unintended side
effects, toxicities or other characteristics that may prevent or limit
commercial use.
MILLENNIUM PLANS TO EXPAND RAPIDLY; IF MILLENNIUM CANNOT MANAGE ITS GROWTH
SUCCESSFULLY, ITS GROWTH MAY SLOW OR STOP
Millennium has rapidly expanded its operations and expects to continue to
expand. Millennium's growth has placed, and will continue to place, a
significant strain on its management, operating and financial systems. If
Millennium cannot manage its expanding operations, it may not be able to
continue to grow or it may grow at a slower pace. Furthermore, Millennium's
operating costs may escalate faster than planned. In order to manage its growth
successfully, Millennium must:
- Maintain close coordination among its executive, finance, operations,
research and development organizations
- Improve its operating, financial and accounting systems, procedures and
controls
- Expand, train and manage its employee base effectively
- Acquire and lease significant additional equipment and facilities
THE ACQUISITIONS MILLENNIUM MAKES MAY NOT BE SCIENTIFICALLY OR COMMERCIALLY
SUCCESSFUL
If Millennium makes additional significant acquisitions in which the
consideration includes stock or other securities, your equity in Millennium may
be significantly diluted. If Millennium makes one or more significant
acquisitions in which the consideration includes cash, Millennium may be
required to use a substantial portion of its available cash. Acquisitions
involve a number of operational risks, including:
- Difficulty and expense of assimilating the operations, technology and
personnel of the acquired business
- Inability to retain the management, key personnel and other employees of
the acquired business
- Inability to maintain the acquired company's relationships with key third
parties, such as alliance partners
- Exposure to legal claims for activities of the acquired business prior to
acquisition
- Diversion of management attention
- Amortization of substantial goodwill and write-off of in-process research
and development costs, adversely affecting Millennium's reported results
of operations
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MILLENNIUM'S GROWTH COULD BE LIMITED IF IT IS UNABLE TO ATTRACT AND RETAIN
KEY PERSONNEL
Millennium's success is substantially dependent on the ability, experience
and performance of our senior management and other key personnel. If we lose one
or more of the members of our senior management or other key employees, our
business and operating results could be seriously harmed. None of the members of
Millennium's senior management or other key employees is bound by a long-term
employment agreement with either company.
In addition, Millennium's future success will depend heavily on our ability
to continue to hire, train, retain and motivate additional skilled managerial
and scientific personnel. The pool of personnel with the skills that we require
is limited. Competition to hire from this limited pool is intense.
MILLENNIUM FACES SUBSTANTIAL COMPETITION, WHICH MAY RESULT IN OTHERS
DISCOVERING, DEVELOPING OR COMMERCIALIZING PRODUCTS AND SERVICES BEFORE OR
MORE SUCCESSFULLY THAN IT DOES
The fields of genomics and pharmaceuticals are highly competitive.
Millennium will not succeed if we cannot compete effectively in these fields.
Many of Millennium's competitors are substantially larger than we are and have
substantially greater capital resources, research and development staffs and
facilities than we have. Furthermore, many of Millennium's competitors are more
experienced than we are in drug discovery, development and commercialization,
obtaining regulatory approvals and product manufacturing. As a result,
Millennium's competitors may identify genes associated with diseases or
discover, develop and commercialize products or services for such genes before
we do. In addition, Millennium's competitors may discover, develop and
commercialize products or services which render non-competitive or obsolete the
products or services that we or our strategic alliance partners are seeking to
develop and commercialize.
RISKS RELATING TO FINANCING
MILLENNIUM HAS INCURRED SUBSTANTIAL LOSSES, IT EXPECTS TO CONTINUE TO INCUR
LOSSES AND IT WILL NOT BE SUCCESSFUL UNLESS IT REVERSES THIS TREND
We have incurred losses in three of the last five years. We expect to
continue to incur substantial operating losses in future periods.
To date, substantially all of Millennium's revenues have resulted from
payments from strategic partners. We have not received any revenues from the
sale of products. We anticipate that it will be a number of years, if ever,
before we will receive revenues from product sales or royalties.
We expect to increase our spending significantly as we continue to expand
our infrastructure, research and development programs and commercialization
activities. As a result, we will need to generate significant revenues to
achieve profitability. We cannot be certain whether or when this will occur
because of the significant uncertainties that affect our business.
MILLENNIUM MAY NEED ADDITIONAL FINANCING, WHICH MAY BE DIFFICULT TO OBTAIN
AND MAY DILUTE YOUR OWNERSHIP INTEREST
Millennium will require substantial funds to conduct research and
development, including preclinical testing and clinical trials of our potential
products, meet our obligations to our strategic alliance partners and
manufacture and market any products and services that are approved for
commercial sale. Millennium's future capital requirements will depend on many
factors, including the following:
- Continued progress in our discovery and development programs
- The number and scope of our discovery and development programs
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- The progress of the development efforts of our strategic partners
- The scope and results of clinical trials initiated by us
- The time and costs involved in obtaining regulatory approvals
- The cost of acquisitions of businesses, products and technologies
- The cost of manufacturing and commercialization activities
- The cost of continuing to build our infrastructure, including our
additional facilities requirements and costs of recruiting personnel
- The timing, receipt, and amount of milestones and other payments from our
alliance partners
- Our ability to establish and maintain strategic alliances
- The timing, receipt and amount of sales and royalties from our potential
products and services in the market
- The costs involved in preparing, filing, prosecuting, maintaining and
enforcing patent claims and other patent-related costs, including
litigation costs and the costs of obtaining any required licenses to
technologies
- Competing technological and market developments
We expect that we will require significant additional financing in the
future. We may seek to raise such financing through public or private equity
offerings, debt financings or additional strategic alliance and licensing
arrangements. Such additional financing may not be available when we need it or
may not be available on terms that are favorable to us.
If we raise additional funds by issuing equity securities, further dilution
to our then existing stockholders will result. In addition, the terms of the
financing may adversely affect the holdings or the rights of such stockholders.
If we are unable to obtain adequate funding on a timely basis, we may be
required to significantly curtail one or more of our discovery or development
programs. We could be required to seek funds through arrangements with
collaborative partners or others that may require us to relinquish rights to
certain of our technologies, product candidates or products which we would
otherwise pursue on our own.
RISKS RELATED TO DEVELOPMENT OF TECHNOLOGY AND PRODUCTS
IF MILLENNIUM'S TECHNOLOGICAL APPROACHES ARE NOT SUCCESSFUL, IT WILL NOT BE
ABLE TO DEVELOP AND COMMERCIALIZE ANY PRODUCTS AND SERVICES
We have directed our lead programs and development focus primarily to
diseases that may be linked to several or many genes working in combination.
Both we and the general scientific and medical communities have a limited
understanding relating to the role of genes in these diseases. Our technological
approaches to gene identification and target validation may not enable us to
successfully identify and characterize genes that predispose individuals to
diseases. If we do not identify such genes, we will not be able to successfully
develop and commercialize any products or services. Even if we do identify such
genes, we will have to do substantial additional work to translate these
discoveries into products.
MILLENNIUM MAY NOT BE ABLE TO OBTAIN DNA SAMPLES OF FAMILIES AND POPULATIONS
REQUIRED FOR ITS GENETIC STUDIES
Our gene identification strategy includes genetic studies of families and
populations prone to particular diseases. These studies require the collection
of large numbers of DNA samples from
20
<PAGE>
affected individuals, their families and other suitable populations. The
availability of DNA samples is important to our ability to discover the genes
responsible for human diseases through human genetic approaches. Competition for
these resources is intense; and access to suitable populations could be limited
by forces beyond Millennium's control, including governmental actions. Certain
of our competitors may have obtained access to significantly more family and
population resources than we have obtained. As a result, we may not be able to
obtain access to DNA samples necessary to support our human gene discovery
programs.
RISKS RELATING TO STRATEGIC ALLIANCE PARTNERS
MILLENNIUM DEPENDS ON STRATEGIC ALLIANCE PARTNERS; ITS BUSINESS WILL SUFFER
IF ANY OF ITS STRATEGIC ALLIANCE PARTNERS BREACHES ITS AGREEMENT OR FAILS TO
SUPPORT OR TERMINATES ITS ALLIANCE WITH MILLENNIUM
We conduct most of our discovery and development activities through
strategic alliances. The success of these programs is heavily dependent on the
efforts and activities of our strategic alliance partners. Our agreements with
our alliance partners allow them significant discretion in determining the
efforts and resources that they will apply to the alliance. Our existing and any
future alliances may not be scientifically or commercially successful.
The risks that we face in connection with these alliances include:
- If any of our alliance partners were to breach or terminate an agreement
with either of us, reduce its funding or otherwise fail to conduct its
collaborative activities successfully, we could be required to devote
additional internal resources to the program that is the subject of the
alliance, scale back or terminate the program or seek an alternative
partner.
- All of our strategic alliance agreements are subject to termination under
various circumstances, including in many cases on short notice without
cause. Some of our alliance agreements provide that if we fail to meet
specified performance criteria, our alliance partner may terminate the
agreement while maintaining rights and licenses to certain of our
discoveries. If an alliance partner terminates its alliance with either of
us, it may adversely affect the perception of us in the business and
financial communities.
- In our alliance agreements, we generally agree not to conduct certain
research and development in the field that is the subject of the alliance.
These agreements may have the effect of limiting the areas of research and
development we may pursue, either alone or in collaboration with third
parties.
- Our alliance partners may develop and commercialize, either alone or with
others, products and services that are similar to or competitive with the
products and services that are the subject of the alliance with us. Such
competing products and services may result in our alliance partner
withdrawing financial and related support for our product and service
candidates.
- Reductions in marketing or sales efforts or a discontinuation of marketing
or sales efforts of our products or services by our alliance partners
would reduce our revenues, which in many cases will be based on a
percentage of net sales by our alliance partner.
- Our alliance partners may change the focus of their development and
commercialization efforts. Pharmaceutical and biotechnology companies
historically have re-evaluated their priorities following mergers and
consolidations, which have been common in recent years in these
industries.
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MILLENNIUM MAY NOT BE SUCCESSFUL IN ESTABLISHING ADDITIONAL STRATEGIC
ALLIANCES
An important element of our business strategy is entering into strategic
alliances for the development and commercialization of products and services
based on our gene discoveries. We face significant competitors in seeking
appropriate alliance partners. We may not be successful in our efforts to
establish additional strategic alliances or other alternative arrangements. The
terms of any additional strategic alliances or other arrangements that we
establish may not be favorable to us. Moreover, such strategic alliances or
other arrangements may not be successful.
CONFLICTS MAY ARISE BETWEEN MILLENNIUM AND ITS SUBSIDIARIES
Millennium has two subsidiaries in which minority equity interests are held
by third parties. Although one of these subsidiaries is expected to be merged
into Millennium, the other subsidiary will continue to be partly owned by third
parties. In addition, Millennium may establish additional subsidiaries in the
future in which it sells minority equity interests to third parties. Conflicts
may arise between Millennium and such subsidiaries, including with respect to:
- the allocation of business opportunities
- the sharing of rights, technologies, facilities, personnel and other
resources
- the fiduciary duties owed by officers and directors who provide services
to both Millennium and one or more of these subsidiaries
RISKS RELATING TO INTELLECTUAL PROPERTY
MILLENNIUM MAY NOT BE ABLE TO OBTAIN PATENT PROTECTION FOR ITS DISCOVERIES
AND MAY INFRINGE PATENT RIGHTS OF THIRD PARTIES
The patent positions of pharmaceutical and biotechnology companies,
including us, are generally uncertain and involve complex legal, scientific and
factual questions.
Our success depends in significant part on our ability to:
- Obtain patents
- Protect trade secrets
- Operate without infringing upon the proprietary rights of others
- Prevent others from infringing on our proprietary rights
The validity and permissible scope of claims covered in genomics patents
involve important unresolved legal principles. For example, there is significant
uncertainty regarding the patentability of partial gene sequences and
full-length genes in the absence of functional data and as to the scope of
patent protection available for full-length genes and partial gene sequences.
Moreover, certain groups have made certain gene sequences available in publicly
accessible databases. These and other similar disclosures may adversely affect
our ability to obtain patent protection for full-length genes claimed by us in
patent applications that we file subsequent to such disclosures. Finally, there
is substantial uncertainty as to whether human clinical data will be required
for issuance of patents for human therapeutics. If such data are required,
Millennium's ability to obtain patent protection could be delayed or otherwise
adversely affected.
Patents may not issue from any patent applications that Millennium owns or
licenses. If patents do issue, the claims allowed may not be sufficiently broad
to protect our technology. In addition, issued patents that we own or license
may be challenged, invalidated or circumvented. Our patents also may not afford
us protection against competitors with similar technology. Because patent
applications in the United States are maintained in secrecy until patents issue,
third parties may have filed or maintained
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<PAGE>
patent applications for technology used by us or covered by our pending patent
applications without our being aware of these applications.
We may not hold proprietary rights to certain patents related to our
proposed products or services. In some cases, these patents may be owned or
controlled by third parties. As a result, we or our alliance partners may be
required to obtain licenses under third party patents to market certain of our
proposed products or services. If licenses are not available to us on acceptable
terms, we or our alliance partners will not be able to market these products or
services.
MILLENNIUM MAY NOT BE ABLE TO KEEP ITS TRADE SECRETS CONFIDENTIAL
We also rely significantly upon unpatented proprietary technology,
information, processes and know how, including proprietary software and
databases of proprietary gene sequences and biological information. We seek to
protect this information by confidentiality agreements with our respective
employees, consultants and other third party contractors as well as through
other security measures. These confidentiality agreements may be breached, and
we may not have adequate remedies for any such breach. In addition, our trade
secrets may otherwise become known or be independently developed by competitors.
MILLENNIUM MAY BECOME INVOLVED IN EXPENSIVE PATENT LITIGATION OR OTHER
INTELLECTUAL PROPERTY PROCEEDINGS WHICH COULD RESULT IN LIABILITY FOR
DAMAGES OR STOP ITS DEVELOPMENT AND COMMERCIALIZATION EFFORTS
There has been substantial litigation and other proceedings regarding the
complex patent and other intellectual property rights in the pharmaceutical and
biotechnology industries. Millennium may become a party to patent litigation or
other proceedings regarding intellectual property rights. For example, we
believe that certain of our patent applications cover genes that are also
claimed in patent applications filed by others. Interference proceedings before
the United States Patent and Trademark Office may be necessary to establish
which party was the first to discover these genes.
Other types of situations in which we may become involved in patent
litigation or other intellectual property proceedings include:
- We may initiate litigation or other proceedings against third parties to
enforce our respective patent rights.
- We may initiate litigation or other proceedings against third parties to
seek to invalidate the patents held by such third parties or to obtain a
judgment that our respective products or services do not infringe such
third parties' patents.
- If our competitors file patent applications that claim technology also
claimed by us, we may participate in interference or opposition
proceedings to determine the priority of invention.
- If third parties initiate litigation claiming that our processes or
products infringe their patent or other intellectual property rights, we
will need to defend against such claims.
The cost to us of any patent litigation or other proceeding, even if
resolved in our favor, could be substantial. Some of our competitors may be able
to sustain the cost of such litigation or proceedings more effectively than we
can because of their substantially greater financial resources. If a patent
litigation or other intellectual property proceeding is resolved unfavorably to
us, we or our alliance partners may be enjoined from manufacturing or selling
our products and services without a license from the other party and be held
liable for significant damages. We may not be able to obtain any required
license on commercially acceptable terms or at all.
Uncertainties resulting from the initiation and continuation of patent
litigation or other proceedings could have a material adverse effect on our
ability to compete in the marketplace. Patent litigation and other proceedings
may also absorb significant management time.
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MILLENNIUM COULD LOSE IMPORTANT LICENSE RIGHTS IN CERTAIN CIRCUMSTANCES
Millennium is a party to a number of technology in licenses that are
important to our business and expect to enter into additional licenses in the
future. These licenses impose various commercialization, sublicensing, royalty,
insurance and other obligations on us. If we fail to comply with these
requirements, the licensor will have the right to terminate the license.
RISKS RELATING TO PRECLINICAL TESTING AND CLINICAL TRIALS
CLINICAL TRIALS OF MILLENNIUM'S PRODUCT CANDIDATES MAY NOT BE SUCCESSFUL
In order to obtain regulatory approvals for the commercial sale of our
future products, we or our alliance partners will be required to demonstrate
through preclinical testing and clinical trials that the product is safe and
efficacious. Although LeukoSite is currently engaged in clinical trials, neither
Millennium nor any of its alliance partners has initiated human clinical trials
with respect to any product or service based upon our discoveries or filed an
investigational new drug application with the FDA to do so.
The results from preclinical testing of a product that is under development
may not be predictive of results that will be obtained in human clinical trials.
In addition, the results of early human clinical trials may not be predictive of
results that will be obtained in larger scale, advanced stage clinical trials.
Furthermore, we, our collaborators or the FDA may suspend clinical trials at any
time if the subjects or patients participating in such trials are being exposed
to unacceptable health risks or for other reasons.
The rate of completion of any clinical trials that we conduct will be
dependent on the rate of patient enrollment. Patient enrollment is a function of
many factors, including the size of the patient population, the nature of the
protocol, the availability of alternative treatments, the proximity of patients
to clinical sites and the eligibility criteria for the study. Delays in planned
patient enrollment may cause us to incur increased costs and program delays.
We expect to rely on our strategic alliance partners and other third parties
to conduct clinical trials of our products in most circumstances. We will have
less control over such clinical trials than if we were conducting the trials
directly. As a result, these trials may not begin or be completed as planned.
REGULATORY RISKS
MILLENNIUM MAY NOT OBTAIN REGULATORY APPROVALS; THE APPROVAL PROCESS IS
COSTLY AND LENGTHY
We must obtain regulatory approval for our ongoing development activities
and before marketing or selling any of our future products or services. We may
not receive regulatory approvals to conduct clinical trials of our products or
to manufacture or market our products and services. In addition, regulatory
agencies may not grant such approvals on a timely basis or may revoke previously
granted approvals.
The process of obtaining United States Food and Drug Administration, or FDA,
and other required regulatory approvals is lengthy and expensive. The time
required for FDA and other clearances or approvals is uncertain and typically
takes a number of years, depending on the complexity and novelty of the product.
Any delay in obtaining or failure to obtain required clearance or approvals
could materially adversely affect our ability to generate revenues from the
affected product or service. We have only limited experience in filing and
prosecuting applications necessary to gain regulatory approvals.
Certain of the products that are likely to result from our research and
development programs may be based on new technologies and new therapeutic
approaches that have not been extensively tested in humans. One example of such
a technology is gene therapy. The regulatory requirements governing these types
of products may be more rigorous than for conventional products. As a result, we
may
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<PAGE>
experience a longer regulatory process in connection with any products that we
develop based on these new technologies or new therapeutic approaches.
Our analysis of data obtained from preclinical and clinical activities is
subject to confirmation and interpretation by regulatory authorities, which
could delay, limit or prevent regulatory approval. Any regulatory approval to
market a product may be subject to limitations on the indicated uses for which
we may market the product. These limitations may limit the size of the market
for the product.
We also are subject to numerous and varying foreign regulatory requirements
governing the design and conduct of clinical trials and the manufacturing and
marketing of our future products and services. The approval procedure varies
among countries. The time required to obtain foreign approvals often differs
from that required to obtain FDA approval. Approval by the FDA does not ensure
approval by regulatory authorities in other countries.
All of these regulatory risks also are applicable to development,
manufacturing and marketing undertaken by our alliance partners or other
collaborators.
EVEN IF MILLENNIUM OBTAINS MARKETING APPROVAL, ITS PRODUCTS WILL BE SUBJECT
TO ONGOING REGULATORY REVIEW
The manufacturer of products for which we obtain marketing approval and the
manufacturing facilities used to make such products will be subject to continual
review and periodic inspections by the FDA. The subsequent discovery of
previously unknown problems with the product, manufacturer or facility may
result in restrictions on the product or manufacturer, including withdrawal of
the product from the market.
If we fail to comply with applicable regulatory requirements, we may be
subject to fines, suspension or withdrawal of regulatory approvals, product
recalls, seizure of products, operating restrictions and criminal prosecutions.
RISKS RELATING TO PRODUCT MANUFACTURING, MARKETING AND SALES
THE MARKET MAY NOT BE RECEPTIVE TO MILLENNIUM'S PRODUCTS AND SERVICES UPON
THEIR INTRODUCTION
The commercial success of our products and services that are approved for
marketing will depend upon their acceptance by the medical community and third
party payors as clinically useful, cost effective and safe. Many of the products
and services that we are developing are based upon new technologies or
therapeutic approaches. As a result, it may be more difficult for us to achieve
market acceptance of our products and services, particularly the first products
and services that we introduce to the market based on new technologies and
therapeutic approaches.
Other factors that we believe will materially affect market acceptance of
our products and services include:
- The timing of receipt of marketing approvals and the countries in which
such approvals are obtained
- The safety, efficacy and ease of administration of the product
- The success of physician education programs
MILLENNIUM HAS NO SALES AND MARKETING EXPERIENCE AND CAPABILITIES
We have no sales, marketing and distribution experience and capabilities. We
plan to rely significantly on sales, marketing and distribution arrangements
with our strategic alliance partners and other third parties for the products
and services that we are developing. The terms of these arrangements may not be
favorable to us. In addition, we may have limited or no control over the
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<PAGE>
sales, marketing and distribution activities of these third parties. Our future
revenues will be materially dependent upon the success of the efforts of these
third parties.
If in the future we determine to perform sales, marketing and distribution
functions ourselves, we would face a number of additional risks, including:
- We may not be able to attract and build a sufficient marketing staff or
sales force
- The cost of establishing a marketing staff or sales force may not be
justifiable in light of any product or service revenues
- Our direct sales and marketing efforts may not successful
MILLENNIUM HAS LIMITED MANUFACTURING CAPABILITIES AND WILL BE DEPENDENT ON
THIRD PARTY MANUFACTURERS
We have limited manufacturing experience and no commercial scale
manufacturing capabilities. In order to continue to develop products and
services, apply for regulatory approvals and, ultimately, commercialize any
products and services, we will need to develop, contract for, or otherwise
arrange for the necessary manufacturing capabilities.
We currently rely upon third parties to produce material for preclinical
testing purposes and expect to continue to do so in the future. We also expect
to rely upon third parties, including our strategic alliance partners, to
produce materials required for clinical trials and for the commercial production
of certain of our products if we succeed in obtaining necessary regulatory
approvals. There are a limited number of manufacturers that operate under the
FDA's good manufacturing practices regulations capable of manufacturing for us.
If we are unable to arrange for third party manufacturing of our respective
products, or to do so on commercially reasonable terms, we may not be able to
complete development of our products or market them.
To the extent that we enter into manufacturing arrangements with third
parties, we will be dependent upon these third parties to perform their
obligations in a timely manner. If such third party suppliers fail to perform
their obligations, we may be adversely affected in a number of ways, including:
- We may not be able to meet commercial demands for our products
- We may not be able to initiate or continue clinical trials of products
that are under development
- We may be delayed in submitting applications for regulatory approvals for
our products
We may in the future determine to manufacture certain of our products in our
own manufacturing facilities. We will require substantial additional funds and
need to recruit qualified personnel in order to build or lease and operate any
manufacturing facilities. We may not be able to successfully develop our own
manufacturing capabilities. Moreover, it may be very costly and time consuming
for us to develop such capabilities.
The manufacture of products by us and our alliance partners and suppliers is
subject to regulation by the FDA and comparable agencies in foreign countries.
Delay in complying or failure to comply with such manufacturing requirements
could materially adversely affect the marketing of our products.
IF MILLENNIUM FAILS TO OBTAIN AN ADEQUATE LEVEL OF REIMBURSEMENT FOR ITS
FUTURE PRODUCTS OR SERVICES BY THIRD PARTY PAYORS, THERE MAY BE NO
COMMERCIALLY VIABLE MARKETS FOR ITS PRODUCTS OR SERVICES
The availability of reimbursement by governmental and other third party
payors affects the market for any pharmaceutical product or service. These third
party payors continually attempt to contain or reduce the costs of healthcare by
challenging the prices charged for medical products and services. In certain
foreign countries, particularly the countries of the European Union, the pricing
of prescription
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<PAGE>
pharmaceuticals is subject to governmental control. We may not be able to sell
our products profitably if reimbursement is unavailable or limited in scope or
amount.
In both the United States and certain foreign jurisdictions, there have been
a number of legislative and regulatory proposals to change the healthcare
system. Further proposals are likely. The potential for adoption of these
proposals affects or will affect our ability to raise capital, obtain additional
collaborative partners and market our products.
If we or our collaborators obtain marketing approvals for our products, we
expect to experience pricing pressure due to the trend toward managed health
care, the increasing influence of health maintenance organizations and
additional legislative proposals.
ETHICAL, LEGAL AND SOCIAL ISSUED RELATED TO GENETIC TESTING MAY CAUSE
MILLENNIUM'S DIAGNOSTIC PRODUCTS TO BE REJECTED BY CUSTOMERS OR PROHIBITED
OR CURTAILED BY GOVERNMENTAL AUTHORITIES
Diagnostic tests that evaluate genetic predisposition to disease raise
issues regarding the use and confidentiality of the information provided by such
tests. Insurance carriers and employers might discriminate on the basis of such
information, resulting in a significant barrier to the acceptance of such tests
by customers. Such discrimination could cause governmental authorities to
prohibit or limit the use of such tests.
RISKS RELATING TO ONGOING OPERATIONS
MILLENNIUM WILL BE EXPOSED TO PRODUCT LIABILITY CLAIMS AND MAY NOT BE ABLE
TO OBTAIN ADEQUATE PRODUCT LIABILITY INSURANCE
Our business exposes us to potential product liability risks which are
inherent in the testing, manufacturing, marketing and sale of human therapeutic
and diagnostic products. Product liability claims or product recalls, regardless
of the ultimate outcome, could require us to spend significant time and money in
litigation and to pay significant damages. We currently have a limited amount of
product liability insurance coverage. If we decide to increase our coverage, we
may not be able to obtain such additional product liability insurance at a
reasonable cost or in sufficient amounts to protect us against losses due to
liability claims.
MILLENNIUM COULD INCUR LIABILITIES RELATING TO HAZARDOUS MATERIALS THAT IT
USES IN RESEARCH AND DEVELOPMENT ACTIVITIES
Our research and development activities involve the controlled use of
hazardous materials, chemicals and various radioactive materials. There is a
risk of accidental contamination or injury from these materials. In the event of
such an accident, we could be held liable for any damages that result. This type
of liability could exceed our resources.
RISKS RELATING TO MILLENNIUM STOCK
MILLENNIUM'S STOCK PRICE COULD BE VOLATILE, WHICH COULD CAUSE YOU TO LOSE
PART OR ALL OF YOUR INVESTMENT
The trading price of Millennium's common stock is likely to be volatile. The
stock market in general, and the market for biotechnology companies in
particular, has experienced extreme volatility. This volatility has often been
unrelated to the operating performance of particular companies. Prices for our
common stock will be determined in the marketplace and may be influenced by many
factors, including variations in our financial results, investors' perceptions
of ours and general economic, industry and market conditions.
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MILLENNIUM HAS ANTITAKEOVER DEFENSES THAT COULD DELAY OR PREVENT AN
ACQUISITION AND COULD ADVERSELY AFFECT THE PRICE OF ITS COMMON STOCK
Provisions of our certificate of incorporation and bylaws and provisions of
Delaware law could delay, defer or prevent an acquisition or change of control
of Millennium or otherwise adversely affect the price of Millennium common
stock. For example, Millennium's board of directors is staggered in three
classes, so that only one-third of the directors can be replaced at any annual
meeting. Additionally, our bylaws limit the ability of stockholders to call a
special meeting. Millennium's certificate of incorporation also permits its
board to issue shares of preferred stock without stockholder approval. In
addition to delaying or preventing an acquisition, the issuance of a substantial
number of preferred shares could adversely affect the price Millennium common
stock.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus contains forward-looking statements that
involve substantial risks and uncertainties. In some case you can identify these
statements by forward-looking words such as "anticipate," "believe," "could,"
"estimate," "expect," "intend," "may," "should," "will," and "would" or similar
words. You should read statements that contain these words carefully because,
with respect to both Millennium and LeukoSite, they discuss future expectations,
contain projections of future results of operations or of financial position or
state other "forward-looking" information. Without limiting the foregoing, the
statements contained below under "Reasons for the Merger; Recommendation of the
LeukoSite Board" constitute forward-looking statements. The important factors
listed above in the section captioned "Risk Factors," as well as any cautionary
language in this proxy statement/prospectus, provide examples of risks,
uncertainties and events that may cause the actual results of either company to
differ materially from the expectations described in these forward-looking
statements. You should be aware that the occurrence of the events described in
these risk factors and elsewhere in this prospectus could have an adverse effect
on the business, results of operations and financial position of Millennium or
LeukoSite.
Any forward-looking statements in this proxy statement/prospectus are not
guarantees of future performances, and actual results, developments and business
decisions may differ from those envisaged by such forward-looking statements,
possibly materially. Millennium and LeukoSite disclaim any duty to update any
forward-looking statements, all of which are expressly qualified by the
statements in this section.
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COMPARATIVE PER SHARE DATA
Set forth below are earnings and book value per share data for Millennium
and LeukoSite on both historical and pro forma combined bases and on a per share
equivalent pro forma basis for LeukoSite.
- Pro forma combined earnings per share are derived from the Unaudited Pro
Forma Combined Financial Information presented elsewhere in this proxy
statement/prospectus, which gives effect to the merger using the purchase
method of accounting for business combinations.
- Book value per share for the pro forma combined presentation is based upon
outstanding shares of Millennium common stock, adjusted to include shares
of Millennium common stock assumed to be issued in the merger for
outstanding shares of LeukoSite common stock.
- The equivalent pro forma per share combined data for shares of LeukoSite
common stock is based on the assumed conversion of each share of LeukoSite
common stock into 0.4296 of a share of Millennium common stock.
- The information set forth below should be read in conjunction with the
historical financial statements of Millennium and LeukoSite incorporated
by reference in this proxy statement/ prospectus and the "Unaudited Pro
Forma Combined Summary Financial Information" and the notes to each of
them presented elsewhere herein.
- The pro forma combined summary financial information is not necessarily
indicative of the operating results or financial position that would have
been achieved if the merger had been consummated as of the beginning of
the periods presented nor is it necessarily indicative of the future
operating results or financial position of Millennium or LeukoSite.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1998 SEPTEMBER 30, 1999
------------------ -------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
MILLENNIUM--HISTORICAL
Basic net income (loss) per common share.................... $ 0.34 $(0.04)
Diluted net income (loss) per common share.................. $ 0.33 $(0.04)
Book value per common share (at end of period).............. $ 5.91 $ 6.25
LEUKOSITE--HISTORICAL
Basic loss per common share................................. $(1.32) $(1.69)
Diluted loss per common share............................... $(1.32) $(1.69)
Book value per common share (at end of period).............. $ 1.55 $ 1.99
MILLENNIUM/LEUKOSITE--PRO FORMA COMBINED
Basic loss per common share................................. $(1.52) $(1.40)
Diluted loss per common share............................... $(1.52) $(1.40)
Book value per common share (at end of period).............. $ 5.30
EQUIVALENT PRO FORMA PER SHARE DATA IMPUTED TO EXISTING
SHAREHOLDERS
Basic loss per common share................................. $(2.68) $(3.61)
Diluted loss per common share............................... $(2.68) $(3.61)
Book value per common share (at end of period).............. $ 3.61 $ 4.62
</TABLE>
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MARKET PRICE AND DIVIDEND DATA
The following table reflects the range of the reported high and low last
sale prices of shares of Millennium common stock and LeukoSite common stock on
the Nasdaq National Market tier of the Nasdaq Stock Market.
<TABLE>
<CAPTION>
MILLENNIUM COMMON LEUKOSITE COMMON
STOCK STOCK
------------------- -------------------
HIGH LOW HIGH LOW
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Year ended December 31, 1997:
First quarter.......................................... $21.50 $13.63 -- --
Second quarter......................................... $17.50 $13.00 -- --
Third quarter.......................................... $21.13 $12.50 $10.00 $ 6.00
Fourth quarter......................................... $21.25 $16.75 $11.75 $ 9.50
Year ended December 31, 1998:
First quarter.......................................... $22.38 $17.75 $10.88 $ 7.88
Second quarter......................................... $19.00 $14.13 $ 9.88 $ 6.50
Third quarter.......................................... $18.69 $10.57 $ 9.50 $ 6.25
Fourth quarter......................................... $25.88 $14.75 $13.50 $ 7.13
Nine months ended September 30, 1999:
First quarter.......................................... $38.13 $25.44 $12.88 $ 8.00
Second quarter......................................... $40.38 $30.00 $12.88 $ 8.00
Third quarter.......................................... $77.41 $36.75 $29.88 $12.63
Fourth quarter (through November 16, 1999)............. $86.00 $62.25 $32.375 $18.75
</TABLE>
Millennium common stock is listed on the Nasdaq Stock Market under the
symbol "MLNM." The common stock of Millennium has been listed on the Nasdaq
Stock Market since May 6, 1996. Prior to May 6, 1996, Millennium common stock
was not publicly traded. LeukoSite common stock is listed on the Nasdaq Stock
Market under the symbol "LKST". The common stock of LeukoSite has been listed on
the Nasdaq Stock Market since August 15, 1997. Prior to August 15, 1997,
LeukoSite common stock was not publicly traded. On October 14, 1999, the last
full trading day prior to the announcement of the merger, the closing price per
share of Millennium common stock was $83.469, and the closing price per share of
LeukoSite common stock was $24.125, each as reported on the Nasdaq Stock Market.
Based on the exchange ratio, the pro forma equivalent value of LeukoSite common
stock at the close of trading on October 14, 1999 was $35.86.
On November 16, 1999, the most recent practicable date prior to the mailing
of this proxy statement/prospectus, the closing price per share of Millennium
common stock was $79.6875, and the closing price per share of LeukoSite common
stock was $32.375, each as reported on the Nasdaq Stock Market.
Neither Millennium nor LeukoSite has ever paid any cash dividends on its
common stock and Millennium does not anticipate paying any cash dividends in the
foreseeable future. Payment of future dividends, if any, will be at the
discretion of Millennium's board of directors.
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THE SPECIAL MEETING
PURPOSE
LeukoSite and Millennium are furnishing this proxy statement/prospectus to
LeukoSite stockholders in connection with the solicitation of proxies by
LeukoSite's board of directors. The LeukoSite board will use the proxies at the
special meeting to be held on and at the date, place and time set forth below.
At the special meeting, LeukoSite stockholders will be asked to consider and
vote upon a proposal to approve the merger agreement, dated as of October 14,
1999, among LeukoSite, Millennium and a wholly-owned subsidiary of Millennium,
and to approve and authorize the merger of the subsidiary with and into
LeukoSite. As a result of the merger, LeukoSite will become a wholly-owned
subsidiary of Millennium. As soon as practicable after the closing and subject
to obtaining any required third party consents, Millennium intends to merge
LeukoSite with and into Millennium.
If the merger agreement and the merger are approved and completed, the
holders of LeukoSite common stock will be entitled to receive from Millennium
0.4296 of a share of Millennium common stock for each share of LeukoSite common
stock held by such holder.
DATE, TIME AND PLACE
The special meeting of stockholders of LeukoSite is scheduled to be held as
follows:
December 22, 1999
10:00 a.m., local time
at LeukoSite, Inc. (executive offices)
215 First Street, Cambridge, Massachusetts 02142
RECORD DATE
The LeukoSite board of directors has fixed the close of business on
November 16, 1999 as the record date for the special meeting. Accordingly, only
holders of LeukoSite common stock of record at the close of business on
November 16, 1999 will be entitled to notice of, and to vote at, the special
meeting and any adjournment, postponement, continuation or rescheduling of the
special meeting.
As of the record date, there were 14,679,784 shares of LeukoSite common
stock outstanding and entitled to vote, which shares were held by approximately
1,978 holders of record. Each holder of record of LeukoSite common stock on the
record date is entitled to one vote per share, which may be cast either in
person or by properly executed proxy, at the special meeting.
VOTE REQUIRED; VOTING AT THE SPECIAL MEETING
Approval of the merger agreement and the merger requires the affirmative
vote of the holders of a majority of the shares of LeukoSite common stock
outstanding as of the record date.
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of LeukoSite common stock entitled to vote at
the special meeting is necessary to constitute a quorum at the special meeting.
Shares which abstain from voting, and shares held in the name of a broker or
other nominee who has not been given the authority to vote on a particular
matter, will be treated as shares that are present and entitled to vote at the
special meeting for purposes of determining whether a quorum exists. However,
because the merger agreement and the merger must be adopted by the holders of a
majority of the shares of LeukoSite common stock outstanding on the record date,
abstentions and shares held in the name of a broker or other nominee who has not
been given the authority to vote will have the same effect as a vote against
approval of the merger agreement and the merger.
PROXIES
All shares of LeukoSite common stock which are entitled to vote and are
represented at the special meeting by properly executed proxies received prior
to or at the special meeting, and not revoked, will be voted at the special
meeting in accordance with the instructions indicated on such
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proxies. Except in cases where a broker or other nominee has indicated on a
proxy that it does not have the power to vote, each proxy, when properly
executed, will be voted in the manner specified in such proxy.
If a proxy is properly executed but no vote is specified, such proxy will be
voted FOR the proposal to approve the merger agreement and the merger. No proxy
that is voted against the adoption of the merger agreement will be voted in
favor of adjournment, postponement, continuation or rescheduling of the special
meeting for the purpose of allowing additional votes or proxies in favor of
approval of the merger agreement and the merger.
REVOCABILITY OF PROXIES
You may revoke your proxy at any time before it is voted by:
- notifying in writing the Secretary of LeukoSite at: LeukoSite, Inc.,
215 First Street, Cambridge, Massachusetts, 02142;
- granting a subsequent proxy; or
- appearing in person and voting at the special meeting.
Attendance at the special meeting will not in and of itself constitute
revocation of a proxy.
SOLICITATION OF PROXIES
LeukoSite will share the expenses incurred in connection with the printing
of this proxy statement/ prospectus with Millennium and will bear all of the
expenses incurred in mailing this proxy statement/ prospectus. LeukoSite will
also request banks, brokers and other intermediaries holding shares beneficially
owned by others to send this proxy statement/prospectus to, and obtain proxies
from, the beneficial owners and will reimburse the holders for their reasonable
expenses in so doing. Proxies will be solicited by mail and additional
solicitations will be made by telephone or facsimile by the officers and regular
employees of LeukoSite. LeukoSite has also made arrangements with Corporate
Investor Communications, Inc. to assist it in soliciting proxies, including from
banks, brokers and nominees, and has agreed to pay $5,000 plus reasonable
expenses for those services.
DO NOT SEND STOCK CERTIFICATES WITH YOUR PROXY
You should not send in any stock certificates with your proxies. A
transmittal form with instructions for the surrender of stock certificates will
be mailed to you as soon as practicable after the approval and completion of the
merger.
VOTING AGREEMENTS
Certain LeukoSite principal stockholders executed voting agreements with
Millennium at the same time that the LeukoSite board of directors approved the
merger agreement and the merger. Under these voting agreements, these
stockholders agreed not to transfer their shares of LeukoSite common stock prior
to the special meeting and to affirmatively vote their shares of LeukoSite
common stock FOR the approval of the merger agreement and the merger. As of
October 14, 1999, the stockholders who entered into these voting agreements held
approximately 20% of LeukoSite common stock outstanding as of such date.
As of the record date, directors and executive officers of LeukoSite and
their affiliates owned approximately 3,140,310 shares of common stock of
LeukoSite, which represented in the aggregate approximately 21.39% of all
outstanding common stock of LeukoSite entitled to vote at the special meeting.
RECOMMENDATION OF LEUKOSITE BOARD
LeukoSite's board of directors unanimously approved the merger agreement and
the merger and unanimously recommends that LeukoSite stockholders vote FOR the
approval of the merger agreement and the merger.
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THE MERGER
BACKGROUND OF THE MERGER
The first contact between Millennium and LeukoSite concerning a potential
business combination was a telephone inquiry from Nick Galakatos, an officer of
Millennium, to a director of LeukoSite, in early March 1999. The LeukoSite
director suggested that Mark Levin, Chairman and Chief Executive Officer of
Millennium, call Christopher Mirabelli, Chairman and Chief Executive Officer of
LeukoSite.
On March 9, 1999 Mr. Levin placed a telephone call to Dr. Mirabelli to
express Millennium's interest in exploring the potential for a business
combination between Millennium and LeukoSite.
On March 23, 1999 and again on April 1, 1999, Mr. Levin and Dr. Mirabelli
spoke by telephone regarding common interests in research and development as
well as long-term objectives for each of Millennium and LeukoSite. Mr. Levin and
Dr. Mirabelli discussed the potential benefits of a merger, given the current
growth and strengths of each company.
On April 27, 1999 Mr. Levin and Dr. Mirabelli met in person to discuss
further a potential business combination between Millennium and LeukoSite.
On May 6, 1999 at a previously scheduled regular meeting, the LeukoSite
board of directors discussed the recent contacts between Millennium and
LeukoSite. On the same day, Dr. Mirabelli and Mr. Lawlor met with Mr. Levin to
discuss the two companies' organizations and the strengthened drug discovery
capabilities that a merger would engender.
On May 17, 1999 Dr. Mirabelli and Augustine Lawlor, Chief Operating Officer
of LeukoSite, met with Mr. Levin, Steve Holzman, Chief Business Officer of
Millennium, Robert Tepper, Chief Scientific Officer of Millennium, Alan Crane,
Vice President of Business Development of Millennium, Kevin Starr, Chief
Financial Officer of Millennium and Larry Brenkus, Senior Director of Strategic
Planning of Millennium. At this meeting, Dr. Mirabelli presented an overview of
LeukoSite's research and development programs and general discussions took place
concerning the same.
In late May, 1999 Mr. Levin proposed a business combination to
Dr. Mirabelli. Following a discussion with various members of the LeukoSite
board of directors, Dr. Mirabelli informed Mr. Levin that LeukoSite was not
interested in Mr. Levin's proposal. Dr. Mirabelli and Mr. Levin decided to
discontinue further discussions at this time.
On August 31, 1999 Mr. Levin called Dr. Mirabelli to ask whether LeukoSite
would be interested in renewing discussions about a potential business
combination. Dr. Mirabelli called Mr. Levin on September 10, 1999 and responded
positively. There were further discussions during an in-person meeting between
Mr. Levin and Dr. Mirabelli on September 13, 1999.
On September 20, 1999 Mr. Levin placed a telephone call to Dr. Mirabelli,
during which Mr. Levin made a new proposal for Millennium to acquire all the
outstanding stock of LeukoSite in a stock-for-stock transaction between
Millennium and LeukoSite. The next day, Dr. Mirabelli and Mr. Lawlor discussed
the proposal with LeukoSite's financial and legal advisors.
On September 22, 1999 at a previously scheduled regular meeting of the
LeukoSite board of directors, Dr. Mirabelli described the proposal from
Millennium, which had been made earlier in the week. The board of directors was
in favor of LeukoSite pursuing discussions with Millennium for a possible merger
of the two companies.
On September 23, 1999 Dr. Mirabelli and Mr. Levin further discussed the
proposal by telephone. Dr. Mirabelli provided information to Mr. Levin
concerning LeukoSite's capital structure and terms of a business combination
that would be acceptable to LeukoSite.
On September 29, 1999 Mr. Levin and Dr. Mirabelli held additional
discussions about the terms of a potential business combination. Later that day
Dr. Mirabelli and Mr. Lawlor met with PaineWebber, LeukoSite's financial
advisor, to discuss the potential terms.
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An initial agreement to combine the businesses was reached on September 30,
1999 in a telephone conversation between Mr. Levin and Dr. Mirabelli.
On October 1, 1999, Millennium retained BancBoston Robertson Stephens Inc.
to render an opinion as to the fairness, from a financial point of view, of the
exchange ratio to Millennium. Millennium also delivered a formal due diligence
request list to Mr. Lawlor on that date.
Also on October 1, 1999, Dr. Mirabelli and Mr. Levin agreed to explore
further the potential of a merger through a series of due diligence meetings
which were then scheduled to begin on October 4, 1999.
On October 4, 1999 Millennium and LeukoSite executed reciprocal
confidentiality agreements, began a series of due diligence presentations (which
involved certain members of management, and financial, legal and accounting
advisors, of each company), and exchanged business, legal and accounting due
diligence materials during the remainder of that week. Due diligence of each of
Millennium and LeukoSite continued through October 12, 1999.
On October 6, 1999, Hale and Dorr LLP, outside counsel to Millennium,
delivered to Bingham Dana LLP, outside counsel to LeukoSite, a draft of a
proposed Agreement and Plan of Merger and related documents. On October 8, 1999,
representatives of Millennium and their advisors met with representatives of
LeukoSite and their advisors to negotiate the terms of those agreements. In
addition, throughout the period from October 1, 1999 through October 14, 1999,
the two companies' management teams and their legal, financial and accounting
advisors continued their business, financial, legal and accounting due
diligence.
On October 12, 1999 Dr. Mirabelli and Mr. Lawlor met with Mr. Levin and
Mr. Starr to discuss the valuation of LeukoSite in the transaction. PaineWebber
joined the meeting by telephone. In that meeting a 0.4296 exchange ratio for the
conversion of a LeukoSite common share into a Millennium common share was
discussed.
On October 12 and 13, 1999, the Millennium board of directors held special
telephonic meetings for purposes of discussing the potential merger with
LeukoSite. Representatives of BancBoston Robertson Stephens attended and
participated in the deliberations at these meetings. At the meetings, the board
considered the commercial and strategic reasons for the proposed business
combination, as well as potential risks relating to the proposal. The board also
considered the due diligence information reported to it by members of
Millennium's management team. Mr. Levin summarized the status of the
negotiations on the principal terms of the merger agreement, together with
remaining unresolved issues. The board authorized management to continue to
negotiate the definitive agreement and the ancillary documentation, which
included employment agreements with Dr. Mirabelli and Mr. Lawlor.
On October 13, 1999 the LeukoSite board of directors held a special
telephonic board meeting to discuss the status of due diligence and the proposed
merger terms. At that meeting, PaineWebber made a presentation to the LeukoSite
board of directors concerning the financial terms of the proposed merger between
LeukoSite and Millennium.
On October 14, 1999, representatives of Millennium's management team and its
advisors completed a number of open issues on the merger agreement and ancillary
documentation. During the late afternoon on October 14, 1999, the Millennium
board convened a special telephonic meeting also attended by representatives of
Hale and Dorr LLP and BancBoston Robertson Stephens. Mr. Levin updated the board
on the status of the negotiations and announced that an agreement on the
material terms had been reached. Mr. Redlick of Hale and Dorr LLP summarized the
agreements and described the board's duties in considering whether to approve
the merger agreement. BancBoston Robertson Stephens delivered its oral opinion
(which was subsequently confirmed in writing) that, as of that date and based
upon and subject to the matters set forth in its opinion, the exchange ratio
provided for in the merger agreement was fair from a financial point of view to
Millennium. The Millennium board concluded that the transaction was fair to, and
in the best interests of, Millennium and its stockholders.
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The board unanimously voted to approve the transaction and authorized the
execution and delivery of the merger agreement and the related documentation.
During the late afternoon on October 14, 1999 the LeukoSite board of
directors held a special telephonic board meeting to consider the approval of
the merger agreement and the merger, at which meeting the LeukoSite board
determined that the merger and the merger agreement were in the best interests
of LeukoSite and its stockholders, approved the execution and delivery of the
merger agreement and recommended that LeukoSite stockholders vote to approve the
merger agreement and the merger. At the meeting, PaineWebber advised orally, and
later delivered its written opinion, that the exchange ratio pursuant to the
merger agreement was fair from a financial point of view to LeukoSite's
stockholders. A representative of Bingham Data LLP, LeukoSite's outside counsel,
summarized the agreements and described the board's duties in considering
whether to approve the merger agreement. As one of the conditions to the signing
of the merger agreement, members of the board of directors were requested and
had agreed to sign affiliate agreements, wherein each of them acknowledged the
restrictions set forth in Rule 145 of the Rules and Regulations of the
Securities Act of 1933, as amended and agreed to abide by certain restrictions
related thereto. In addition, it was agreed that members of management of
LeukoSite should pursue to completion the request by Millennium to obtain voting
agreements from certain significant shareholders.
Following the conclusion of the Millennium and LeukoSite board meetings, the
parties executed and delivered the merger agreement, Dr. Mirabelli and
Mr. Lawlor executed employment agreements to become effective upon the closing
of the merger, and certain stockholders of LeukoSite delivered voting agreements
and a press release announcing the execution of the agreement was issued that
evening.
REASONS FOR THE MERGER; RECOMMENDATION OF THE LEUKOSITE BOARD
JOINT REASONS FOR THE MERGER. The boards of directors of Millennium and
LeukoSite have each determined that, compared to continuing to operate their
companies on a stand-alone basis, the merged company would have better potential
to improve long-term operating and financial results. Millennium has a
significant, early-stage product pipeline and an integrated technology platform
which facilitates product discovery, and LeukoSite brings a portfolio of
complementary small molecule and biotherapeutic product candidates in
preclinical and clinical development, including a product which may be on the
market in 2000. Furthermore, the combined companies have significant research
and development funding through 19 strategic alliances. As a result, the
combined company will be able to offer a broader spectrum of activities than
either company would have been able to offer independently, thereby helping the
combined company in its efforts to build a fully-integrated biopharmaceutical
company. Both companies believe that this broadened spectrum, which ranges from
the identification and cataloging of genes to the commercialization of products
for patient treatment, along with the expertise of its personnel and clinical
development and regulatory experience, will make the combined company more
competitive than either company would have been operating independently. Both
companies believe that their combined capabilities, research and development
teams and product pipelines will accelerate the development of an integrated
biopharmaceutical company focused on breakthrough products for the management
and treatment of major human disease.
MILLENNIUM'S REASONS FOR THE MERGER. In reaching its decision to approve
the merger agreement, the Millennium board of directors consulted with its
management team and advisors and independently considered the proposed merger
agreement and the transactions contemplated by the merger agreement. Among the
factors considered by the Millennium board of directors were the following
factors in favor of the merger:
- LeukoSite has capabilities in the areas of pre-clinical development,
product manufacturing, clinical research and regulatory affairs that
provide for the opportunity to more rapidly advance the Millennium
internal pipeline toward clinical development and product
commercialization
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- LeukoSite has focused on oncology and inflammation treatments, which are
areas of strategic importance to Millennium
- in the area of inflammation research, the combined Millennium and
LeukoSite programs will represent a high quality research and drug
discovery capability for the treatment of major human disease including
rheumatoid arthritis, multiple sclerosis, inflammatory bowel disease and
asthma
- LeukoSite has a pipeline of small molecule and antibody-based
therapeutics, both of which are classes of drugs that are important to
Millennium's strategy
- LeukoSite has six molecules in clinical development
(CAMPATH-Registered Trademark-, LDP-01, LDP-02, LDP-977, LDP-341 and
LDP-519) that represent potential breakthrough treatments for cancer,
multiple sclerosis, stroke, inflammatory bowel disease, asthma, and other
areas of unmet need
- LeukoSite's lead product, CAMPATH-Registered Trademark-, represents a
potential breakthrough therapy for the treatment of chronic lymphocytic
leukemia and LeukoSite is preparing to complete the filing of a biologics
license application for this disease
- LeukoSite has over 12 major pre-clinical development programs, from which
two or more products may start clinical development over the next 12 to
18 months
- the Millennium board's view that the scientific synergies between
LeukoSite's strength in biology, chemistry and clinical development and
Millennium's genomics technology and industrialized approach to drug
discovery will allow the combined company to better realize the shared
objective of being a fully integrated biopharmaceutical company
- in addition to the potential for the market introduction of
CAMPATH-Registered Trademark- in 2000, additional studies on
CAMPATH-Registered Trademark-, if successful, could lead to approvals for
new clinical indications and product revenues
- LeukoSite's development capabilities provide Millennium with needed skills
to proceed with the in-licensing of late-stage clinical products as part
of Millennium's strategy to accelerate the generation of product revenues
- LeukoSite has six major alliances that provide an opportunity to share the
risks of product development
- Millennium's belief that the high quality of science practiced by
LeukoSite is consistent with Millennium's standards and practices
- the terms of the merger agreement, including the termination fee and
reimbursement of expenses to be paid by LeukoSite in the event of the
termination of the merger agreement for specified reasons
- the current and historical market valuations of the two companies
- the opinion of BancBoston Robertson Stephens that, as of October 14, 1999,
and based upon and subject to the matters described in the opinion, the
exchange ratio was fair to Millennium from a financial point of view
- the benefits to Millennium stockholders of holding shares in a larger and
financially stronger enterprise
The Millennium board also considered factors which weighed against the
merger, including:
- the fact that, based on trading prices for Millennium common stock and
LeukoSite common stock immediately prior to the announcement of the
exchange ratio, the LeukoSite stockholders would receive a premium over
the then current market price of LeukoSite common stock
- the potential effect that the public announcement of the merger would have
on the market price of Millennium common stock
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- the fixed nature of the exchange ratio and the resulting risk that, should
there be a significant increase in the market value of Millennium's common
stock, the value of the consideration to be received by LeukoSite
stockholders would be increased
- the risk that LeukoSite's products would not be successfully introduced on
the projected timetable, if at all, and the risk that other benefits of
the merger would not be achieved
- the termination fee and reimbursement of expenses to be paid by Millennium
in the event of the termination of the merger agreement for specified
reasons
On balance, considering all of the foregoing factors and risks, the
Millennium board concluded that the terms of the merger are fair to, and in the
best interests of Millennium stockholders, and the Millennium board unanimously
approved the merger agreement.
LEUKOSITE'S REASONS FOR THE MERGER. LeukoSite's board of directors
unanimously approved the merger agreement and believes that the merger is fair
to and in the best interests of LeukoSite and its stockholders. LEUKOSITE'S
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT LEUKOSITE'S STOCKHOLDERS VOTE FOR
APPROVAL OF THE MERGER AGREEMENT AND THE MERGER.
In reaching this decision, the board of directors considered a number of
factors relevant to the merger. Included in the factors considered are the
following:
- the LeukoSite board's view that LeukoSite's plan to raise the necessary
capital was subject to considerable risks given the current financing
environment for early stage biotechnology companies
- the LeukoSite board's view that the combined company will have an
increased ability to fund research and development of LeukoSite's products
and the exploitation of LeukoSite's platform technologies
- the LeukoSite board's view that the scientific synergies between
Millennium's genomics technology and industrialized approach to drug
discovery and LeukoSite's strength in biology, chemistry and clinical
development will allow the combined company to better realize the shared
objective of being a fully integrated biopharmaceutical company
- the LeukoSite board's view that the proposed structure of a
stock-for-stock transaction could potentially benefit LeukoSite
stockholders due to the potential positive impact of LeukoSite drug
candidates on Millennium's business and stockholder value
- the LeukoSite board's view, based in part on the opinion of PaineWebber,
that the exchange ratio of 0.4296 was a fair price to LeukoSite's
stockholders and represented a significant premium over historic
valuations of LeukoSite (the merger consideration represented a premium of
approximately 58% over the closing price of LeukoSite common stock on
October 14, 1999 and a premium of approximately 33% over the closing price
of LeukoSite on September 14, 1999), and that the consideration to be
offered to the stockholders of LeukoSite was fair from a financial point
of view to the LeukoSite stockholders
- the LeukoSite board's view that the price of Millennium's common stock was
valued attractively given the growth prospects in its underlying business
and its planned future development
- the presentation delivered by PaineWebber to the LeukoSite board of
directors and the written opinion of PaineWebber to the effect that, as of
the date of the opinion and based on and subject to the matters set forth
in the opinion, the consideration to be offered to the stockholders of
LeukoSite was fair from a financial point of view to the LeukoSite
stockholders
- the LeukoSite board's view that the terms of the merger agreement,
including the parties factual representations, warranties and covenants,
are reasonable and the fact that the agreement did not contain any
extraordinary conditions to Millennium's obligation to close the merger
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- the LeukoSite board also considered a number of potential negative factors
with respect to the merger, including but not limited to:
- the fixed nature of the exchange ratio and the resulting risk that,
should there be a significant decrease in the market value of
Millennium's common stock, the value of the consideration to be
received by LeukoSite stockholders would be reduced
- the loss of control over the future operations of LeukoSite following
the merger
- the dilution to the LeukoSite stockholders of the potential benefits of
one or more of its product candidates being successfully commercialized
- the recent increases in the stock price of Millennium in the days prior
to the merger and the fact that Millennium's stock price was at or near
its all-time high
- the risks that the benefits sought to be achieved in the merger may not
be achieved
The LeukoSite board discussed with PaineWebber the possibility that the
benefits described above or other benefits could be achieved through any other
combination or transaction and the risks and benefits of continuing to remain
independent. After reviewing the potentially negative factors, the LeukoSite
board concluded that they were outweighed by the positive factors and determined
that the merger is fair to, and in the best interests of, LeukoSite and its
stockholders.
This discussion of information and factors considered by the LeukoSite board
is not intended to be exhaustive but is believed to include certain material
factors considered by the LeukoSite board. The LeukoSite board did not assign
relative weight to or quantify the importance of the factors considered.
Accordingly, individual members of the LeukoSite board may have given different
weights to different factors and may have viewed different factors as affecting
the determination of fairness differently.
OPINION OF FINANCIAL ADVISOR TO MILLENNIUM
On October 1, 1999, Millennium and BancBoston Robertson Stephens executed an
engagement letter pursuant to which BancBoston Robertson Stephens was retained
by Millennium to render an opinion to the Millennium board of directors as to
the fairness, from a financial point of view, of the exchange ratio to
Millennium.
On October 14, 1999, at a meeting of the Millennium board of directors held
to evaluate the proposed merger, BancBoston Robertson Stephens delivered to the
Millennium board of directors its oral opinion, which was subsequently confirmed
in writing, that, as of that date and based upon and subject to the matters
described in the opinion, the exchange ratio was fair from a financial point of
view to Millennium. The exchange ratio was determined through negotiations
between the respective managements of Millennium and LeukoSite. Although
BancBoston Robertson Stephens assisted the management of Millennium in those
negotiations, it was not asked to, and did not, recommend to Millennium that any
specific exchange ratio constituted the appropriate exchange ratio for the
merger.
The full text of the BancBoston Robertson Stephens opinion, which sets forth
assumptions made, matters considered and limitations on the review undertaken,
is attached as Appendix B to this proxy statement/prospectus. Stockholders of
Millennium are urged to read the BancBoston Robertson Stephens opinion in its
entirety. The BancBoston Robertson Stephens opinion was prepared for the benefit
and use of the Millennium board of directors in its consideration of the merger.
The BancBoston Robertson Stephens opinion does not address:
- the relative merits of the merger and any other transactions,
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- business strategies discussed by the Millennium board of directors as
alternatives to the merger, or
- the underlying business decision of the Millennium board of directors to
proceed with the merger.
The summary of the BancBoston Robertson Stephens opinion set forth in this
proxy statement/ prospectus is qualified in its entirety by reference to the
full text of the BancBoston Robertson Stephens opinion.
In arriving at its opinion, BancBoston Robertson Stephens, among other
things:
(1) reviewed certain publicly available financial statements and other
business and financial information of LeukoSite and Millennium,
respectively;
(2) reviewed certain internal financial statements and other financial and
operating data concerning LeukoSite and Millennium prepared by the
managements of LeukoSite and Millennium;
(3) reviewed certain financial forecasts prepared by the managements of
LeukoSite and Millennium;
(4) held discussions with the respective managements of LeukoSite and
Millennium concerning the businesses, past and current operations,
financial condition and future prospects of both LeukoSite and
Millennium, independently and combined, including discussions with the
managements of LeukoSite and Millennium concerning the benefits of
combining LeukoSite and Millennium as well as their views regarding the
strategic rationale for the merger;
(5) reviewed the financial terms and conditions set forth in the draft dated
October 13, 1999 of the merger agreement;
(6) reviewed the stock price and trading history of LeukoSite and
Millennium;
(7) compared the financial performance of LeukoSite and Millennium and the
prices and trading activity of LeukoSite common stock and Millennium
common stock with those of certain other publicly traded companies
comparable with LeukoSite and Millennium, respectively;
(8) compared the financial terms of the merger with the financial terms, to
the extent publicly available, of other transactions that BancBoston
Robertson Stephens deemed relevant;
(9) prepared a pro forma merger analysis;
(10) prepared a discounted cash flow analysis of LeukoSite; and
(11) made such other studies and inquiries, and reviewed such other data, as
BancBoston Robertson Stephens deemed relevant.
In its review and analysis, and in arriving at its opinion, BancBoston
Robertson Stephens assumed and relied upon the accuracy and completeness of all
of the financial and other information provided to it (including information
furnished to it orally or otherwise discussed with it by the managements of
LeukoSite and Millennium) or publicly available and neither attempted to verify,
nor assumed responsibility for verifying, any of such information. BancBoston
Robertson Stephens relied upon the assurances of management of LeukoSite and
Millennium that they were not aware of any facts that would make such
information inaccurate or misleading. Furthermore, BancBoston Robertson Stephens
did not obtain or make, or assume any responsibility for obtaining or making,
any independent evaluation or appraisal of the properties, assets or liabilities
(contingent or otherwise) of LeukoSite or Millennium, nor was it furnished with
any such evaluation or appraisal. With respect to the financial forecasts (and
the assumptions and bases therefor) for each of LeukoSite and Millennium that it
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reviewed, upon the advice of the managements of LeukoSite and Millennium,
BancBoston Robertson Stephens assumed that such forecasts were reasonably
prepared in good faith on the basis of reasonable assumptions and reflected the
best currently available estimates and judgements as to the future financial
condition and performance of LeukoSite and Millennium, respectively, and it
further assumed that such forecasts would be realized in the amounts and in the
time periods currently estimated. BancBoston Robertson Stephens assumed that the
merger would be consummated upon the terms set forth in the draft merger
agreement made available to it before delivering its opinion without material
alteration thereof, including, among other things, that the merger would be
accounted for as a "purchase method" business combination in accordance with
U.S. generally accepted accounting principles and that the merger would be
traded as a tax-free reorganization pursuant to the Internal Revenue Code of
1986, as amended. In addition, BancBoston Robertson Stephens assumed that the
historical financial statements of each of LeukoSite and Millennium reviewed by
it were prepared and fairly presented in accordance with U.S. generally accepted
accounting principles consistently applied. BancBoston Robertson Stephens relied
as to all legal matters relevant to rendering its opinion on the advice of
counsel.
The BancBoston Robertson Stephens opinion is limited to the fairness, from a
financial point of view and as to the date of such opinion, to Millennium of the
exchange ratio. It does not express any opinion as to (1) the value of any
employee agreement or other arrangement entered into in connection with the
merger, (2) any tax or other consequences that might result from the merger or
(3) what the value of Millennium common stock will be when issued to LeukoSite's
stockholders pursuant to the merger agreement or the price at which shares of
Millennium common stock may be traded in the future. Further, the opinion does
not address the relative merits of the merger and the other business strategies
that the Millennium board of directors has considered or may be considering, nor
does it address the decision of the Millennium board of directors to proceed
with the merger.
The following is a summary of the financial analyses performed by BancBoston
Robertson Stephens in connection with its opinion. Certain of the information in
this section is presented in tabular form. IN ORDER TO BETTER UNDERSTAND THE
FINANCIAL ANALYSES PERFORMED BY BANCBOSTON ROBERTSON STEPHENS, THESE TABLES MUST
BE READ TOGETHER WITH THE TEXT OF EACH SUMMARY. THE BANCBOSTON ROBERTSON
STEPHENS OPINION IS BASED UPON THE TOTALITY OF THE VARIOUS ANALYSES PERFORMED,
AND BANCBOSTON ROBERTSON STEPHENS BELIEVES THAT SELECTING ANY PORTION OF THESE
ANALYSES, WITHOUT CONSIDERING ALL ANALYSES, WOULD CREATE AN INCOMPLETE VIEW OF
THE PROCESS UNDERLYING THE BANCBOSTON ROBERTSON STEPHENS OPINION.
EXCHANGE RATIO ANALYSIS. BancBoston Robertson Stephens compared the ratios
of the average closing price of Millennium common stock to the average closing
price of LeukoSite common stock over various periods ending on October 11, 1999
and calculated the premiums over such ratios implied by the exchange ratio. The
following table sets forth those historical ratios and implied premiums:
<TABLE>
<CAPTION>
PERIOD ENDING ON RATIO OF AVERAGE CLOSING PREMIUM OF EXCHANGE
OCTOBER 11, 1999 PRICES OF MILLENNIUM COMMON STOCK RATIO OVER RATIOS OF
AND BEGINNING ON: TO LEUKOSITE COMMON STOCK AVERAGE CLOSING PRICES
- ----------------- --------------------------------- ----------------------
<S> <C> <C>
October 11, 1999.............................. 0.2529x 69.9%
September 28, 1999............................ 0.2770x 55.1%
September 14, 1999............................ 0.3019x 42.3%
August 30, 1999............................... 0.3352x 28.2%
July 19, 1999................................. 0.3275x 31.2%
</TABLE>
COMPARABLE COMPANIES ANALYSIS. Using publicly available information,
BancBoston Robertson Stephens compared selected financial and stock market data
of LeukoSite and Millennium with corresponding data of certain publicly traded
companies that BancBoston Robertson Stephens deemed to be comparable to
LeukoSite and Millennium. Given that the selected comparable companies have
40
<PAGE>
financial and stock market performance characteristics that differ dramatically
depending upon their market capitalizations, BancBoston Robertson Stephens
categorized the comparable companies into two groups. The comparable companies
selected by BancBoston Robertson Stephens were:
LARGE CAPITALIZATION COMPANIES (WITH MARKET CAPITALIZATIONS GREATER THAN
$2 BILLION)
- Amgen Inc.
- BioChem Pharma Inc.
- Biogen Inc.
- Chiron Corp.
- Genentech Inc.
- Genzyme Corp.
- IDEC Pharmaceuticals
- Immunex Corp.
- MedImmune Inc.
MID-CAPITALIZATION COMPANIES (WITH MARKET CAPITALIZATIONS LESS THAN
$2 BILLION)
- Abgenix Inc.
- Alkermes Inc.
- Cephalon, Inc.
- COR Therapeutics, Inc.
- Enzon Inc.
- ICOS Corp.
- ImClone Systems
- U.S. Bioscience, Inc.
- Vertex Pharmaceuticals
In performing its analysis, BancBoston Robertson Stephens calculated, for
each selected comparable company, a multiple of its total capitalization
(defined as market capitalization plus debt minus cash) to estimated revenues
for calendar years 2000 and 2001. The market capitalization of each selected
comparable company was calculated on the basis of closing market prices on
October 12, 1999, and revenue estimates were taken from publicly available
research reports. Applying this range of multiples to the estimates made by
Millennium's management of LeukoSite's revenues for calendar years 2000 and
2001, BancBoston Robertson Stephens derived the ranges of implied equity value,
implied equity value per share and implied exchange ratio set forth below:
<TABLE>
<CAPTION>
IMPLIED EQUITY IMPLIED
MULTIPLE IMPLIED EQUITY VALUE PER SHARE EXCHANGE
RANGES VALUE RANGES (MM) RANGES RATIO RANGES
------------------ -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Total Cap./CY2000E Revenue......... 22.0x-28.0x $ 419.3-$524.3 $ 25.43-$31.81 0.3023-0.3781
Total Cap./CY2001E Revenue......... 12.0x-16.0x $ 301.5-$390.7 $ 18.29-$23.70 0.2174-0.2817
</TABLE>
41
<PAGE>
BancBoston Robertson Stephens also applied a control premium range, based on
the results of its precedent transaction analysis, of 35.0% to 60.0% to derive
the ranges of implied equity value, implied equity value per share and implied
exchange ratio set forth below:
<TABLE>
<CAPTION>
CONTROL IMPLIED EQUITY IMPLIED
PREMIUM IMPLIED EQUITY VALUE PER SHARE EXCHANGE
RANGES VALUE RANGES (MM) RANGES RATIO RANGES
------------------ -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Total Cap./CY2000E Revenue....... 35.0%-60.0% $ 566.1-$839.0 $ 34.34-$50.89 0.4081-0.6049
Total Cap./CY2001E Revenue....... 35.0%-60.0% $ 407.1-$625.1 $ 24.69-$37.92 0.2935-0.4507
</TABLE>
PRECEDENT TRANSACTIONS ANALYSIS. BancBoston Robertson Stephens selected the
following comparable precedent transactions in the biotechnology industry for
purposes of evaluating the exchange ratio:
- MedImmune's acquisition of U.S Biosciences
- Schering AG's acquisition of Diatide
- Merck's acquisition of SIBIA Neurosciences
- Johnson & Johnson's acquisition of Centocor
- Abbott Laboratories' acquisition of ALZA
- Pharmacia & Upjohn's acquisition of SUGEN
- Gilead Sciences' acquisition of NeXstar Pharmaceuticals
- Warner-Lambert's acquisition of Agouron Pharmaceuticals
- Watson Pharmaceuticals' acquisition of TheraTech
- ALZA's acquisition of SEQUUS Pharmaceuticals
- Mylan Laboratories' acquisition of Penederm
- T Cell Sciences' acquisition of Virus Research Institute
- Elan's acquisition of Neurex
- Baxter International's acquisition of Somatogen
- Elan's acquisition of Sano
- Arris Pharmaceuticals' acquisition of Sequanna Therapeutics
- Elan's acquisition of Advanced Therapeutic Systems
- Elan's acquisition of Athena Neurosciences
In analyzing these precedent transactions, BancBoston Robertson Stephens
compared the total consideration paid in each precedent transaction to the
estimated revenues of the acquired entity for the twelve months immediately
following the transaction. BancBoston Robertson Stephens relied on publicly
available research reports for the data underlying its calculations. Such an
analysis would typically have been used to find a range of total capitalization
values for LeukoSite. Because this analysis produced such a wide range of
multiples, however, BancBoston Robertson Stephens did not consider this analysis
in evaluating the exchange ratio.
BancBoston Robertson Stephens also compared the premiums paid in each
transaction over market capitalization based on each acquired company's closing
price one day and one month prior to announcement date. In addition, BancBoston
Robertson Stephens compared the premiums paid over market capitalization based
on each acquired company's average closing price over the twenty-day
42
<PAGE>
period prior to announcement date. Applying these premium ranges to LeukoSite's
market capitalization based on closing prices on a comparable day or for a
comparable period preceding the announcement of the merger, BancBoston Robertson
Stephens derived the following:
<TABLE>
<CAPTION>
IMPLIED EQUITY IMPLIED
PREMIUM IMPLIED EQUITY VALUE PER SHARE EXCHANGE
RANGES VALUE RANGES (MM) RANGES RATIO RANGES
------------------ -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
One Day Premium.................. 40.0%-60.0% $ 513.5-$586.9 $ 31.15-$35.60 0.3703-0.4232
One Month Premium................ 50.0%-75.0% $ 580.3-$677.0 $ 35.20-$41.07 0.4184-0.4882
20-Day Average Premium........... 40.0%-75.0% $ 499.3-$624.1 $ 30.28-$37.85 0.3600-0.4500
</TABLE>
No company, business or transaction compared in the comparable companies
analysis or precedent transactions analysis is identical to LeukoSite or
Millennium. Accordingly, an analysis of the results of the foregoing is not
entirely mathematical: rather, it involves complex considerations and judgments
concerning differences in financial and operating characteristics and other
factors that could affect the acquisition, public trading and other values of
the comparable companies, precedent transactions or the business segment,
company or transactions to which LeukoSite and Millennium are being compared.
DISCOUNTED CASH FLOW ANALYSIS. BancBoston Robertson Stephens performed a
discounted cash flow analysis on the after-tax free cash flows of LeukoSite for
the calendar years 2000 through 2005. In conducting its analysis, BancBoston
Robertson Stephens used estimates prepared by Millennium's management.
BancBoston Robertson Stephens employed the following procedures:
(1) BancBoston Robertson Stephens discounted the estimated after-tax free
cash flows using a range of discount rates from 16.0% to 20.0%. The range
of discount rates was based on the weighted average cost of capital of
LeukoSite and the comparable companies, derived from publicly available
research reports. LeukoSite's after-tax free cash flows were calculated
as the after-tax operating earnings of LeukoSite, adjusted to add back
non-cash expenses and to subtract uses of cash not reflected in the
income statement.
(2) BancBoston Robertson Stephens then added to the present value of the
after-tax free cash flows the terminal value of LeukoSite in the calendar
year ending 2006, discounted back to the present at the same discount
rates applied above. The terminal value was computed by multiplying
estimated revenue for calendar year 2006 by terminal value revenue
multiples ranging from 12.0x to 16.0x. The range of terminal multiples
selected reflects BancBoston Robertson Stephens' judgment as to an
appropriate range of multiples at the end of the referenced period.
Applying the above ranges of discount rates and terminal value multiples to
the after-tax free cash flows of LeukoSite yielded the following:
<TABLE>
<CAPTION>
IMPLIED EQUITY IMPLIED
IMPLIED EQUITY VALUE PER SHARE EXCHANGE
VALUE RANGE (MM) RANGE RATIO RANGE
- ------------------- -------------------- --------------------
<S> <C> <C>
$365.2-$625.8 $ 22.15-$37.96 0.2633-0.4512
</TABLE>
While the foregoing summary describes certain analyses and factors that
BancBoston Robertson Stephens deemed material in its presentation to the
Millennium board of directors, it is not a comprehensive description of all
analyses and factors considered by BancBoston Robertson Stephens. The
preparation of a fairness opinion is a complex process that involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of these methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to summary
description. BancBoston Robertson Stephens believes that its analyses must be
considered as a whole and that selecting portions of its analyses and of the
factors considered by it, without considering all analyses and factors, would
create an incomplete view of the evaluation process underlying the
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<PAGE>
BancBoston Robertson Stephens opinion. Several analytical methodologies were
employed and no one method of analysis should be regarded as critical to the
overall conclusion reached by BancBoston Robertson Stephens. Each analytical
technique has inherent strengths and weaknesses, and the nature of the available
information may further affect the value of particular techniques. The
conclusion reached by BancBoston Robertson Stephens is based on all analyses and
factors taken as a whole and also on application of BancBoston Robertson
Stephens' own experience and judgment. Such conclusion may involve significant
elements of subjective judgment and qualitative analysis. BancBoston Robertson
Stephens therefore believes that selecting any portion of those analyses,
without considering all analyses, would provide an incomplete view of the
BancBoston Robertson Stephens opinion.
In performing its analyses, BancBoston Robertson Stephens considered general
economic, market and financial conditions and other matters, many of which are
beyond the control of LeukoSite and Millennium. It should be understood that
subsequent developments may affect the conclusion expressed in the BancBoston
Robertson Stephens opinion, and that the analyses performed by BancBoston
Robertson Stephens are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than those suggested
by such analyses. Analyses relating to the value of a business do not purport to
be appraisals or to reflect the prices at which the business actually may be
purchased.
Pursuant to its engagement letter with Millennium, BancBoston Robertson
Stephens was paid a fee of $1 million for its services in connection with the
preparation of the BancBoston Robertson Stephens opinion. Millennium also agreed
to reimburse BancBoston Robertson Stephens for its expenses and to indemnify
BancBoston Robertson Stephens and other related persons for liabilities relating
to the services provided by BancBoston Robertson Stephens under its engagement
letter, including liabilities under the federal securities laws.
BancBoston Robertson Stephens was retained based on its experience with
mergers and acquisitions and securities valuations generally, as well as its
investment banking relationship and familiarity with Millennium. BancBoston
Robertson Stephens has provided financial advisory and investment banking
services to Millennium from time to time, for which it has received customary
fees, and may continue to do so in the future.
BancBoston Robertson Stephens is a nationally recognized investment banking
firm. As part of its investment banking business, BancBoston Robertson Stephens
is frequently engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of securities, private placements and other purposes. BancBoston
Robertson Stephens may actively trade the equity of Millennium and LeukoSite for
its own account and for the account of its customers and, accordingly, may at
any time hold a long or short position in such securities. BancBoston Robertson
Stephens maintains a market in the Millennium common stock and regularly
publishes research reports regarding the biopharmaceutical industry and the
business and securities of Millennium and other publicly traded companies in the
biopharmaceutical industry.
OPINION OF FINANCIAL ADVISOR TO LEUKOSITE
PaineWebber, as part of its engagement by LeukoSite, was retained to render
an opinion as to whether the exchange ratio was fair, from a financial point of
view, to the holders of LeukoSite common stock. The following is a summary of
the report presented on October 13, 1999, by PaineWebber to the LeukoSite board
of directors in connection with the rendering of its opinion on October 14,
1999.
THE FULL TEXT OF THE PAINEWEBBER OPINION, DATED OCTOBER 14, 1999, WHICH SETS
FORTH THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND
LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS APPEDIX C TO THIS DOCUMENT.
YOU SHOULD READ THE PAINEWEBBER OPINION CAREFULLY AND IN
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<PAGE>
ITS ENTIRETY. THIS SUMMARY OF THE PAINEWEBBER OPINION IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE PAINEWEBBER OPINION.
In connection with the consideration by the LeukoSite board of directors of
the merger agreement, PaineWebber delivered its written opinion, dated
October 14, 1999, to the effect that, as of that date, and based upon its review
and assumptions and subject to the limitations summarized below, the exchange
ratio is fair, from a financial point of view, to the holders of LeukoSite
common stock. The PaineWebber opinion was directed to, and prepared at the
request and for the information of the LeukoSite board of directors and does not
constitute a recommendation to any holder of LeukoSite common stock as to how
any such stockholder should vote with respect to the merger.
In arriving at its opinion, PaineWebber, among other things:
- Reviewed LeukoSite's Annual Reports, Forms 10-K and related financial
information for the three fiscal years ended December 31, 1998; and
LeukoSite's Form 10-Q and the related unaudited financial information for
the six months ended June 30, 1999;
- Reviewed Millennium's Annual Reports, Forms 10-K and related financial
information for the three fiscal years ended December 31, 1998; and
Millennium's Form 10-Q and the related unaudited financial information for
the six months ended June 30, 1999;
- Reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets and prospects of LeukoSite and
Millennium, respectively, furnished to PaineWebber by LeukoSite and
Millennium, respectively;
- Conducted discussions with members of senior management of LeukoSite and
Millennium concerning their respective businesses and prospects;
- Reviewed the historical market prices and trading activity for LeukoSite
common stock and Millennium common stock and compared them with those of
certain publicly traded companies which PaineWebber deemed to be relevant;
- Compared the financial position and results of operations of LeukoSite and
Millennium with those of certain other publicly traded companies which
PaineWebber deemed to be relevant;
- Compared the proposed financial terms of the transactions contemplated by
the merger agreement with the financial terms of certain other mergers and
acquisitions which PaineWebber deemed to be relevant;
- Reviewed a draft of the merger agreement dated October 13, 1999;
- Reviewed drafts of the stockholder voting agreements dated October 13,
1999; and
- Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as
PaineWebber deemed necessary, including PaineWebber's assessment of
general economic, market and monetary conditions.
In preparing its opinion, PaineWebber relied on the accuracy and
completeness of all information that was publicly available, supplied or
otherwise communicated to PaineWebber by or on behalf of LeukoSite and
Millennium, and PaineWebber did not assume any responsibility to independently
verify such information. With respect to the financial forecasts examined by
PaineWebber, PaineWebber assumed, with LeukoSite's and Millennium's consent,
that they were reasonably prepared on bases reflecting the best currently
available estimates and good faith judgment of the management of LeukoSite and
Millennium as to the future performance of LeukoSite and Millennium,
respectively. PaineWebber also relied upon assurances of the management of
LeukoSite and Millennium that they were unaware of any facts that would make the
information or financial forecasts provided to PaineWebber incomplete or
misleading. PaineWebber was not engaged to make, and did not make, an
45
<PAGE>
independent evaluation or appraisal of the assets or liabilities (contingent or
otherwise, known or unknown) of LeukoSite or Millennium, nor was PaineWebber
furnished with any such evaluations or appraisals. PaineWebber also assumed the
following with LeukoSite's consent:
- The merger will receive purchase accounting treatment under US generally
accepted accounting principals, or GAAP
- The merger will qualify as a tax-free, stock-for-stock exchange under US
tax law
- All material liabilities (contingent or otherwise, known or unknown) of
LeukoSite and Millennium were as set forth in the consolidated financial
statements of LeukoSite and Millennium, respectively.
The PaineWebber opinion was based upon economic, monetary and market
conditions existing on the date of the PaineWebber opinion. Furthermore,
PaineWebber expressed no opinion as to the price or trading ranges at which
LeukoSite common stock or Millennium common stock will trade after the date of
the PaineWebber opinion.
The PaineWebber opinion does not address the relative merits of the merger
and any other transactions or business strategies that may have been discussed
by the LeukoSite board of directors as alternatives to the merger, or the
decision of the LeukoSite board of directors to proceed with the merger.
PaineWebber was not requested to, and did not, solicit third party indications
of interest in acquiring all or any portion of LeukoSite. LeukoSite did not
place any limitations upon PaineWebber with respect to the procedures followed
or factors considered in rendering its opinion.
The following paragraphs summarize the significant analyses performed by
PaineWebber in arriving at its opinion.
HISTORICAL STOCK PERFORMANCE. PaineWebber reviewed trading prices for the
shares of LeukoSite common stock. This share performance review indicated that
for the twelve months ended October 12, 1999, the low and high closing prices
for the LeukoSite common stock on the Nasdaq National Market were $7.13 and
$29.88, respectively. PaineWebber also reviewed the LeukoSite share price on
October 12, 1999 and averages over the following periods prior to October 12,
1999 as set forth in the following table:
<TABLE>
<CAPTION>
TRADING PERIOD PRICE
- -------------- -----
<S> <C>
October 12, 1999............................................ $22.25
</TABLE>
<TABLE>
<CAPTION>
TRADING PERIOD AVERAGE PRICE
- -------------- -------------
<S> <C>
Latest 10 days.............................................. $20.24
Latest 20 days.............................................. $21.07
Latest 30 days.............................................. $23.22
Latest 60 days.............................................. $21.08
Latest 180 days............................................. $14.43
Latest twelve months........................................ $13.34
</TABLE>
PaineWebber also reviewed trading prices for the shares of Millennium common
stock. This share performance review indicated that for the twelve months ended
October 12, 1999, the low and high closing prices for the Millennium common
shares on the Nasdaq National Market were $15.75 and
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<PAGE>
$86.00, respectively. PaineWebber also reviewed the Millennium share price on
October 12, 1999 and averages over the following periods prior to October 12,
1999 as set forth in the following table:
<TABLE>
<CAPTION>
TRADING PERIOD PRICE
- -------------- -----
<S> <C>
October 12, 1999............................................ $84.13
</TABLE>
<TABLE>
<CAPTION>
TRADING PERIOD AVERAGE PRICE
- -------------- -------------
<S> <C>
Latest 10 days.............................................. $75.09
Latest 20 days.............................................. $71.46
Latest 30 days.............................................. $71.09
Latest 60 days.............................................. $64.93
Latest 180 days............................................. $45.42
Latest twelve months........................................ $38.82
</TABLE>
EXCHANGE RATIO ANALYSIS. PaineWebber calculated exchange ratios based on
the trading price relationship between the LeukoSite common stock and Millennium
common stock as described under the caption "Historical stock performance"
above. This calculated exchange ratio review indicated that for LeukoSite's and
Millennium's latest twelve months ended October 12, 1999, the low LeukoSite/
Millennium exchange ratio was 0.2309 and the high LeukoSite/Millennium ratio was
0.6923. PaineWebber also reviewed the LeukoSite/Millennium exchange ratio on
October 12, 1999 and averages over periods prior to October 12, 1999 as set
forth in the following tables:
<TABLE>
<CAPTION>
TRADING PERIOD EXCHANGE RATIO
- -------------- --------------
<S> <C>
October 12, 1999............................................ 0.2645
</TABLE>
<TABLE>
<CAPTION>
AVERAGE
TRADING PERIOD EXCHANGE RATIO
- -------------- --------------
<S> <C>
Latest 5 days............................................... 0.2475
Latest 10 days.............................................. 0.2721
Latest 30 days.............................................. 0.3295
Latest 90 days.............................................. 0.3238
Latest 180 days............................................. 0.3175
Latest twelve months........................................ 0.3662
</TABLE>
SELECTED COMPARABLE PUBLIC COMPANY ANALYSIS. Using publicly available
information, PaineWebber compared selected historical and projected financial,
operating and stock market performance data of LeukoSite and Millennium to the
corresponding data of certain publicly traded companies that PaineWebber deemed
to be relevant for the purposes of comparison to LeukoSite and Millennium.
The LeukoSite comparable companies consisted of:
<TABLE>
<S> <C>
Abgenix, Inc. ImmunoGen, Inc.
Aronex Pharmaceuticals, Inc. Isis Pharmaceuticals, Inc.
Atrix Laboratories, Inc. Medarex, Inc.
Corixa Corporation Onyx Pharmaceuticals, Inc.
EntreMed, Inc. Pharmacyclics, Inc.
GelTex Pharmaceuticals, Inc. Progenics Pharmaceuticals, Inc.
ICOS Corporation Protein Design Labs, Inc.
ILEX Oncology, Inc. QLT PhotoTherapeutics, Inc.
ImClone Systems Incorporated Vion Pharmaceuticals, Inc.
</TABLE>
47
<PAGE>
The Millennium comparable companies consisted of:
<TABLE>
<S> <C>
Affymetrix, Inc. Human Genome Sciences, Inc.
Alkermes, Inc. ICOS Corporation
Axys Pharmaceuticals, Inc. Incyte Pharmaceuticals, Inc.
CuraGen Corporation Lynx Therapeutics, Inc.
Gene Logic Inc. Myriad Genetics, Inc.
Genome Therapeutics Corp. Celera Genomics Group (PE Corp.)
Genset, S.A.
</TABLE>
With respect to both the LeukoSite and Millennium comparable companies,
PaineWebber analyzed a number of different data items including the market value
of the total outstanding equity and the market value of the total outstanding
equity plus net debt.
Because of the inherent differences between the product portfolios and
operations of LeukoSite and Millennium and the LeukoSite and Millennium
comparable companies, PaineWebber believed that a purely quantitative analysis
would be insufficient and not adequately reliable to render a fairness opinion.
As PaineWebber informed the LeukoSite Board, an appropriate use of comparable
company analysis in this instance would involve qualitative judgments concerning
differences between the financial and operating characteristics and products
under development which would effect the public trading values of LeukoSite and
Millennium comparable companies and LeukoSite and Millennium.
SELECTED COMPARABLE MERGERS AND ACQUISITIONS ANALYSIS. PaineWebber reviewed
publicly available financial information for selected mergers and acquisitions
involving specialty and emerging pharmaceutical and biotechnology companies.
From this universe, PaineWebber used information from 40 mergers and
acquisitions to perform its analysis.
With respect to the public specialty and emerging pharmaceutical and
biotechnology mergers and acquisitions PaineWebber analyzed, PaineWebber
reviewed a number of different data items including the equity purchase price
plus net debt.
Because the reasons for and the circumstances surrounding each of the
transactions analyzed were specific to each transaction and because of the
inherent differences between the businesses, operations and prospects of
LeukoSite and Millennium compared to the businesses, operations and prospects of
the companies that were parties to the selected specialty and emerging
pharmaceutical and biotechnology companies mergers and acquisitions PaineWebber
analyzed, PaineWebber believed it was inappropriate to, and therefore did not,
rely solely on the quantitative results of the analysis, and accordingly also
made qualitative judgments concerning differences between the characteristics of
these transactions. These qualitative judgments did not lead to specific
conclusions regarding the fairness of the merger consideration, but rather were
part of PaineWebber's evaluation of the relevance of this analysis under the
particular circumstances of the merger.
DISCOUNTED CASH FLOW ANALYSIS. PaineWebber analyzed LeukoSite based on an
unleveraged discounted cash flow analysis of the projected financial performance
of LeukoSite. Such projected financial performance was based upon a forecast for
LeukoSite provided by LeukoSite management. PaineWebber performed the analysis
in two parts, separating the financial performance related to one of LeukoSite's
later stage products, CAMPATH-Registered Trademark-, from the financial
performance of LeukoSite's other operations. Each of these discounted cash flow
analyses determined the discounted present value of the unleveraged after-tax
cash flows generated over the forecast period for each part, and then added a
terminal value for both CAMPATH-Registered Trademark- and non-CAMPATH-Registered
Trademark-operations based upon a range of earnings before interest and taxes or
EBIT multiples and discount rates which PaineWebber deemed appropriate for each
of the two parts.
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<PAGE>
With respect to Millennium, PaineWebber analyzed Millennium based on an
unleveraged discounted cash flow analysis of the projected financial performance
of Millennium. Such projected financial performance was based upon a forecast
for Millennium provided by Millennium management. The discounted cash flow
analysis determined the discounted present value of the unleveraged after-tax
cash flows generated over the forecast period and then added a terminal value
based upon a range of EBIT multiples and discount rates which PaineWebber deemed
appropriate for these analyses.
PREMIUMS PAID ANALYSIS. PaineWebber reviewed purchase price per share
premiums paid in 122 publicly disclosed stock-for-stock merger transactions of
non-financial domestic companies announced and completed from January 1, 1997 to
October 8, 1999. This analysis indicated the following premiums to the target's
closing stock prices as set forth in the following table:
<TABLE>
<CAPTION>
PERIOD PRIOR TO ANNOUNCEMENT AVERAGE MEDIAN
- ---------------------------- -------- --------
<S> <C> <C>
One day.................................................... 24.4% 20.3%
One week................................................... 32.5% 29.3%
Four weeks................................................. 42.7% 33.9%
</TABLE>
PaineWebber also reviewed the purchase price per share premiums paid in the
comparable mergers and acquisitions transactions involving selected specialty
and emerging pharmaceutical and biotechnology companies described previously.
This analysis indicated the following premiums to the targets' closing stock
prices as set forth in the following table:
<TABLE>
<CAPTION>
PERIOD PRIOR TO ANNOUNCEMENT AVERAGE MEDIAN
- ---------------------------- -------- --------
<S> <C> <C>
One day.................................................... 37.8% 33.9%
One week................................................... 41.3% 39.8%
Four weeks................................................. 58.8% 54.8%
</TABLE>
The implied premiums to the LeukoSite closing stock price based on an
exchange ratio of 0.4296 Millennium common shares per LeukoSite share for the
one day, one week and four week periods prior to October 13, 1999 were as set
forth in the following table:
<TABLE>
<CAPTION>
PERIOD PRIOR TO OCTOBER 13, 1999 LEUKOSITE IMPLIED PREMIUM
- -------------------------------- -------------------------
<S> <C>
One day.............................................. 62.4%
One week............................................. 81.8%
Four weeks........................................... 32.6%
</TABLE>
CONTRIBUTION ANALYSIS. PaineWebber analyzed LeukoSite's and Millennium's
relative contribution to the combined entity, based on LeukoSite's management
projections and Millennium's management projections, for the fiscal years 1999
through 2003 with respect to revenue and EBIT, as set forth in the following
table:
<TABLE>
<CAPTION>
LEUKOSITE CONTRIBUTION
ANALYSIS TO PRO FORMA ENTITY
- -------- ----------------------
<S> <C>
1999 Revenue............................................. 5.3%
1999 EBIT................................................ N/M
2003 Revenue............................................. 16.2%
2003 EBIT................................................ 20.4%
</TABLE>
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Based on an exchange ratio of 0.4296 Millennium common shares for each
outstanding share of LeukoSite common stock, holders of LeukoSite common stock
will own approximately 16.4% of the diluted common shares of the combined entity
after giving effect to the merger.
The results of this contribution analysis are not necessarily indicative of
the contributions that the respective businesses of LeukoSite and Millennium may
have in the future.
PRO FORMA MERGER ANALYSIS. PaineWebber performed an analysis of the
potential pro forma effect of the merger on Millennium's projected earnings per
share or EPS. In performing this analysis, PaineWebber assumed the following
with LeukoSite's and Millennium's consent:
- The merger will receive purchase accounting treatment under U.S. GAAP
- Goodwill amortized over four years
- A significant charge to results of operations as in-process research and
development
- No synergies achieved
PaineWebber combined the projected operating results of LeukoSite provided
by LeukoSite management with projected operating results for Millennium provided
by Millennium management, to arrive at the combined company projected net
income. PaineWebber divided this result by the pro forma diluted shares
outstanding to arrive at a combined company diluted EPS. PaineWebber then
compared the calculated combined company EPS to the EPS estimate for Millennium
on a stand-alone basis (as provided by Millennium management) to determine the
pro forma impact of the merger on Millennium.
The summary of the PaineWebber opinion set forth above does not purport to
be a complete description of the data or analyses presented by PaineWebber. The
preparation of a fairness opinion involves various determinations as to the most
appropriate and relevant quantitative methods of financial analyses and the
application of those methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to partial analysis or summary
description. Accordingly, PaineWebber believes that its analysis must be
considered as a whole and that considering any portion of such analysis and of
the factors considered, without considering all analyses and factors, could
create a misleading or incomplete view of the process underlying the opinion. In
its analyses, PaineWebber made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the control of LeukoSite and Millennium. Any estimates
contained in these analyses are not necessarily indicative of actual values or
predictive of future results or values, which may be significantly more or less
favorable than as set forth therein. Accordingly, such estimates are inherently
subject to substantial uncertainty and none of LeukoSite, Millennium or
PaineWebber assume responsibility for the accuracy of such estimates. In
addition, analyses relating to the value of businesses do not purport to be
appraisals or to reflect the prices at which businesses may actually be sold.
LeukoSite selected PaineWebber to be its financial advisor in connection
with the merger because PaineWebber is a prominent investment banking and
financial advisory firm with experience in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of securities, private placements and
valuations for corporate purposes.
Pursuant to an engagement letter between LeukoSite and PaineWebber dated
September 22, 1999, PaineWebber earned a fee of $500,000 for rendering the
opinion. In addition, PaineWebber will receive a fee, payable upon completion of
the merger, of approximately $4.7 million, against which the opinion fee will be
credited, and will be reimbursed for certain of its related expenses.
PaineWebber will not be entitled to any additional fees or compensation in the
event the merger is not approved or otherwise consummated. LeukoSite also
agreed, under separate agreement, to indemnify PaineWebber, its
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affiliates and each of its directors, officers, agents and employees and each
person, if any, controlling PaineWebber or any of its affiliates against certain
liabilities, including liabilities under federal securities laws.
Prior to this engagement, PaineWebber has not provided investment banking
services to LeukoSite. In the ordinary course of business, PaineWebber may
actively trade the securities of LeukoSite and Millennium for its own account
and for the accounts of its customers and, accordingly, may at any time hold
long or short positions in such securities.
INTERESTS OF LEUKOSITE'S DIRECTORS AND OFFICERS IN THE MERGER
GENERAL. Executive officers and the members of the board of directors of
LeukoSite have interests in the merger that differ from the interests of its
stockholders generally. Both boards were aware of these interests and considered
them, among other matters, in approving the merger agreement and the
transactions contemplated thereby.
INDEMNIFICATION AND INSURANCE. The merger agreement provides that
Millennium will, for a period of six years from the closing, indemnify each
present and former director or officer of LeukoSite or any of its subsidiaries
to the extent that they are indemnified by LeukoSite prior to the merger with
respect to liabilities for acts or omissions occurring at or prior to the date
of the merger. The merger agreement also provides that Millennium will maintain
LeukoSite's current directors' and officers' liability insurance coverage on
terms no less favorable than the policy in effect on October 14, 1999 for three
years after the date of the merger. However, Millennium is not obligated to pay
more than 150% of the amount paid for annual premiums by LeukoSite in 1999.
OPTIONS. At the time of the merger, under the terms of LeukoSite's Amended
and Restated 1993 Stock Option Plan, as amended, all options will accelerate and
become immediately exercisable. Under these provisions, vesting for options
totaling 78,938 Millennium shares for Christopher Mirabelli and 67,033
Millennium shares for Augustine Lawlor will accelerate and become immediately
exercisable. For all LeukoSite officers and directors as a group, vesting for
options totaling 181,094 Millennium shares will accelerate and become
immediately exercisable.
DIRECTORS AND EXECUTIVE OFFICERS. At the time of the merger, Millennium
will appoint Christopher K. Mirabelli, Ph.D., LeukoSite's Chairman and Chief
Executive Officer, to be a director and an executive officer of Millennium. In
the event that Dr. Mirabelli ceases to be a director of Millennium prior to
Millennium's 2003 annual meeting of stockholders, the Millennium board of
directors is required to consider in good faith replacing Dr. Mirabelli with
another person who was serving as a director of LeukoSite on October 14, 1999.
Millennium has entered into an employment agreement with Dr. Mirabelli which
will become effective upon consummation of the merger. Pursuant to this
employment agreement, Dr. Mirabelli will be paid an annual base salary of
$287,179, subject to annual review. In addition, Dr. Mirabelli will be eligible
to participate in annual cash bonus programs as may be established from time to
time by Millennium. Twenty-five percent of any Millennium options granted to
Dr. Mirabelli between the closing of the merger and the first anniversary of the
closing date will become exercisable on the first anniversary of the closing
date if Dr. Mirabelli has completed at least one consecutive year of employment
with Millennium after the closing date, or he has completed at least six
consecutive months of employment and has met certain obligations to be available
for consulting to Millennium. Millennium has agreed to make Dr. Mirabelli whole
for any excise taxes payable by him as a result of certain payments relating to
a change of control of LeukoSite.
Dr. Mirabelli's employment agreement is for a term of three years, subject
to earlier termination by either party. In the event of an early termination of
Dr. Mirabelli's employment by Millennium without cause, by Dr. Mirabelli after
he has completed at least six consecutive months of employment
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<PAGE>
following the merger, by Dr. Mirabelli for "good reason," as defined in the
agreement, prior to the termination of such six-month period, or as a result of
Dr. Mirabelli's death or disability, Millennium is required to pay
Dr. Mirabelli his salary and benefits until 18 months after termination, plus a
lump sum payment on the date of termination equal to six months base salary.
Dr. Mirabelli has agreed not to compete with Millennium for a period of two
years following the termination of his employment.
Millennium has entered into an employment agreement with Mr. Lawlor which
will become effective upon consummation of the merger. Pursuant to this
employment agreement, Mr. Lawlor will be paid an annual base salary of $226,512.
Millennium has agreed to make Mr. Lawlor whole for any excise taxes payable by
him as a result of certain payments relating to a change of control of
LeukoSite. Mr. Lawlor's employment agreement is for a term of six months,
subject to earlier termination by either party. In the event of an early
termination of Mr. Lawlor's employment by Millennium without cause, upon the
expiration of the employment agreement, by Mr. Lawlor for "good reason," as
defined in the agreement, or as a result of Mr. Lawlor's death or disability,
Millennium is required to pay Mr. Lawlor his salary and benefits until
18 months after termination. Mr. Lawlor has agreed not to compete with
Millennium for a period of two years following the termination of his
employment.
EFFECTIVE TIME OF THE MERGER
The merger will occur as soon as practicable on or after December 22, 1999
so long as stockholder approval is obtained. The merger will become effective
upon filing of the certificate of merger with the Secretary of State of the
State of Delaware or on such later date and time as may be specified in the
certificate of merger. The time at which the merger becomes effective is
referred to in this proxy statement/prospectus as the "effective time of the
merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material anticipated U.S. federal income
tax consequences of the merger to LeukoSite stockholders who hold LeukoSite
common stock as a capital asset, that is, generally, for investment. The summary
is based on the Internal Revenue Code (the "Code"), Treasury regulations issued
under the Code, and administrative rulings and court decisions in effect as of
the date of this proxy statement-prospectus, all of which are subject to change
at any time, possibly with retroactive effect. This discussion summarizes the
opinion of the law firm of Bingham Dana LLP, counsel to LeukoSite and certain
tax consequences that may be expected to flow from the conclusion reached in
that opinion. This summary is not a complete description of all of the U.S.
federal income tax consequences of the merger and, in particular, may not
address considerations applicable to LeukoSite stockholders subject to special
treatment under U.S. federal income tax law. LeukoSite stockholders subject to
special treatment include, for example, foreign persons, financial institutions,
dealers in securities, traders in securities who elect to apply a mark-to-market
method of accounting, insurance companies, tax-exempt entities, holders who
acquired their shares of LeukoSite common stock pursuant to the exercise of an
employee stock option or right or otherwise as compensation, and holders who
hold LeukoSite common stock as part of a "hedge," "straddle" or "conversion
transaction." In addition, no information is provided in this document with
respect to the tax consequences of the merger under any foreign, state or local
laws.
LEUKOSITE STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE
TAX CONSEQUENCES OF THE MERGER TO THEM IN THEIR PARTICULAR SITUATIONS, INCLUDING
THE EFFECTS OF U.S. FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
In connection with the filing of the Registration Statement, Bingham Dana
LLP has delivered to LeukoSite its opinion, dated on or about the effective date
of this proxy statement/prospectus, addressing the U.S. federal income tax
consequences of the merger described below. Bingham Dana LLP has rendered its
opinion on the basis of facts, representations and assumptions set forth or
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<PAGE>
referred to in its opinion. In rendering this opinion, Bingham Dana LLP required
and relied upon factual representations contained in certificates of officers of
Millennium and LeukoSite. The opinion is that, for U.S. federal income tax
purposes, the merger will be treated as a "reorganization"--that is, a
transaction of a type that is generally tax-free. As a result:
- neither Millennium nor LeukoSite will recognize any gain or loss as a
result of the merger;
- LeukoSite stockholders who exchange all of their LeukoSite common stock
solely for Millennium common stock pursuant to the merger will recognize
no gain or loss as a result of that exchange, except with respect to cash
received in lieu of a fractional share interest in Millennium common
stock;
- the aggregate tax basis of the shares of Millennium common stock received
by LeukoSite stockholders, including fractional shares deemed received and
redeemed as described below, will equal the aggregate tax basis of the
shares of LeukoSite common stock surrendered in exchange for that
Millennium common stock;
- the holding period of a share of Millennium common stock received in the
merger, including a fractional share deemed received and redeemed as
described below, will include the holder's holding period in the LeukoSite
common stock surrendered in exchange for that Millennium common stock; and
- cash received by a LeukoSite stockholder in lieu of a fractional share
interest in Millennium common stock will be treated as received in
redemption of that fractional share interest, and a LeukoSite stockholder
will recognize a capital gain or loss for U.S. federal income tax purposes
measured by the difference between the amount of cash received and the
portion of the tax basis of the share of LeukoSite common stock allocable
to that fractional share interest, so long as the deemed redemption
meaningfully reduces the LeukoSite's stockholder's interest in Millennium,
taking into account the constructive ownership rules of the Code. This
capital gain or loss will be a long-term capital gain or loss if and to
the extent that the holding period for those shares of LeukoSite common
stock is greater than one year at the effective time. A common stockholder
that owns an extremely small percentage of the stock of LeukoSite,
exercises no control over the affairs of Millennium or LeukoSite, and that
does not actually or constructively own any shares of Millennium stock
other than those received in the merger, will be treated as experiencing a
meaningful reduction in interest.
The obligations of LeukoSite and Millennium to consummate the merger are
conditioned upon the receipt of further opinions of their respective counsel,
Bingham Dana LLP and Hale and Dorr LLP, in form and substance reasonably
satisfactory to LeukoSite and Millennium, as the case may be, dated the closing
date, substantially to the effect that, on the basis of facts, factual
representations and assumptions set forth in each opinion the merger will be
treated as a reorganization within the meaning of Section 368(a) of the Code,
that is, a transaction of a type that is generally tax-free for U.S. federal
income tax purposes. In rendering those opinions, counsel may require and rely
on representations contained in certificates of Millennium, LeukoSite, their
respective officers and others, reasonably satisfactory in form and substance to
counsel, including the representation by Millennium that, as soon as practicable
after the closing and subject to obtaining any required third party consents,
Millennium intends to merge LeukoSite with and into Millennium. None of the tax
opinions to be delivered to the parties in connection with the merger as
described in this document is binding on the Internal Revenue Service (the
"IRS") or the courts, and the parties do not intend to request a ruling from the
IRS with respect to the merger. Accordingly, there can be no assurance that the
IRS will not challenge the conclusions reflected in those opinions or that a
court will not sustain such a challenge.
In the event that (a) either Millennium or LeukoSite fails to receive the
opinion of its counsel described in the immediately preceding paragraph,
(b) Millennium or LeukoSite decides to waive the condition to their obligations
to consummate the merger relating to those opinions and (c) Millennium
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and LeukoSite determine that the tax consequences of the merger are materially
different from those described above, Millennium and LeukoSite will circulate
additional materials to the LeukoSite stockholders and will resolicit their
approval of the merger.
ACCOUNTING TREATMENT
The merger will be accounted for using purchase accounting, with Millennium
being deemed to have acquired LeukoSite. Under the purchase method of
accounting, tangible and identifiable intangible assets acquired and liabilities
assumed are recorded at their estimated fair values. The excess of the purchase
price, including estimated fees and expenses related to the merger, over net
assets acquired is classified as goodwill.
REGULATORY APPROVALS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and related
rules, the merger cannot be completed until notifications have been given and
information has been furnished to the Federal Trade Commission and the Antitrust
Division of the Department of Justice and specified waiting period requirements
have been satisfied. Millennium and LeukoSite filed notification and report
forms with the Federal Trade Commission and the Antitrust Division on
October 29, 1999. At any time before or after consummation of the merger, the
Antitrust Division or the Federal Trade Commission, or any state, could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the consummation of the merger or
seeking divestiture of particular assets of Millennium or LeukoSite. Private
parties also may seek to take legal action under the antitrust laws. In
addition, non-United States governmental and regulatory authorities may seek to
take action under applicable antitrust laws. There can be no assurance that a
challenge to the merger will not be made or, if such challenge is made, that
Millennium and LeukoSite will prevail.
LISTING OF SHARES OF MILLENNIUM COMMON STOCK ON THE NASDAQ STOCK MARKET
Millennium will file a listing application with the Nasdaq Stock Market to
cause the shares of Millennium common stock which are to be issued in the
merger, upon exercise of options granted to employees of LeukoSite and upon
exercise of warrants to be listed for trading on the Nasdaq Stock Market.
NO APPRAISAL RIGHTS
Under Delaware corporate law, holders of LeukoSite common stock are not
entitled to appraisal rights in connection with the merger because, on the
record date, LeukoSite common stock was designated and quoted for trading on the
Nasdaq National Market and will be converted into shares of Millennium common
stock, which at the effective time of the merger will be listed on the Nasdaq
National Market.
RESALE RESTRICTIONS
Millennium common stock issued in the merger will not be subject to any
restrictions on transfer arising under the Securities Act of 1933, except for
shares issued to any LeukoSite stockholder who may be deemed to be an
"affiliate" of LeukoSite or Millennium for purposes of Rule 145 under the
Securities Act. Each such affiliate receiving Millennium shares in the merger
has agreed not to transfer any Millennium common stock received in the merger
except in compliance with the resale provisions of Rule 145 under the Securities
Act or as otherwise permitted under the Securities Act. This proxy
statement/prospectus does not cover resales of Millennium common stock received
by any person upon completion of the merger, and no person is authorized to make
any use of this proxy statement/ prospectus in connection with any such resale.
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THE MERGER AGREEMENT
IN THIS SECTION OF THE PROXY STATEMENT/PROSPECTUS, WE DESCRIBE THE MATERIAL
PROVISIONS OF THE MERGER AGREEMENT. WE HAVE ATTACHED A COPY OF THE MERGER
AGREEMENT AS APPENDIX A TO THIS PROXY STATEMENT/ PROSPECTUS AND INCORPORATE THE
MERGER AGREEMENT INTO THIS PROXY STATEMENT/PROSPECTUS BY REFERENCE. THE SUMMARY
OF THE MERGER AGREEMENT WE PROVIDE BELOW IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE MERGER AGREEMENT. WE ENCOURAGE YOU TO READ THE MERGER AGREEMENT
BECAUSE IT IS THE LEGAL DOCUMENT THAT GOVERNS THE MERGER.
THE MERGER
Following the approval of the merger agreement and the merger by the
stockholders of LeukoSite and the satisfaction or waiver of the other conditions
to the merger, ANM, Inc., a wholly owned subsidiary of Millennium, will merge
with and into LeukoSite. LeukoSite will become a wholly owned subsidiary of
Millennium. If all conditions to the merger are satisfied or waived, the merger
will become effective at the time of the filing by the surviving corporation of
a duly executed certificate of merger with the Secretary of State of the State
of Delaware. As soon as practicable after the closing and subject to obtaining
any required third party consents, Millennium intends to merge LeukoSite with
and into Millennium.
CONVERSION OF SECURITIES
At the effective time of the merger, each share of LeukoSite common stock
issued and outstanding immediately before the effective time will automatically
be converted into the right to receive 0.4296 shares of Millennium common stock.
If a stock split, reverse split, stock dividend, reorganization,
recapitalization or similar transaction takes place before the effective time of
the merger, the exchange ratio will be adjusted accordingly. All shares of
LeukoSite common stock, when converted, will no longer be outstanding and will
automatically be canceled and retired and will cease to exist.
EXCHANGE OF SHARES
SURRENDER OF SHARES OF LEUKOSITE COMMON STOCK. Millennium will retain the
services of a bank or trust company to act as exchange agent to facilitate the
exchange of shares. After the closing of the merger, the exchange agent will
mail a letter of transmittal and instructions to each holder of record of
LeukoSite common stock. When a LeukoSite stockholder surrenders share
certificates to the exchange agent, the stockholder will be entitled to receive
a certificate for a number of whole shares of Millennium common stock equal to
the exchange ratio multiplied by the number of shares of LeukoSite common stock
surrendered, plus cash in lieu of fractional shares and cash in the amount of
any dividends or other distributions to which the stockholder is entitled.
LEUKOSITE STOCKHOLDERS SHOULD NOT SEND IN THEIR LEUKOSITE STOCK CERTIFICATES
UNTIL THEY RECEIVE A LETTER OF TRANSMITTAL AND INSTRUCTIONS.
In the event of a transfer of ownership of LeukoSite common stock which is
not registered in the transfer records of LeukoSite, a certificate representing
Millennium common stock and cash in lieu of fractional shares and any dividends
or distributions may be issued or paid to a person other than the person whose
name is on the certificate for LeukoSite common stock, if the certificate is
presented to the exchange agent accompanied by all documents required to show
and effect the transfer of ownership and by evidence that any applicable stock
transfer taxes have been paid.
DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
distributions declared or made after the merger with respect to shares of
Millennium common stock will be paid to the holder of any unsurrendered
certificate with respect to shares of LeukoSite common stock and no cash payment
in lieu of fractional shares will be paid to any such holder until the holder
surrenders the LeukoSite stock certificate as provided above. Following such
surrender, Millennium will pay to the record holder of the certificates
representing shares of Millennium common stock issued in exchange for such
LeukoSite stock certificate, without interest, any dividends or other
distributions with respect to Millennium
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<PAGE>
common stock with a record date after the merger but prior to surrender and a
payment date subsequent to surrender payable with respect to such shares of
Millennium common stock.
NO FURTHER OWNERSHIP RIGHTS IN LEUKOSITE COMMON STOCK. All shares of
Millennium common stock issued upon the surrender of certificates for LeukoSite
common stock will be deemed to have been issued in full satisfaction of all
rights pertaining to such LeukoSite common stock. The stock transfer books of
LeukoSite will close at the closing of the merger and no further transfers of
LeukoSite stock will take place. After the merger, LeukoSite certificates
surrendered in accordance with the merger agreement will be canceled and
exchanged for shares of Millennium common stock.
FRACTIONAL SHARES. Millennium will not issue any fractional shares. Instead
of receiving fractional shares, LeukoSite stockholders will receive cash equal
to the same fraction of the average of the last reported sales prices of
Millennium common stock during the ten consecutive trading days ending on the
last trading day prior to the closing date of the merger.
TREATMENT OF STOCK PLANS AND WARRANTS
At the closing of the merger, Millennium will assume LeukoSite's stock plans
and each outstanding option and warrant to purchase shares of LeukoSite common
stock, whether vested or unvested, will be deemed to constitute an option or
warrant to acquire, on the same terms and conditions as were applicable under
the applicable LeukoSite stock plan or warrant, the same number of shares of
Millennium common stock as the holder of the option or warrant would have been
entitled to receive pursuant to the merger had that holder exercised the option
or warrant in full immediately prior to the effective time, at a price per share
equal to (x) the aggregate exercise price for the shares of LeukoSite common
stock purchasable pursuant to the option or warrant immediately prior to the
effective time divided by (y) the number of full shares of Millennium common
stock deemed purchasable pursuant to the option or warrant, as described above.
LeukoSite terminated its 1997 Employee Stock Purchase Plan on October 14, 1999,
and will not commence a new offering under that Plan prior to the merger.
REPRESENTATIONS AND WARRANTIES
In the merger agreement, LeukoSite and Millennium have made a number of
representations and warranties about their businesses, financial condition,
structure and other facts pertinent to the merger.
LeukoSite made representations and warranties relating to the following:
- corporate organization and similar matters
- its capital structure
- LeukoSite's authority to enter into the merger agreement, the
enforceability of the merger agreement, the receipt of required consents,
licenses, permits, orders and authorizations from governmental authorities
relating to the merger agreement and the absence of conflict between the
requirements of the merger agreement and LeukoSite's obligations under
other contracts
- documents filed with the Securities and Exchange Commission and the
accuracy of information contained in those documents
- the absence of undisclosed liabilities
- the absence of certain changes in its business
- the filing of tax returns and payment of taxes
- real property leased by LeukoSite and its subsidiaries
- intellectual property matters
- preclinical testing and clinical trials conducted by LeukoSite and its
subsidiaries
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- its material contracts
- the absence of litigation that could materially harm LeukoSite
- LeukoSite's compliance with environmental laws
- its employee benefit plans
- LeukoSite's compliance with applicable laws
- regulatory matters
- the absence of any action likely to prevent the merger from qualifying as
a reorganization under Section 368(a) of the Internal Revenue Code
- the accuracy of information supplied by LeukoSite in connection with this
proxy statement/ prospectus and the registration statement of which it is
a part
- labor matters
- the adequacy of insurance policies held by LeukoSite and its subsidiaries
- the absence of discussions or negotiations between LeukoSite or its
subsidiaries and third parties relating to the merger or sale of LeukoSite
or its subsidiaries
- the receipt of the opinion of LeukoSite's financial advisor that from a
financial point of view the merger is fair to the holders of LeukoSite's
common stock
- actions taken by LeukoSite's Board of Directors to ensure that the
restrictions contained in Section 203 of the Delaware General Corporate
Law applicable to a "business combination" (as defined in Section 203)
will not apply to the merger agreement or the Stockholder Voting
Agreements
Millennium and ANM, Inc., a wholly-owned subsidiary of Millennium, made
representations and warranties relating to the following:
- their corporate organization and similar matters
- their capital structure
- their authority to enter into the merger agreement, the enforceability of
the merger agreement, the receipt of required consents, approvals, orders
and authorizations from governmental authorities relating to the merger
agreement and the absence of conflict between the requirements of the
merger agreement and obligations of Millennium and ANM, Inc. under other
contracts
- documents filed by Millennium with the Securities and Exchange Commission,
and the accuracy of information contained in those documents
- the absence of undisclosed liabilities
- the absence of certain changes in their businesses
- the absence of litigation that could materially harm Millennium
- Millennium's compliance with applicable laws
- the absence of any action likely to prevent the merger from qualifying as
a reorganization under Section 368(a) of the Internal Revenue Code
- the accuracy of information supplied by Millennium in connection with this
proxy statement/ prospectus and the registration statement of which it is
a part
- the absence of business activities by ANM, Inc.
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- the receipt of the opinion of Millennium's financial advisor that the
exchange ratio is fair to Millennium from a financial point of view
COVENANTS
LeukoSite has agreed that prior to the closing of the merger it will carry
on its business in the ordinary course and will not, in general terms, do any of
the following without Millennium's consent:
- accelerate, amend or change the period of exercisability of any warrant,
outstanding option or restricted stock or authorize cash payments in
exchange for any warrant or option (except as required by the terms of
such plans or any related agreements)
- declare or pay dividends on or make any other distributions in respect of
any of its capital stock, or split, combine or reclassify its stock, or
issue or authorize the issuance of any securities in respect of, in lieu
of or in substitution for shares of its capital stock, or purchase or
otherwise acquire any shares of its capital stock
- issue new stock or subscriptions, rights, warrants or options to acquire
its stock, other than issuances of stock pursuant to the exercise of
warrants or options
- acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or substantial portion of the
assets of, any business, corporation or partnership
- sell, lease, license or otherwise dispose of any of its properties or
assets
- increase compensation payable to its officers or employees, grant
severance or termination pay to any of its officers or employees, enter
into any collective bargaining agreement, establish any bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination or severance or
other plan for the benefit of any directors, officers or employees, or
forgive any indebtedness of any employees
- amend or propose to amend its charter or bylaws, except as contemplated by
the merger agreement
- incur any indebtedness for borrowed money, make any loans to any person or
entity or guarantee any debt securities of others
- initiate, compromise or settle any material litigation or arbitration
proceeding
- modify, amend or terminate any contract that is material to LeukoSite and
its subsidiaries taken as a whole, or waive, release or assign any
material rights or claims
- make or rescind any tax election, settle or compromise any tax liability
or amend any tax return
- change its methods of accounting as in effect at June 30, 1999 except as
required by generally accepted accounting principles
- make or commit to make any capital expenditures that exceed its capital
budget
- license any intellectual property rights to or from any third party
- close any facility or office
- invest funds in debt securities or other instruments maturing more than
90 days after the date of investment
- initiate any new clinical trials or any new phase of any ongoing clinical
trials
- adopt or implement any stockholder rights plan that could have the effect
of impeding or restricting the consummation of the transactions
contemplated by the merger agreement
- take or agree to take any of the actions described above
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ADDITIONAL AGREEMENTS
NO SOLICITATION. LeukoSite has agreed not to solicit, initiate or encourage
any inquiries or proposals that constitute, or could reasonably be expected to
lead to, a proposal or offer for a merger, consolidation, business combination,
sale of substantial assets, tender offer, sale of shares of capital stock or
similar transaction involving LeukoSite or any of its subsidiaries or engage in
negotiations or discussions or provide any non-public information to any person
regarding such a transaction. LeukoSite shall notify Millennium immediately
after receipt of such a proposal. LeukoSite may, however, furnish non-public
information to, or enter into discussions or negotiations with, or recommend to
its stockholders a proposal by, a person or entity that makes an unsolicited
bona fide written proposal for such a transaction if the transaction would
result in the acquisition of more than 50% of the combined voting power of the
shares of LeukoSite or all or substantially all of the assets of LeukoSite and
its subsidiaries if and only to the extent that:
- its board of directors believes in good faith (after consultation with its
financial advisor) that the proposal is reasonably capable of being
completed on the terms proposed and would, if consummated, result in a
transaction more favorable than the transaction contemplated by the merger
agreement and determines in good faith after consultation with outside
legal counsel that such action is necessary for the board to comply with
its fiduciary duties to stockholders;
- prior to furnishing any non-public information to, or entering into
discussions or negotiations with, such a person or entity, LeukoSite's
board of directors receives from such person or entity an executed
confidentiality agreement with terms no less favorable to such person or
entity than those contained in the confidentiality agreement entered into
between LeukoSite and Millennium; and
- prior to recommending such a proposal to its stockholders, LeukoSite
provides Millennium with at least five business days' prior notice of its
intention to do so, during which time Millennium may make a
counterproposal and LeukoSite shall negotiate in good faith with respect
to the terms and conditions of such counterproposal.
EMPLOYEE BENEFIT PLANS. Millennium will enroll employees of LeukoSite in
its employee benefit plans as of the effective date of the merger, giving the
LeukoSite employees service credit for their employment with LeukoSite for
eligibility and vesting purposes as if these services had been performed with
Millennium, and waiving any preexisting condition exclusions under its medical
plan. Millennium will credit LeukoSite employees with deductible payments and
co-payments made by the employees in 2000 prior to the merger, and will give
credit for earned but unused vacation and accrued vacation.
SEVERANCE. If, at any time on or after the merger and prior to the first
anniversary of the merger, Millennium or LeukoSite terminates the employment of
any LeukoSite employee without cause or any LeukoSite employee terminates his or
her employment with Millennium or LeukoSite for good reason, Millennium will
continue to pay the salary of and provide employee benefits to that employee.
These severance benefits will be provided to senior vice presidents for
twelve months following the date of termination, to vice presidents for nine
months following the date of termination, to directors for six months following
the date of termination and to all other employees for three months following
the date of termination.
BOARD REPRESENTATION. Upon the merger, Millennium will expand its board of
directors by one director and Christopher K. Mirabelli will be elected to
Millennium's board. In the event that Dr. Mirabelli ceases to be a director of
Millennium prior to Millennium's 2003 annual meeting of stockholders, the
Millennium board of directors is required to consider in good faith replacing
Dr. Mirabelli with another person who was serving as a LeukoSite director on
October 14, 1999, consistent with the board's business judgment.
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<PAGE>
CONDITIONS
Neither Millennium nor LeukoSite will be obligated to complete the merger
unless certain conditions are satisfied or waived, including the following:
- holders of the requisite majority of LeukoSite common stock must have
approved the merger agreement
- the waiting period under applicable federal anti-trust laws must have
expired or been terminated
- all authorizations, consents, orders or approvals of, or declarations or
filings with, or expirations of waiting periods imposed by, any
governmental entity must have been filed, been obtained or occurred
- the registration statement registering the shares of Millennium common
stock being issued in the merger under the Securities Act of 1933, as
amended, must have become effective and must not be the subject of a stop
order or proceeding seeking a stop order
- no court or administrative body will have enacted, issued, promulgated,
enforced or entered an injunction or other order, executive order, stay,
decree or judgment or statute, rule or regulation that makes the merger
illegal or otherwise prohibits consummation of the merger
- the shares of Millennium common stock issuable to LeukoSite stockholders
in the merger shall have been approved for quotation on the Nasdaq
national market system
ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF MILLENNIUM
The obligations of Millennium and ANM, Inc. to effect the merger are also
subject to the satisfaction or waiver of the following additional conditions:
- LeukoSite's representations and warranties contained in the merger
agreement must be true and correct on the closing date (except where such
failure to be true and correct has not had and is not reasonably likely to
have a material adverse effect on LeukoSite)
- LeukoSite must have performed in all material respects all of its
obligations under the merger agreement
- Millennium must have received an opinion from its counsel to the effect
that the merger will be treated for federal income tax purposes as a
tax-free reorganization under Section 368(a) of the Code
- LeukoSite must have obtained all required consents and approvals of third
parties
- Millennium must have received copies of resignations, effective as of the
effective time of the merger, of each director of LeukoSite and its
subsidiaries
- the employment agreements between Millennium and each of Dr. Mirabelli and
Mr. Lawlor must be in full force and effect
ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF LEUKOSITE
The obligation of LeukoSite to effect the merger is also subject to the
satisfaction or waiver of the following additional conditions:
- the representations and warranties of Millennium and ANM, Inc. contained
in the merger agreement must be true and correct on the closing date
(except where such failure to be true and correct has not had and is not
reasonably likely to have a material adverse effect on Millennium)
- Millennium and ANM, Inc. must have performed in all material respects all
of its obligations under the merger agreement
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- LeukoSite must have received an opinion from its counsel to the effect
that the merger will be treated for federal income tax purposes as a
tax-free reorganization under Section 368(a) of the Code
TERMINATION
TERMINATION GENERALLY. The merger agreement may be terminated at any time
prior to the closing, whether before or after approval of the merger agreement
by the stockholders of LeukoSite or Millennium, as follows:
- by mutual written consent of Millennium or LeukoSite
- by either Millennium or LeukoSite:
- if the merger is not consummated on or before April 30, 2000 (except
that the right to terminate the agreement under this clause shall not
be available to any party whose failure to fulfill any obligation under
the merger agreement has been the cause of or resulted in the failure
of the merger to occur on or before such date)
- if a governmental entity shall have taken a nonappealable final action
having the effect of permanently prohibiting the merger
- if the LeukoSite stockholders do not approve the merger agreement at
the LeukoSite stockholder meeting or any adjournment or postponement of
that meeting
- if there has been a breach of any representation, warranty, covenant or
agreement on the part of the other party set forth in the merger
agreement that causes the conditions to the obligations of either party
not to be satisfied and has not been, or is not capable of being, cured
within 15 days following receipt by the breaching party of written
notice of such breach from the other party
- by Millennium:
- if the board of directors of LeukoSite fails to recommend approval of
the merger agreement or withdraws or modifies its recommendation
- if Millennium requests in writing that the board of directors of
LeukoSite reconfirm its recommendation of the merger agreement or the
merger and LeukoSite's board of directors fails to do so within five
business days
- if LeukoSite's board of directors approves or recommends to LeukoSite
stockholders a proposal for a merger, consolidation, business
combination, sale of substantial assets, tender offer, sale of shares
of capital stock or similar transaction involving the company or any of
its subsidiaries, other than the merger
- if a tender offer or exchange offer for outstanding shares of LeukoSite
common stock is commenced and LeukoSite's board of directors recommends
to LeukoSite stockholders that they tender their shares or, within ten
days after such tender offer or exchange offer, fails to recommend
against acceptance of such offer or takes no position on the matter
- if LeukoSite has breached the no solicitation provisions of the merger
agreement
- if for any reason LeukoSite fails to call and hold the LeukoSite
stockholder meeting as required by the merger agreement
EFFECT OF TERMINATION; FEES AND EXPENSES. If the merger agreement is
terminated, Millennium and LeukoSite will each continue to be obligated under a
confidentiality agreement entered into between the parties and will each
continue to represent and warrant that no agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any broker's
or finder's fee or any other commission or fee in connection with any of the
transactions contemplated by the merger
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<PAGE>
agreement. Millennium and LeukoSite will each be obligated to pay the fees and
expenses they incur in connection with the merger agreement and the transactions
contemplated by the merger agreement, and will share equally all fees and
expenses incurred in connection with the printing and filing of this proxy
statement/prospectus and the registration statement registering the shares of
Millennium common stock being issued in the merger.
LeukoSite shall pay Millennium up to $1.5 million as reimbursement for
expenses incurred relating to the merger upon termination of the merger
agreement in the following circumstances:
- by Millennium or LeukoSite if the LeukoSite stockholders do not approve
the merger agreement at the LeukoSite stockholder meeting or any
adjournment or postponement of that meeting
- by Millennium:
- if the board of directors of LeukoSite fails to recommend approval of
the merger agreement or withdraws or modifies its recommendation
- if Millennium requests in writing that the board of directors of
LeukoSite reconfirm its recommendation of the merger agreement or the
merger and LeukoSite's board of directors fails to do so within five
business days
- if LeukoSite's board of directors approves or recommends to LeukoSite
stockholders a proposal for a merger, consolidation, business
combination, sale of substantial assets, tender offer, sale of shares
of capital stock or similar transaction involving the company or any of
its subsidiaries, other than the merger
- if a tender offer or exchange offer for outstanding shares of LeukoSite
common stock is commenced and LeukoSite's board of directors recommends
to LeukoSite stockholders that they tender their shares or, within ten
days after such tender offer or exchange offer, fails to recommend
against acceptance of such offer or takes no position on the matter
- if LeukoSite has breached the no solicitation provisions of the merger
agreement
- if for any reason LeukoSite fails to call and hold the LeukoSite
stockholder meeting as required by the merger agreement
- by Millennium or LeukoSite if the Merger has not been consummated on or
prior to April 30, 2000 as a result of the breach by LeukoSite of any of
its representations or warranties
- by Millennium if there has been a breach of any representation, warranty,
covenant or agreement by LeukoSite set forth in the merger agreement that
causes the conditions to the obligations of Millennium not to be satisfied
and has not been, or is not capable of being, cured within 15 days
following receipt by LeukoSite of written notice of such breach from
Millennium
In addition, LeukoSite may be required to pay Millennium a termination fee
of $25.6 million if any of the following occurs:
- Millennium terminates the merger agreement:
- because the board of directors of LeukoSite fails to recommend approval
of the merger agreement or withdraws or modifies its recommendation
- after Millennium requests in writing that the board of directors of
LeukoSite reconfirm its recommendation of the merger agreement or the
merger and LeukoSite's board of directors fails to do so within five
business days
- because LeukoSite's board of directors approves or recommends to
LeukoSite stockholders a proposal for a merger, consolidation, business
combination, sale of substantial assets, tender offer, sale of shares
of capital stock or similar transaction involving LeukoSite or any of
its subsidiaries, other than the merger
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- if a tender offer or exchange offer for outstanding shares of LeukoSite
common stock is commenced and LeukoSite's board of directors recommends
to LeukoSite stockholders that they tender their shares or, within ten
days after such tender offer or exchange offer, fails to recommend
against acceptance of such offer or takes no position on the matter
- because LeukoSite has breached the no solicitation provisions of the
merger agreement
- because for any reason LeukoSite fails to call and hold the LeukoSite
stockholder meeting as required by the merger agreement
- Millennium terminates the merger agreement following a breach of any
representation, warranty, covenant or agreement on the part of LeukoSite
set forth in the merger agreement that causes the conditions to
Millennium's obligations not to be satisfied and has not been, or is not
capable of being, cured within 15 days following receipt by LeukoSite of
written notice of such breach from Millennium
- Millennium or LeukoSite terminates the merger agreement because the
LeukoSite stockholders have not approved the merger at the LeukoSite
stockholder meeting and there shall have been announced a proposal for a
merger, consolidation, business combination, sale of substantial assets,
tender offer, sale of shares of capital stock or similar transaction
involving LeukoSite or any of its subsidiaries, other than the merger,
which shall not have been absolutely and unconditionally withdrawn and
abandoned, subject to certain exceptions in the case of a tender offer or
exchange offer
Millennium shall pay LeukoSite up to $1.5 million as reimbursement for
expenses incurred relating to the merger upon termination of the merger
agreement:
- by Millennium or LeukoSite if the Merger has not been consummated on or
prior to April 30, 2000 as a result of the breach by Millennium of any of
its representations or warranties
- by LeukoSite if there has been a breach of any representation, warranty,
covenant or agreement by Millennium set forth in the merger agreement that
causes the conditions to the obligations of LeukoSite not to be satisfied
and has not been, or is not capable of being, cured within 15 days
following receipt by Millennium of written notice of such breach from
LeukoSite
In addition, Millennium may be required to pay LeukoSite a termination fee
of $25.6 million upon the termination of the merger agreement by LeukoSite
following a breach of any representation, warranty, covenant or agreement on the
part of Millennium set forth in the merger agreement that causes the conditions
to the obligations of LeukoSite not to be satisfied and has not been, or is not
capable of being, cured within 15 days following receipt by Millennium of
written notice of such breach from LeukoSite.
AMENDMENT
The merger agreement may be amended by the parties by action taken or
authorized by their respective boards of directors at any time before or after
approval by the stockholders of LeukoSite, by an instrument in writing signed on
behalf of each of the parties. However, after the LeukoSite stockholders approve
the merger, no amendment shall be made which by law requires further approval by
such stockholders without such approval.
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INFORMATION CONCERNING MILLENNIUM
Millennium seeks to discover and develop proprietary therapeutic and
diagnostic human healthcare products and services based on the discovery and
understanding of the medical usefulness of genes. Millennium employs genetics
and genetic analysis, also called genomics, and uses computer-based information
systems to assist in the identification of analysis and elucidation of the
biological function of genes. Millennium applies its technology across the
entire healthcare sector, from gene identification through patient management.
Millennium was organized as a Delaware corporation in 1993. Its principal
executive offices are located at 75 Sidney Street, Cambridge, Massachusetts
02139, and its telephone number is 617-679-7000. Its World Wide Web site address
is www.mlnm.com. The information in its website is not incorporated by reference
into this proxy statement/prospectus.
RECENT TRANSACTIONS
On October 14, 1999, Millennium entered into an agreement and plan of merger
pursuant to which Millennium BioTherapeutics, Inc. ("MBio") would be merged with
and into Millennium. Each share of Class B Common Stock of MBio will, upon
consummation of that merger, be converted into a number of shares of common
stock of Millennium equal to the average of (i) $15.00 divided by $62.536 and
(ii) $15.00 divided by the average of the last recorded sale prices per share of
Millennium common stock on the Nasdaq National Market over the 20 consecutive
trading days ending on the second trading day prior to the effective date of
that merger. The effective date of that merger is expected to be the 20(th)
business day following the mailing of a prospectus to the holders of Class B
Common Stock of MBio.
On October 14, 1999, Millennium also entered into a share exchange agreement
with Eli Lilly and Company ("Lilly"). Lilly was issued 360,198 shares of
Millennium common stock in exchange for its shares of Series B Convertible
Preferred Stock. Millennium agreed to register the shares issued to Lilly on
Form S-3. The number of shares issued to Lilly will be adjusted, upward or
downward, based on the closing price of Millennium Common Stock over the five
consecutive trading days ending on the first trading day prior to the
effectiveness of the Form S-3 resale Registration Statement. If the product of:
- 2,000,000, times
- $15.00 divided by such average sale price
is less than the number of shares issued to Lilly, Millennium will issue a
number of additional shares equal to the difference. If the product exceeds the
number of shares issued to Lilly, Lilly will return a number of shares to
Millennium equal to the excess.
In May 1997, MBio formed a strategic alliance with Lilly in the field of
therapeutic proteins. As part of the formation of this alliance, Lilly made an
equity investment in the capital stock of MBio of $20 million, for which it
received approximately 18% of MBio's voting stock. This strategic alliance was
amended in October 1999, concurrently with the purchase by Millennium of all the
MBio stock held by Lilly. Under the amendment, the research program was
refocused from the discovery of new therapeutic proteins to the further
development of the therapeutic proteins which had been identified in the course
of the research program. The research program will now end in May 2000, and
Lilly's funding obligations under the refocused research program were waived. In
addition, Lilly's non-exclusive license to use the genes and proteins from the
jointly funded program in their small molecule drug discovery programs was
amended to be a non-royalty bearing license.
As part of the October 1999 amendment and in accordance with the original
terms of this alliance, Lilly received royalty-bearing worldwide exclusive
rights to develop and commercialize 25% of the therapeutic proteins discovered
under the research program. MBio received non-royalty bearing, worldwide
exclusive rights to develop and commercialize 75% of the therapeutic proteins
discovered under the research program.
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In the event that Lilly achieves product development and regulatory
milestones in its development of the therapeutic proteins exclusively licensed
to it from the alliance, Lilly will be obligated to make milestone payments to
MBio.
In conjunction with the October 1999 amendment, Millennium has also agreed
to now provide the research funding for the further development of the
identified therapeutic proteins which was previously provided by Lilly.
ADDITIONAL INFORMATION
A detailed description of Millennium's business, executive compensation,
various benefit plans, including stock option plans, voting securities and the
principal holders thereof, certain relationships and related transactions,
financial statements and other matters related to Millennium is incorporated by
reference from filings made by Millennium with the SEC. See "Where You Can Find
More Information."
STOCK OWNERSHIP BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS OF MILLENNIUM
The following table sets forth certain information, as of October 27, 1999
or such later date as is noted, with respect to the beneficial ownership of
Millennium's common stock by (i) each person known by Millennium to own
beneficially more than 5% of the outstanding shares of common stock; (ii) each
director of Millennium; (iii) each executive officer of Millennium named in the
Summary Compensation Table in Millennium's proxy statement for its annual
meeting under the heading "Executive Compensation" and (iv) all directors and
executive officers of Millennium as a group. The table (a) assumes completion of
the merger of Millennium BioTherapeutics, Inc., a wholly owned subsidiary of
Millennium, into Millennium and is based on an assumed conversion ratio in that
merger of 0.24 shares of Millennium common stock for each share of capital stock
of Millennium BioTherapeutics, Inc. and (b) does not include such persons'
ownership, if any, of shares of capital stock of Millennium Predictive
Medicine, Inc., a privately held, majority-owned subsidiary of Millennium. See
"Information Concerning Millennium--Recent Transactions". Ownership of these
shares is reported in filings made by Millennium with the Securities and
Exchange Commission (the "Commission"). See "Where You Can Find More
Information."
Under the rules of 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 October 27, 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.
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<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
NUMBER OF SHARES OWNED OWNED
NAME AND ADDRESS OF BENEFICIAL OWNER OF COMMON STOCK PRIOR TO THE MERGER AFTER THE MERGER
- ------------------------------------ ---------------- ------------------- ----------------
<S> <C> <C> <C>
Bayer AG(1)................................... 4,957,660 13.26 % 11.18 %
D51368 Leverkusen
Federal Republic of Germany
Mark J. Levin(2).............................. 1,075,704 2.88 % 2.43 %
Joshua Boger, Ph.D............................ 52,147 * *
Eugene Cordes, Ph.D........................... 52,147 * *
A. Grant Heidrich, III(3)..................... 96,943 * *
Raju S. Kucherlapati, Ph.D.(4)................ 324,276 * *
Eric L. Lander, Ph.D.(5)...................... 20,897 * *
Steven H. Holtzman(6)......................... 244,325 * *
Frank D. Lee, Ph.D.(7)........................ 405,822 1.09 % *
Michael R. Pavia, Ph.D.(8).................... 95,883 * *
Kevin P. Starr(9)............................. 40,742 * *
All directors and executive officers as a
group (13 persons)(10)...................... 2,679,680 7.18 % 6.05 %
</TABLE>
- ------------------------
* Represents holdings of less than one percent.
(1) Represents shares held by Bayer AG as reported in a Schedule 13D filed with
the Securities and Exchange Commission on November 18, 1998.
(2) Includes 128,965 shares of common stock of the Company issuable to
Mr. Levin within 60 days of October 27, 1999 upon exercise of stock options
and 8,417 shares issuable upon the closing of the merger of Millennium and
Millennium BioTherapeutics, Inc.
(3) Shares of Millennium common stock beneficially owned includes 68,912 shares
beneficially owned by the A. Grant Heidrich and Jeanette Yvonne Heidrich
Trust and 17,917 shares issuable to Mr. Heidrich within 60 days of
October 27, 1999 upon exercise of stock options granted to him by the
Millennium and 480 shares issuable upon the closing of the merger of
Millennium and Millennium BioTherapeutics, Inc.
(4) Shares of Millennium common stock beneficially owned includes 99,584 shares
issuable to Dr. Kucherlapati within 60 days of October 27, 1999 upon
exercise of stock options granted to him by Millennium and 480 shares
issuable upon the closing of the merger of Millennium and Millennium
BioTherapeutics, Inc.
(5) Shares of Millennium common stock beneficially owned represents 17,917
shares issuable to Dr. Lander within 60 days of October 27, 1999 upon
exercise of stock options granted to him by Millennium and 2,500 shares
beneficially owned by the Lander Family Charitable Trust for which
Dr. Lander disclaims beneficial ownership and 480 shares issuable upon the
closing of the merger of Millennium and Millennium BioTherapeutics, Inc.
(6) Shares of Millennium common stock beneficially owned includes 90,847 shares
of common stock issuable to Mr. Holtzman within 60 days of October 27, 1999
upon exercise of stock options and 6,978 shares issuable upon the closing
of the merger of Millennium and Millennium BioTherapeutics, Inc.
(7) Shares of Millennium common stock beneficially owned includes 65,124 shares
of common stock issuable to Dr. Lee within 60 days of October 27, 1999 upon
exercise of stock options and 6,098 shares issuable upon the closing of the
merger of Millennium and Millennium BioTherapeutics, Inc.
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(8) Shares of Millennium Common Stock beneficially owned includes 94,914 shares
of common stock issuable to Dr. Pavia within 60 days of October 27, 1999
upon exercise of stock options and 969 shares issuable upon the closing of
the merger of Millennium and Millennium BioTherapeutics, Inc.
(9) Shares of Millennium common stock beneficially owned includes 18,414 shares
of common stock issuable to Mr. Starr within 60 days of October 27, 1999
upon exercise of stock options and 22,328 shares issuable upon the closing
of the merger of Millennium and Millennium BioTherapeutics, Inc.
(10) Shares of common stock of Millennium owned by all directors and executive
officers as a group includes 714,124 shares issuable upon exercise of
stock options granted by Millennium to all directors and executive
officers as a group which are exercisable within 60 days of October 27,
1999 and 52,386 shares issuable upon the closing of the merger of
Millennium and Millennium BioTherapeutics, Inc.
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INFORMATION CONCERNING LEUKOSITE
LeukoSite, Inc. is a biotechnology company developing proprietary monoclonal
antibody and small molecule drugs to treat patients with cancer and
inflammatory, autoimmune and viral diseases. LeukoSite is preparing to complete
the filing of the biologics license application for its lead drug, the
CAMPATH-Registered Trademark- monoclonal antibody. LeukoSite is a party to a
joint venture with ILEX Oncology, Inc. for CAMPATH-Registered Trademark-, and
Schering AG and its U.S. affiliate, Berlex Laboratories, expect to market,
distribute and sell CAMPATH-Registered Trademark- in Europe and the United
States. Including CAMPATH-Registered Trademark-, LeukoSite has six drug
candidates in clinical development and nine partnered small molecule research
and development programs. LeukoSite's collaborators include Schering AG,
Warner-Lambert Company, Roche Bioscience, Kyowa Hakko Kogyo Co., Ltd.,
Genentech, Inc., Hoechst Marion Roussel, ILEX Oncology, Inc., MorphoSys AG and
Medarex, Inc. LeukoSite was organized as a Delaware corporation in 1992. Its
principal executive office is located at 215 First Street, Cambridge,
Massachusetts 02142, and its telephone number is 617-621-9350. Its World Wide
Web site address is www.leukosite.com. The information in its Web site is not
incorporated by reference into this proxy statement/prospectus.
ADDITIONAL INFORMATION
A detailed description of LeukoSite's business, executive compensation,
various benefit plans, including stock option plans, voting securities and the
principal holders thereof, directors and executive officers, certain
relationships and related transactions, financial statements and other matters
related to LeukoSite is incorporated by reference from filings made by LeukoSite
with the SEC, including LeukoSite's Annual Report on Form 10-K for the year
ended December 31, 1998 which is incorporated by reference herein. See "Where
You Can Find More Information."
STOCK OWNERSHIP BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS OF LEUKOSITE
The following table sets forth certain information, as of November 3, 1999
or such earlier date as is noted, with respect to the beneficial ownership of
LeukoSite's common stock by (i) each person known by LeukoSite to own
beneficially more than 5% of the outstanding shares of its common stock,
(ii) each director, (iii) each executive officer named in the Summary
Compensation Table in LeukoSite's's proxy statement for its 1999 Annual
Stockholders Meeting under the heading "Executive Compensation" and (iv) all
directors and executive officers of LeukoSite as a group. As of November 3, 1999
there were 14,678,534 shares of LeukoSite common stock outstanding and each such
share is entitled to one vote.
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 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 or
her spouse) with respect to the shares set forth in the
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following table. The inclusion herein of any shares deemed beneficially owned
does not constitute an admission of actual beneficial ownership of those shares.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF NUMBER OF SHARES
LEUKOSITE OF MILLENNIUM
COMMON STOCK PERCENTAGE COMMON STOCK PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER PRIOR TO THE MERGER(1) OWNED FOLLOWING THE MERGER OWNED
- ------------------------------------ ---------------------- ---------- -------------------- ----------
<S> <C> <C> <C> <C>
Entities Affiliated with HealthCare
Ventures LLC(2).................... 1,497,759 10.2% 643,437 1.5 %
44 Nassau Street
Princeton, New Jersey 08542
Perseus Capital LLC.................. 1,447,595 9.9% 621,886 1.4 %
The Army and Navy Club Building
1627 I Street N.W., Suite 610
Washington, D.C. 20006
Entities Affiliated with Schroders
PLC(3)............................. 942,077 6.4% 404,716 *
120 Cheapside
London EC2V UDS
England
Timothy Springer(4).................. 909,614 6.2% 390,770 *
Center for Blood Research
200 Longwood Avenue
Boston, Massachusetts 02115
James H. Cavanaugh(5)................ 1,497,759 10.2% 643,437 1.5 %
Martin Peretz, Ph.D.(6).............. 286,866 1.9% 123,237 *
Kate Bingham(7)...................... 942,077 6.4% 404,716 *
Christopher K. Mirabelli, Ph.D.(8)... 228,388 1.5% 98,115 *
Yasunori Kaneko, M.D(9).............. 83,000 * 35,656 *
Christopher T. Walsh, Ph.D.(10)...... 19,364 * 8,318 *
Mark Skaletsky(11)................... 16,316 * 7,009 *
Walter Newman, Ph.D.(12)............. 83,501 * 35,872 *
Augustine Lawlor(13)................. 53,035 * 22,783 *
Lee Brettman M.D.(14)................ 67,817 * 29,134 *
Jay Luly(15)......................... 39,888 * 17,135 *
All current directors and executive
officers as a group
(12 persons)(16)................... 4,227,625 28.8% 1,816,187 4.1 %
</TABLE>
- ------------------------
* Represents holdings of less than 1% ownership
(1) The shares owned, and the shares included in the total number of shares
outstanding, have been adjusted, and the percentage owned has been
computed, in accordance with Rule 13d-3(d)(1) under the Securities Exchange
Act of 1934, as amended, and includes options, to the extent called for by
such rule, with respect to shares of LeukoSite common stock that can be
exercised within 60 days of November 3, 1999. The inclusion herein of any
shares deemed to be beneficially owned does not constitute an admission of
actual beneficial ownership of those shares. Except as set forth in the
footnotes below, such shares are beneficially owned with sole investment
and sole voting power.
(2) Includes shares held by HealthCare Ventures III, L.P. ("HCV III"),
HealthCare Ventures IV, L.P. ("HCV IV") and HealthCare Ventures V, L.P.
("HCV V"). Includes 312,907 shares of LeukoSite common stock distributed to
the general partner of HCV III and HCV IV. Includes 8,999 shares of
LeukoSite common stock which HealthCare Ventures LLC has the right to
acquire within 60 days
69
<PAGE>
of November 3, 1999 upon the exercise of stock options. Dr. Cavanaugh, a
director of LeukoSite, is a general partner of the general partner of each
of HCV III, HCV IV, and HCV V. On October 14, 1999, HCV III and HCV V
entered into voting agreements with Millennium to vote 1,130,944 shares in
favor of the merger agreement and merger at the special meeting of
stockholders.
(3) Includes shares held by Schroder Ventures International Life Sciences Fund
L.P. 1 ("Schroder 1"), Schroder Ventures International Life Sciences Fund
L.P. 2 ("Schroder 2"), Schroder Ventures International Life Sciences Trust
("Schroder Trust"), and Schroder Ventures International Life Sciences Fund
Co-Investment Scheme ("Schroder Co-Investment"). Includes 8,999 shares of
LeukoSite common stock which Schroders PLC has the right to acquire within
60 days of November 3, 1999 upon the exercise of stock options. Ms. Kate
Bingham, a director of LeukoSite, is a partner of Schroders Ventures Life
Sciences. On October 14, 1999, Schroder 1, Schroder 2, Schroder Trust and
Schroder Co-Investment entered into voting agreements with Millennium to
vote 933,078 shares in favor of the merger agreement and merger at the
special meeting of stockholders.
(4) Includes shares held by the Springer Family Trust. Dr. Springer disclaims
beneficial ownership of all shares owned the Springer Family Trust except
to the extent of his proportional interest. Includes 15,833 shares of
LeukoSite common stock which Dr. Springer has the right to acquire within
60 days of November 3, 1999 upon the exercise of stock options. On
October 14, 1999, Dr. Springer entered into a voting agreement with
Millennium to vote 715,025 shares in favor of the merger agreement and
merger at the special meeting of stockholders.
(5) Includes shares held by HCV III, HCV IV, and HCV V. Dr. Cavanaugh, a
director of LeukoSite, is a general partner of the general partner of each
of HCV III, HCV IV, and HCV V. Dr. Cavanaugh, together with, among others,
Harold R. Weiner, William Crouse and John Littlechild, the other general
partners of the general partner of HCV III, HCV IV, and HCV V, share voting
and investment control with respect to the shares owned by HCV III,
HCV IV, and HCV V. Includes 312,907 shares of LeukoSite common stock
distributed to the general partner of HCV III and HCV IV. Also includes
8,999 shares of LeukoSite common stock which HealthCare Ventures LLC has
the right to acquire within 60 days of November 3, 1999 upon the exercise
of stock options. Dr. Cavanaugh may be deemed to beneficially own the
shares held by HCV III, HCV IV, and HCV V, although he disclaims actual
beneficial ownership except to the extent of his proportional ownership
interests. Dr. Cavanaugh does not own any shares of stock in his individual
capacity.
(6) Includes shares held by family members and trusts. Includes 8,999 shares of
LeukoSite common stock which Dr. Peretz has the right to acquire within
60 days of November 3, 1999 upon the exercise of stock options.
(7) Includes shares held by Schroder 1, Schroder 2, Schroder Trust and Schroder
Co-Investment. Ms. Bingham, a director of LeukoSite, is a partner of
Schroders Ventures Life Sciences. Also includes 8,999 shares of LeukoSite
common stock which Schroders PLC has the right to acquire within 60 days of
November 3, 1999 upon the exercise of stock options. Ms. Bingham may be
deemed to beneficially own the shares held by Schroder 1, Schroder 2,
Schroder Trust, Schroder Co-Investment and Schroder PLC, although she
disclaims actual beneficial ownership except to the extent of her
proportional ownership interest. Ms. Bingham does not own any shares of
LeukoSite common stock in her individual capacity.
(8) Includes 126,496 shares of LeukoSite common stock which Dr. Mirabelli has
the right to acquire within 60 days of November 3, 1999 upon the exercise
of stock options.
70
<PAGE>
(9) Includes 8,000 shares of LeukoSite common stock which Dr. Kaneko has the
right to acquire within 60 days of November 3, 1999 upon the exercise of
stock options, and 75,000 shares held by YK Capital L.P.
(10) Includes 10,219 shares of LeukoSite common stock which Dr. Walsh has the
right to acquire within 60 days of November 3, 1999 upon the exercise of
stock options.
(11) Includes 16,316 shares of LeukoSite common stock which Mr. Skaletsky has
the right to acquire within 60 days of November 3, 1999 upon the exercise
of stock options.
(12) Includes 59,112 shares of LeukoSite common stock which Dr. Newman has the
right to acquire within 60 days of November 3, 1999 upon the exercise of
stock options. Also includes shares held by the Newman Family Trust.
Dr. Newman disclaims beneficial ownership of all shares owned by the Newman
Family Trust.
(13) Includes 53,035 shares of LeukoSite common stock which Mr. Lawlor has the
right to acquire within 60 days of November 3, 1999 upon the exercise of
stock options.
(14) Includes 65,647 shares of LeukoSite common stock which Dr. Brettman has the
right to acquire within 60 days of November 3, 1999 upon the exercise of
stock options.
(15) Includes 39,888 shares of LeukoSite common stock which Dr. Luly has the
right to acquire within 60 days of November 3, 1999 upon the exercise of
stock options.
(16) Includes 421,543 shares of LeukoSite common stock which the directors and
officers have the right to acquire within 60 days of November 3, 1999 upon
the exercise of stock options.
71
<PAGE>
COMPARISON OF STOCKHOLDER RIGHTS
Both LeukoSite and Millennium are Delaware corporations and are governed by
Delaware law. In addition, the rights of LeukoSite stockholders are currently
governed by the LeukoSite restated certificate of incorporation and the
LeukoSite bylaws, and the rights of Millennium stockholders are governed by the
Millennium restated certificate of incorporation and the Millennium bylaws.
After the merger, the rights of holders of LeukoSite common stock will be
governed by the Millennium restated certificate of incorporation, the Millennium
bylaws and Delaware law. The following is a summary of the material differences
between such rights. This summary does not purport to be a complete discussion
of, and is qualified in its entirety by reference to, Delaware law as well as to
the LeukoSite restated certificate of incorporation, the LeukoSite bylaws, the
Millennium restated certificate of incorporation and the Millennium bylaws,
copies of which are on file with the SEC.
<TABLE>
<CAPTION>
LEUKOSITE STOCKHOLDER RIGHTS MILLENNIUM STOCKHOLDER RIGHTS
-------------------------------- --------------------------------
<S> <C> <C>
Authorized Capital Stock: The authorized capital stock of The authorized capital stock of
LeukoSite consists of Millennium consists of
25 million shares of common 100 million shares of common
stock and five million shares of stock and five million shares of
undesignated preferred stock. undesignated preferred stock.
Number of Directors: The LeukoSite bylaws provide for The Millennium restated
the LeukoSite Board to have the certificate of incorporation
power to determine the total requires no less than three
number. The LeukoSite Board directors, and the Millennium
currently consists of eight bylaws provide that the total
directors. number of directors may be
determined by the Millennium
Board. The Millennium Board
currently consists of six
directors.
Classification of Board of
Directors: LeukoSite does not have a The Millennium Board is divided
classified board. The LeukoSite into three classes, with each
bylaws require that all class serving a staggered three
directors be elected for a one year term. There are currently
year term and until his or her two classes with three
successor is elected and directors, and one class with no
qualified. director. Dr. Mirabelli will be
elected to the class with a
vacancy (term expiring at the
2000 annual meeting)
Removal of Directors: Pursuant to the LeukoSite The Millennium restated
bylaws, any director or the certificate of incorporation
entire LeukoSite Board may be provides that directors may be
removed, either for or without removed only for cause by the
cause, at any time by the affirmative vote of the holders
affirmative vote of the holders of at least two-thirds of all
of a majority of all outstanding outstanding shares of Millennium
shares of LeukoSite stock stock entitled to vote.
entitled to vote, except that a
director elected by the holders
of a particular class or series
of stock may be removed without
cause only by a vote of the
holders of a majority of the
outstanding shares of such class
or series.
</TABLE>
72
<PAGE>
<TABLE>
<CAPTION>
LEUKOSITE STOCKHOLDER RIGHTS MILLENNIUM STOCKHOLDER RIGHTS
-------------------------------- --------------------------------
<S> <C> <C>
Amendment of Corporate Charter The LeukoSite restated The Millennium restated
certificate of incorporation may certificate of incorporation may
be amended by the affirmative be amended by the affirmative
vote of holders of a majority of vote of holders of a majority of
LeukoSite common stock Millennium common stock
outstanding, except with respect outstanding, except with respect
to proposals amending the to proposals amending the
LeukoSite certificate of Millennium certificate of
incorporation to change the incorporation to change the
authority of the board of provisions related to the
directors to issue shares of Millennium Board of Directors,
preferred stock, to change the stockholder voting by written
provisions related to the board consent and special meetings of
of directors, indemnification, stockholders, with respect to
stockholder voting by written which the affirmative vote of
consent and special meetings of the holders of 75% of the shares
stockholders, and the of Millennium stock entitled to
affirmative vote required by the vote is required.
stockholders to reduce the
number of authorized shares of
common stock or preferred stock,
with respect to which the
affirmative vote of the holders
of 75% of the shares of
LeukoSite stock entitled to vote
is required.
Amendment of Bylaws: The LeukoSite bylaws may be Except as provided below, the
altered or repealed by the Millennium restated bylaws may
holders of 75% of the shares of be amended, and new bylaws may
LeukoSite voting stock entitled be adopted, by Millennium
to vote or by a majority of the stockholders or the Millennium
LeukoSite Board. Board. The Millennium restated
bylaws state that all such
amendments voted on by the
Millennium stockholders must be
approved by holders of a
majority of all outstanding
Millennium stock. Certain
provisions of the Millennium
bylaws regarding the powers and
election of directors and
amendments to the bylaws require
the affirmative vote of 75% of
the voting power of all
outstanding stock entitled to
vote in order to be amended by a
vote of stockholders.
Voting Stock The outstanding LeukoSite voting The outstanding Millennium
stock consists solely of voting stock consists solely of
LeukoSite common stock. Millennium common stock.
</TABLE>
73
<PAGE>
<TABLE>
<CAPTION>
LEUKOSITE STOCKHOLDER RIGHTS MILLENNIUM STOCKHOLDER RIGHTS
-------------------------------- --------------------------------
<S> <C> <C>
Indemnification and Exculpation
of Directors and Officers: The LeukoSite restated The Millennium restated
certificate of incorporation and certificate of incorporation
bylaws provide that LeukoSite provides that Millennium will
will indemnify to the fullest indemnify to the fullest extent
extent permitted by law any permitted by law any person
person made, or threatened to be made, or threatened to be made,
made, party to an action or party to an action or proceeding
proceeding by reason of the fact by reason of the fact that he is
that he is or was a director or or was a director or officer of
officer of LeukoSite or that Millennium or that such director
such director or officer was or officer was serving any other
serving any other entity in any entity in any capacity at the
capacity at the request of request of Millennium. The
LeukoSite. The LeukoSite Millennium certificate of
restated certificate of incorporation further provides
incorporation further provides that no director shall be
that no director shall be personally liable to Millennium
personally liable to LeukoSite or its stockholders for monetary
or its stockholders for monetary damages for any breach of
damages for any breach of fiduciary duty.
fiduciary duty.
Business Combination
Prohibitions: The LeukoSite restated The Millennium restated
certificate authorizes the board certificate authorizes the board
of directors to issue "blank of directors to issue "blank
check" preferred stock without check" preferred stock without
any need for action by any need for action by
LeukoSite' stockholders. Millennium stockholders.
Other provisions which may have The Millennium restated
the effect of deterring unwanted certificate of incorporation and
business combinations include bylaws contain provisions
supermajority voting comparable to those included in
requirements for amendments to the LeukoSite restated
the restated certificate of certificate of incorporation and
incorporation and bylaws, as bylaws. In addition, the
described above; inability of Millennium restated certificate
stockholders to take written of incorporation and bylaws
action in lieu of a meeting; contain provisions relating to a
advance notice requirements for staggered board of directors,
the nomination of directors and and prohibit stockholders from
the bringing of business before calling special meetings of
a stockholders meeting. stockholders. These additional
provisions may also inhibit
unwanted business combinations.
</TABLE>
74
<PAGE>
<TABLE>
<CAPTION>
LEUKOSITE STOCKHOLDER RIGHTS MILLENNIUM STOCKHOLDER RIGHTS
-------------------------------- --------------------------------
<S> <C> <C>
Special Meetings of
Stockholders: Special meetings of LeukoSite The Millennium restated bylaws
stockholders may be called by provide that the chairman, the
the chairman of the board of chief executive officer or the
directors, the president, a Millennium Board may call a
majority of the total number of special meeting.
directors which LeukoSite would
have if there were no vacancies,
or by the stockholders holding
shares representing 20% of the
outstanding shares.
Action of Stockholders Without
a Meeting: The LeukoSite restated bylaws The Millennium restated bylaws
provide that the stockholders of provide that the stockholders of
LeukoSite may not take any Millennium may not take any
action by written consent in action by written consent in
lieu of a meeting. lieu of a meeting.
</TABLE>
75
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial statements have been
prepared to give effect to the merger using the purchase method of accounting.
The unaudited pro forma combined balance sheet as of September 30, 1999
gives effect to the merger as if it had occurred on such date, and reflects the
allocation of the purchase price to the LeukoSite assets acquired, including
in-process research and development, and liabilities assumed. The unaudited pro
forma combined statements of operations combine the historical statements of
operations of Millennium and LeukoSite as if the merger had occurred at
January 1, 1998. The historical financial statements of LeukoSite included
herein have been adjusted on a pro forma basis to reflect the February 1999
acquisition of CytoMed, Inc. by LeukoSite as if such acquisition had occurred on
January 1, 1998 ("Historical LeukoSite Financial Statements Assuming the CytoMed
Acquisition"). Information with respect to the 1998 Historical LeukoSite
Financial Statements Assuming the CytoMed Acquisition is derived from and can be
found in the LeukoSite Form 8-K filed on April 27, 1999 in conjunction with the
CytoMed acquisition and incorporated by reference herein. The unaudited pro
forma combined statement of operations for the nine-month period ended
September 30, 1999 combines the historical unaudited statements of operations of
Millennium and LeukoSite, as adjusted, for such period. It is expected that
following the merger, Millennium will incur additional costs, which are not
expected to be significant to the combined results of operations, in connection
with integrating the operations of the two companies. Integration-related costs
are not included in the accompanying unaudited pro forma combined financial
statements.
The Millennium statement of operations for the period in which the merger
occurs will include a significant charge for acquired in-process research and
development, currently estimated to be approximately $327.6 million, or 59.2% of
the purchase price. This amount represents the values determined by management,
using a discounted cash flow methodology, to be attributable to the in-process
research and development programs of LeukoSite based on a preliminary valuation
of such programs. Such amount is subject to significant change pending
completion of the final independent valuation analysis. The charge relates to
specific on-going research and development programs and preclinical projects.
Assuming each of these research programs continues through all stages of
clinical development, the projected future research and development expenditures
related to these programs, excluding the cost of research and development which
may be performed by corporate collaborators, is approximately $139.3 million.
The programs are forecasted to be completed at various times between 2000 and
2006. If Millennium would have allocated less of the purchase price to these
programs, the value would have been recorded as goodwill on the balance sheet
and amortized over the expected benefit period, resulting in increased
amortization expense during that period. Millennium believes that the allocation
of the purchase price to these programs is appropriate given the future
potential of these programs to contribute to the operations of Millennium.
Unaudited pro forma combined financial information is presented for
illustrative purposes only and is not necessarily indicative of the financial
position or results of operations that would have actually been reported had the
merger occurred at the beginning of the periods presented, nor is it necessarily
indicative of future financial position or results of operations. These
unaudited pro forma combined financial statements are based upon the respective
historical financial statements of Millennium and LeukoSite, as adjusted, and do
not incorporate, nor do they assume, any benefits from cost savings or synergies
of operations of the combined company.
76
<PAGE>
MILLENNIUM PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEETS
AS OF SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL LEUKOSITE
HISTORICAL FINANCIAL STATEMENTS PRO FORMA
MILLENNIUM ASSUMING THE PRO FORMA MILLENNIUM
PHARMACEUTICALS, INC. CYTOMED ACQUISITION ADJUSTMENTS PHARMACEUTICALS, INC.
--------------------- -------------------- ----------- ---------------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash
equivalents.............. $ 81,960 $ 8,021 $ 89,981
Marketable securities...... 143,220 14,360 157,580
Due from strategic
partners................. 9,547 9,547
Prepaid expenses and other
current assets........... 6,746 6,900 13,646
-------- -------- -------- --------
Total current assets......... 241,473 29,281 270,754
-------- -------- -------- --------
Property and equipment,
net........................ 51,152 4,541 55,693
Restricted cash and other
assets..................... 12,564 5,291 17,855
Intangible assets, net....... 3,684 208 $ 43,072 (B) 200,758
2,920 (C)
151,082 (D)
(208)(F)
-------- -------- -------- --------
Total assets................. $308,873 $ 39,321 $196,866 $545,060
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........... $ 13,450 $ 464 $ 13,914
Accrued expenses........... 8,466 5,259 $ 7,000 (E) 20,725
Deferred revenue........... 7,371 2,540 9,911
Current portion of capital
lease obligations........ 8,836 959 9,795
-------- -------- -------- --------
Total current liabilities.... 38,123 9,222 7,000 54,345
-------- -------- -------- --------
Capital lease obligations,
net of current portion..... 25,984 975 26,959
Minority interest............ 15,564 15,564
Commitments and contingencies
Stockholders' equity:
Preferred stock............
Common stock............... 36 147 (147)(G) 43
7 (H)
Additional paid-in 321,525 97,594 (97,594)(G) 868,126
capital.................. 546,601 (H)
Deferred compensation...... (1,370) (1,370)
Notes receivable from
officers................. (29) (29)
Other comprehensive loss... (539) (539)
Accumulated deficit........ (90,421) (68,617) (327,618)(A) (418,039)
68,617 (G)
-------- -------- -------- --------
Total stockholders' equity... 229,202 29,124 189,866 448,192
-------- -------- -------- --------
Total liabilities and
stockholders' equity....... $308,873 $ 39,321 $196,866 $545,060
======== ======== ======== ========
</TABLE>
See notes to unaudited pro forma financial statements.
77
<PAGE>
MILLENIUM PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
LEUKOSITE
FINANCIAL
STATEMENTS PRO
HISTORICAL ASSUMING THE FORMA
MILLENNIUM CYTOMED PRO FORMA MILLENNIUM
PHARMACEUTICALS, INC. ACQUISITION ADJUSTMENTS PHARMACEUTICALS, INC.
--------------------- ------------ ----------- ---------------------
<S> <C> <C> <C> <C>
Revenues:
Strategic alliances............. $128,581 $ 128,581
Corporate collaborations and
grants........................ $ 8,267 8,267
Joint venture revenue........... 2,662 2,662
-------- -------- --------- ---------
128,581 10,929 139,510
-------- -------- --------- ---------
Costs and expenses:
Research and development........ 113,276 23,551 136,827
General and administrative...... 23,907 2,567 26,474
Acquired in-process research and
development................... 2,661 2,661
Amortization of intangible
assets........................ 2,027 $ 36,951 (I) 38,978
-------- -------- --------- ---------
139,210 28,779 36,951 204,940
-------- -------- --------- ---------
Loss from operations.............. (10,629) (17,850) (36,951) (65,430)
Interest income................... 9,209 1,021 10,230
Interest expense.................. (2,177) (131) (2,308)
Minority interest................. 2,204 2,204
Equity in operations of joint
venture......................... (3,900) (3,900)
-------- -------- --------- ---------
Net loss.......................... $ (1,393) $(20,860) $ (36,951) $ (59,204)
======== ======== ========= =========
Basic and diluted net loss per
share........................... $ (0.04) $ (1.49) ($ 1.40)
======== ======== =========
Shares Used In Calculating:
Basic and diluted net loss per
share........................... 35,817 13,988 (13,988)(J) 42,394
6,577 (K)
======== ======== =========
</TABLE>
See notes to unaudited pro forma financial statements.
78
<PAGE>
MILLENNIUM PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
LEUKOSITE
FINANCIAL
STATEMENTS PRO
HISTORICAL ASSUMING THE FORMA
MILLENNIUM CYTOMED PRO FORMA MILLENNIUM
PHARMACEUTICALS, INC. ACQUISITION ADJUSTMENTS PHARMACEUTICALS, INC.
--------------------- ------------ ----------- ---------------------
<S> <C> <C> <C> <C>
Revenues:
Strategic alliances............. $133,682 $ 133,682
Corporate collaborations and
grants........................ $ 12,324 12,324
Joint venture revenue........... 1,260 1,260
-------- -------- --------- ---------
133,682 13,584 147,266
-------- -------- --------- ---------
Costs and expenses:
Research and development........ 114,190 24,535 138,725
General and administrative...... 24,419 4,144 28,563
Amortization of intangible
assets........................ 2,702 $ 49,269 (I) 51,971
-------- -------- --------- ---------
141,311 28,679 49,269 219,259
-------- -------- --------- ---------
Loss from operations.............. (7,629) (15,095) (49,269) (71,993)
Interest income................... 6,198 1,789 7,987
Interest expense.................. (2,410) (171) (2,581)
Minority interest................. 14,179 14,179
Equity in operations of joint
venture......................... (3,858) (3,858)
-------- -------- --------- ---------
Net income (loss)................. $ 10,338 $(17,335) $ (49,269) $ (56,266)
======== ======== ========= =========
Basic net income (loss) per
share........................... $ 0.34 $ (1.39) $ (1.52)
======== ======== =========
Diluted net income (loss) per
share........................... $ 0.33 $ (1.39) $ (1.52)
======== ======== =========
Shares Used In Calculating:
Basic net income (loss) per (12,462)(J)
share........................... 30,319 12,462 6,577 (K) 36,896
======== ======== =========
Diluted net income (loss) per
share........................... 31,508 12,462 36,896
======== ======== =========
</TABLE>
See notes to unaudited pro forma financial statements.
79
<PAGE>
MILLENNIUM PHARMACEUTICALS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
NOTE 1
The unaudited pro forma combined financial statements reflect the conversion
of all of the outstanding shares of LeukoSite common stock into approximately
6,577,110 shares of Millennium common stock pursuant to the merger. This
calculation is based on LeukoSite's outstanding capitalization at September 30,
1999 using the conversion ratio of 0.4296 of a share of Millennium common stock
for each share of outstanding LeukoSite common stock. Options and warrants to
purchase approximately 2,297,246 shares of LeukoSite common stock with a
weighted average exercise price of $9.17 will be assumed by Millennium pursuant
to the merger and converted into options and warrants to purchase 986,911 shares
of Millennium common stock. The total cost of the proposed merger is estimated
to be approximately $553.6 million, determined as follows (in thousands):
<TABLE>
<S> <C>
Fair value of Millennium shares (calculated using $74.52 per
share fair value at the date of the merger agreement)..... $490,100
Value of LeukoSite options and warrants assumed............. 56,508
Millennium transaction costs, consisting primarily of
financial advisory, legal and accounting fees............. 7,000
--------
$553,608
========
</TABLE>
Based upon a preliminary valuation of tangible and intangible assets
acquired and liabilities assumed, Millennium has allocated the total cost of the
merger to the net assets of LeukoSite as follows (in thousands):
<TABLE>
<S> <C>
Tangible assets acquired.................................... $ 39,113
In-process research and development......................... 327,618
Intangible assets (assembled workforce, core technology and
goodwill)................................................. 197,074
Liabilities assumed......................................... (10,197)
--------
$553,608
========
</TABLE>
LeukoSite is engaged in the discovery and development of a new class of
pharmaceutical products for the treatment or prevention of serious diseases.
LeukoSite's business focus is in the development of medicines for treating
cancer and inflammatory, autoimmune and viral diseases. LeukoSite's research and
development programs in these areas are in various stages from pre-clinical
development to late stage clinical trials. LeukoSite's strategy has been to
develop and commercialize its products through alliances with major
pharmaceutical and biotechnology companies. No products utilizing LeukoSite's
proprietary technologies have been approved for marketing to date. The LeukoSite
research and development programs currently in process were valued as follows:
<TABLE>
<S> <C>
CAMPATH-Registered Trademark-............................... $ 38,922
LDP-01...................................................... 20,155
LDP-02...................................................... 24,482
LDP-341..................................................... 139,149
LDP-977..................................................... 17,334
Preclinical projects........................................ 87,576
--------
$327,618
========
</TABLE>
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<PAGE>
MILLENNIUM PHARMACEUTICALS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 (CONTINUED)
The in-process research and development has been written off against the
combined retained earnings. Because the charge is nonrecurring, it has not been
reflected in the pro forma combined statements of operations. Such charge will
be included in the Millennium statement of operations in the quarter in which
the merger is completed. The intangible assets will be amortized over their
estimated useful lives of 4 years.
NOTE 2
The pro forma combined balance sheet includes the adjustments necessary to
give effect to the merger as if it had occurred on September 30, 1999 and to
reflect the allocation of the acquisition cost to the fair value of tangible and
intangible assets acquired and liabilities assumed as noted above, including a
charge to retained earnings for acquired in-process research and development and
the elimination of LeukoSite's equity accounts. Adjustments included in the pro
forma combined balance sheet are summarized as follows (in thousands except per
share amounts):
(A) The charge to operations for in-process research and development of
$327,618.
(B) The valuation of $43,072 for LeukoSite core technology.
(C) The valuation of $2,920 for the LeukoSite workforce.
(D) The valuation of $151,082 for the LeukoSite goodwill.
(E) The accrual of the estimated acquisition costs of $7,000.
(F) To eliminate LeukoSite historical goodwill of $208.
(G) To eliminate LeukoSite historical stockholders' equity amounts:
<TABLE>
<S> <C>
Common stock................................................ $ 147
Additional paid-in capital.................................. 97,594
Accumulated deficit......................................... 68,617
</TABLE>
(H) Issuance of 6,577,110 shares of Millennium $.001 par value common stock
to acquire all of the outstanding common stock of LeukoSite, as discussed
in Note 1. Common stock credited for $7 and additional paid-in capital
credited for $546,601, including an adjustment of $56,508 to reflect the
fair value of stock options and warrants issued by Millennium
Pharmaceuticals in exchange for the LeukoSite stock options and warrants.
NOTE 3
The Historical LeukoSite Financial Statements Assuming the CytoMed
Acquisition, for the nine months ended September 30, 1999, have been adjusted on
a pro forma basis to reflect the February 1999 acquisition of CytoMed, Inc. by
LeukoSite as if such acquisition had occurred on January 1, 1998. Such pro forma
adjustments include the addition of $744 of Research and Development Costs,
incurred by CytoMed in 1999 prior to the acquisition, and the reversal of the
$1,588 Acquired In-Process Research and Development charge, associated with the
CytoMed acquisition, due to its non-recurring nature.
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<PAGE>
MILLENNIUM PHARMACEUTICALS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 (CONTINUED)
The Historical LeukoSite Financial Statements Assuming the CytoMed
Acquisition for the year ended December 31, 1998 are derived from and can be
found in the LeukoSite Form 8-K filed on April 27, 1999 in conjunction with the
CytoMed acquisition.
NOTE 4
The pro forma combined statements of operations include the adjustments
necessary to give effect to the merger as if it had occurred on January 1, 1998.
(I) Adjustments consist of the amortization of acquired intangible assets
using the following estimated useful lives:
<TABLE>
<S> <C>
Assembled workforce......................................... 4 years
Core technology............................................. 4 years
Goodwill.................................................... 4 years
</TABLE>
NOTE 5
(J) To eliminate LeukoSite weighted average shares outstanding.
(K) Pro forma basic and diluted net loss per share amounts for the year
ended December 31, 1998 and the nine-month period ended September 30,
1999, are based upon the historical weighted-average number of Millennium
common stock outstanding adjusted to reflect the issuance, as of
January 1, 1998, of approximately 6,577,110 shares of Millennium common
stock.
(L) The impact of outstanding options and warrants, including LeukoSite
options and warrants assumed, has been excluded from the calculation of
diluted net loss per share as the effect would be antidilutive.
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<PAGE>
EXPERTS
The consolidated financial statements of LeukoSite as of December 31, 1997
and 1998 and for each of the three years in the period ended December 31, 1998
incorporated by reference into this registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto and are included herein upon the authority of such
firm as experts in giving said report.
The financial statements of CytoMed, Inc. incorporated by reference in
LeukoSite's Current Report on Form 8-K/A dated April 27, 1999 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The consolidated financial statements of Millennium incorporated by
reference in Millennium's Annual Report (Form 10-K) for the year ended
December 31, 1998, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
LEGAL MATTERS
The validity of the shares of Millennium common stock to be issued in the
merger will be passed upon for Millennium by Hale and Dorr LLP, Boston,
Massachusetts, counsel to Millennium. Certain legal matters with respect to the
federal income tax consequences of the merger will be passed upon for Millennium
by Hale and Dorr LLP, Boston, Massachusetts and for LeukoSite by Bingham Dana
LLP.
STOCKHOLDER PROPOSALS
LeukoSite will hold a 2000 Annual Meeting of Stockholders only if the merger
is not consummated before the time of that meeting. In the event that the 2000
Annual Meeting of Stockholders is to be held, any proposals of stockholders
intended to be presented at that meeting must be received not later than
December 15, 1999 in order to be considered for inclusion in the LeukoSite proxy
materials relating to that meeting.
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<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
<PAGE>
AGREEMENT AND PLAN OF MERGER
AMONG
MILLENNIUM PHARMACEUTICALS, INC.
ANM, INC.
AND
LEUKOSITE, INC.
OCTOBER 14, 1999
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
ARTICLE I THE MERGER........................................ 1
Section 1.01 Effective Time of the Merger................ 1
Section 1.02 Closing..................................... 2
Section 1.03 Effects of the Merger....................... 2
Section 1.04 Directors and Officers...................... 2
ARTICLE II CONVERSION OF SECURITIES......................... 2
Section 2.01 Conversion of Capital Stock................. 2
Section 2.02 Exchange of Certificates.................... 3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY... 6
Section 3.01 Organization of the Company................. 6
Section 3.02 The Company Capital Structure............... 7
Section 3.03 Authority; No Conflict; Required Filings and
Consents................................................ 8
Section 3.04 SEC Filings; Financial Statements........... 9
Section 3.05 No Undisclosed Liabilities.................. 10
Section 3.06 Absence of Certain Changes or Events........ 10
Section 3.07 Taxes....................................... 11
Section 3.08 Properties.................................. 12
Section 3.09 Intellectual Property....................... 12
Section 3.10 Preclinical Testing and Clinical Trials..... 14
Section 3.11 Agreements, Contracts and Commitments....... 14
Section 3.12 Litigation.................................. 15
Section 3.13 Environmental Matters....................... 15
Section 3.14 Employee Benefit Plans...................... 16
Section 3.15 Compliance With Laws........................ 17
Section 3.16 Certain Regulatory Matters.................. 18
Section 3.17 Tax Matters................................. 18
Section 3.18 Registration Statement; Proxy
Statement/Prospectus.................................... 18
Section 3.19 Labor Matters............................... 19
Section 3.20 Insurance................................... 19
Section 3.21 No Existing Discussions..................... 19
Section 3.22 Opinion of Financial Advisor................ 20
Section 3.23 Section 203 of the DGCL Not Applicable...... 20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND
SUB....................................................... 20
Section 4.01 Organization of Parent and Sub.............. 20
Section 4.02 Parent Capital Structure.................... 20
Section 4.03 Authority; No Conflict; Required Filings and
Consents................................................ 21
Section 4.04 SEC Filings; Financial Statements........... 22
Section 4.05 No Undisclosed Liabilities.................. 22
Section 4.06 Absence of Certain Changes or Events........ 23
Section 4.07 Litigation.................................. 23
Section 4.08 Compliance With Laws........................ 23
Section 4.09 Tax Matters................................. 23
Section 4.10 Registration Statement; Proxy
Statement/Prospectus.................................... 23
Section 4.11 Operations of Sub........................... 24
Section 4.12 Opinion of Financial Advisor................ 24
ARTICLE V CONDUCT OF BUSINESS............................... 24
Section 5.01 Covenants of the Company.................... 25
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Section 5.02 Cooperation................................. 27
Section 5.03 Confidentiality............................. 27
ARTICLE VI ADDITIONAL AGREEMENTS............................ 27
Section 6.01 No Solicitation............................. 27
Section 6.02 Proxy Statement/Prospectus; Registration
Statement............................................... 29
Section 6.03 Nasdaq Quotation............................ 30
Section 6.04 Access to Information....................... 30
Section 6.05 Stockholders Meetings....................... 30
Section 6.06 Legal Conditions to Merger.................. 31
Section 6.07 Public Disclosure........................... 32
Section 6.08 Tax-Free Reorganization..................... 32
Section 6.09 Affiliate Agreements........................ 32
Section 6.10 Nasdaq Listing.............................. 33
Section 6.11 Stock Plans and Warrants.................... 33
Section 6.12 Brokers or Finders.......................... 34
Section 6.13 Indemnification............................. 34
Section 6.14 Notification of Certain Matters............. 35
Section 6.15 Comfort Letters from the Company's
Accountants............................................. 35
Section 6.16 Stockholder Litigation...................... 35
Section 6.17 Relationship with Partners.................. 35
Section 6.18 Employee Matters............................ 35
Section 6.19 Board Representation........................ 37
Section 6.20 401(k) Plan................................. 38
ARTICLE VII CONDITIONS TO MERGER............................ 38
Section 7.01 Conditions to Each Party's Obligation To
Effect the Merger....................................... 38
Section 7.02 Additional Conditions to Obligations of
Parent and Sub.......................................... 39
Section 7.03 Additional Conditions to Obligations of the
Company................................................. 40
ARTICLE VIII TERMINATION AND AMENDMENT...................... 40
Section 8.01 Termination................................. 40
Section 8.02 Effect of Termination....................... 42
Section 8.03 Fees and Expenses........................... 42
Section 8.04 Amendment................................... 44
Section 8.05 Extension; Waiver........................... 44
ARTICLE IX MISCELLANEOUS.................................... 44
Section 9.01 Nonsurvival of Representations, Warranties
and Agreements.......................................... 45
Section 9.02 Notices..................................... 45
Section 9.03 Interpretation.............................. 46
Section 9.04 Counterparts................................ 46
Section 9.05 Entire Agreement; No Third Party
Beneficiaries........................................... 46
Section 9.06 Governing Law............................... 46
Section 9.07 Other Remedies; Specific Performance........ 46
Section 9.08 Assignment.................................. 47
Section 9.09 Severability................................ 47
Section 9.10 WAIVER OF JURY TRIAL........................ 47
Section 9.11 Elimination of Parent Voting Proposal....... 47
</TABLE>
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<PAGE>
TABLES OF DEFINED TERMS
<TABLE>
<CAPTION>
CROSS REFERENCE
TERMS IN AGREEMENT
- ----- ---------------
<S> <C>
Acquisition Proposal........................................ Section 6.01(a)
Affiliate................................................... Section 6.10
Affiliate Agreement......................................... Section 6.10
Agreement................................................... Preamble
Agreement of Merger Section................................. 1.01
Alternative Transaction..................................... Section 8.03(g)
Antitrust Laws.............................................. Section 6.06(b)
Bankruptcy and Equity Exception............................. Section 3.03(a)
Blue Sky.................................................... Section 7.02(d)
Certificates................................................ Section 2.02(b)
Closing Section............................................. 1.02
Closing Date................................................ Section 1.02
Code........................................................ Preamble.......
Company Balance Sheet....................................... Section 3.04(b)
Company Common Stock........................................ Section 2.01(b)
Company Disclosure Schedule................................. Article III
Company Employee Plans...................................... Section (a)
Company Material Adverse Effect............................. Section 3.01
Company Material Contract................................... Section 3.10
Company Meeting............................................. Section 3.16
Company..................................................... Section 3.02(b)
Company Rights.............................................. Section 3.02(b)
Company Rights Plan......................................... Section 3.02(b)
Company SEC Reports......................................... Section 3.04(a)
Company Stock Plans......................................... Section 3.02(a)
Company Voting Agreements................................... Preamble
Company Voting Proposal..................................... Section 6.05(a)
Confidentiality Agreement................................... Section 5.04
Constituent Corporations.................................... Section 1.03
Exchange Ratio.............................................. Section 2.01(c)
Effective Time.............................................. Section 1.01
Environmental Law........................................... Section 3.12(c)
ERISA....................................................... Section 3.13(a)
ERISA Affiliate............................................. Section 3.13(a)
Exchange Act Section........................................ 3.03(c)
Exchange Agent.............................................. Section 2.02(a)
Exchange Fund............................................... Section 2.02(a)
Governmental Entity......................................... Section 3.03(c)
Hazardous Substance......................................... Section 3.12(c)
HSR Act..................................................... Section 3.03(c)
Indemnified Parties......................................... Section 6.14(a)
IRS......................................................... Section 3.07(b)
Joint Proxy Statement....................................... Section 3.16
Leases...................................................... Section 3.08
Merger...................................................... Preambles
Order....................................................... Section 6.06(b)
Outside Date................................................ Section 8.01(b)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
CROSS REFERENCE
TERMS IN AGREEMENT
- ----- ---------------
<S> <C>
Parent Balance Sheet........................................ Section 4.04(b)
Parent Common Stock......................................... Section 2.01(b)
Parent Disclosure Schedule.................................. Article IV
Parent Employee Plans....................................... Section 4.13(a)
Parent Material Adverse Effect.............................. Section 4.01
Parent Material Contracts................................... Section 4.10
Parent Meeting.............................................. Section 3.16
Parent SEC Reports.......................................... Section 4.04(a)
Parent Stock Plans.......................................... Section 4.02(a)
Parent Voting Proposal...................................... Section 6.05(b)
Registration Statement...................................... Section 3.16
Rule 145.................................................... Section 6.10
SEC......................................................... Section 3.03(c)
Securities Act.............................................. Section 3.03(c)
Stockholder Stock Option Agreement.......................... Preamble
Subsidiary.................................................. Section 3.01
Superior Proposal........................................... Section 6.01(a)
Surviving Corporation....................................... Section 1.03(a)
Tax......................................................... Section 3.07(a)
Taxes....................................................... Section 3.07(a)
Third Party................................................. Section 8.03(g)
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of October 14,
1999, by and among Millennium Pharmaceuticals, Inc., a Delaware corporation
("Parent"), ANM, Inc., a Delaware corporation and a direct, wholly-owned
subsidiary of Parent ("Sub"), and Leukosite, Inc., a Delaware corporation (the
"Company").
WHEREAS, the Boards of Directors of Parent and the Company deem it advisable
and in the best interests of each corporation and its respective stockholders
that Parent and the Company combine in order to advance the long-term business
interests of Parent and the Company;
WHEREAS, the combination of Parent and the Company shall be effected by the
terms of this Agreement through a merger of Sub into the Company, as a result of
which the stockholders of the Company will become stockholders of Parent (the
"Merger");
WHEREAS, concurrently with the execution of this Agreement, and as a
condition and inducement of the willingness of Parent to enter into this
Agreement, certain stockholders of the Company have executed Voting Agreements
in favor of Parent in the form attached hereto as Exhibit A (the "Stockholder
Voting Agreement"), pursuant to which such stockholders have agreed to vote and
to give Parent a proxy to vote all of the shares of capital stock of the Company
that such stockholders own; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I
THE MERGER
Section 1.01 EFFECTIVE TIME OF THE MERGER. Subject to the provisions of
this Agreement, a certificate of merger in such form as is required by the
relevant provisions of the Delaware General Corporation Law ("DGCL") (the
"Certificate of Merger") shall be duly executed and acknowledged by the
Surviving Corporation (as defined in Section 1.03) and thereafter delivered to
the Secretary of State of the State of Delaware for filing, as soon as
practicable on the Closing Date (as defined in Section 1.02). The Merger shall
become effective upon the filing of the Certificate of Merger with the Secretary
of State of the State of Delaware or at such later time as is established by
Parent and the Company and set forth in the Certificate of Merger (the
"Effective Time").
Section 1.02 CLOSING. The closing of the Merger (the "Closing") will take
place at 10:00 a.m., Boston time, on a date to be specified by Parent and the
Company (the "Closing Date"), which shall be no later than the fifth business
day after satisfaction or waiver of the conditions set forth in Article VII
(other than delivery of items to be delivered at the Closing), at the offices of
Hale and Dorr LLP, 60 State Street, Boston, Massachusetts, unless another date,
place or time is agreed to in writing by Parent and the Company.
Section 1.03 EFFECTS OF THE MERGER. At the Effective Time (i) the separate
existence of Sub shall cease and Sub shall be merged with and into the Company
(Sub and the Company are sometimes referred to below as the "Constituent
Corporations" and the Company following the Merger is sometimes referred to
below as the "Surviving Corporation"), and (ii) the Bylaws of Sub as in effect
immediately prior to the Effective Time shall be the Bylaws of the Surviving
Corporation. The Merger shall have the effects set forth in Section 259 of the
DGCL.
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<PAGE>
Section 1.04 DIRECTORS AND OFFICERS. The directors and officers of Sub
immediately prior to the Effective Time shall be the initial directors and
officers of the Surviving Corporation, each to hold office in accordance with
the Certificate of Incorporation and Bylaws of the Surviving Corporation.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.01 CONVERSION OF CAPITAL STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of capital stock of the Company or capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of the
capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of Common Stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. All shares of
common stock, $.01 par value per share, of the Company ("Company Common
Stock") that are owned by the Company as treasury stock or by any
wholly-owned Subsidiary (as defined in Section 3.01) of the Company and any
shares of Company Common Stock owned by Parent, Sub or any other
wholly-owned Subsidiary of Parent shall be cancelled and retired and shall
cease to exist and no stock of Parent or other consideration shall be
delivered in exchange therefor. Any shares of Common Stock, $.001 par value
per share, of Parent ("Parent Common Stock") owned by the Company shall be
unaffected by the Merger.
(c) Exchange Ratio for Company Common Stock. Subject to Section 2.02,
each issued and outstanding share of Company Common Stock (other than shares
to be cancelled in accordance with Section 2.01(b)), shall be converted into
the right to receive a number of shares of Parent Common Stock as is equal
to (x) one times (y) the Exchange Ratio (as defined below). The "Exchange
Ratio" shall be .4296. All such shares of Company Common Stock, when so
converted, shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each holder of a
certificate representing any such shares or rights shall cease to have any
rights with respect thereto, except the right to receive the shares of
Parent Common Stock and any cash in lieu of fractional shares of Parent
Common Stock to be issued or paid in consideration therefor upon the
surrender of such certificate in accordance with Section 2.02, without
interest.
(d) Adjustments to Exchange Ratio. The Exchange Ratio shall be adjusted
to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible
into Parent Common Stock or Company Common Stock), reorganization,
recapitalization or other like change with respect to Parent Common Stock or
Company Common Stock occurring after the date hereof and prior to the
Effective Time.
Section 2.02 EXCHANGE OF CERTIFICATES. The procedures for exchanging
outstanding shares of Company Common Stock for Parent Common Stock pursuant to
the Merger are as follows:
(a) Exchange Agent. As of the Effective Time, Parent shall deposit with
a bank or trust company designated by Parent (the "Exchange Agent"), for the
benefit of the holders of shares of Company Common Stock, for exchange in
accordance with this Section 2.02, through the Exchange Agent, certificates
representing the shares of Parent Common Stock issuable pursuant to Section
2.01 in exchange for outstanding shares of Company Common Stock and cash in
an amount sufficient to make payments required pursuant to Section
2.02(e) (such shares of Parent Common Stock and such cash being hereinafter
referred to as the "Exchange Fund").
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which
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<PAGE>
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock (the "Certificates") whose shares were converted
pursuant to Section 2.01 into the right to receive shares of Parent Common
Stock (i) a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Exchange Agent and shall be in such
form and have such other provisions as Parent may reasonably specify) and
(ii) instructions for effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock (plus
cash in lieu of fractional shares, if any, of Parent Common Stock and any
dividends or distributions as provided below). Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate representing that
number of whole shares of Parent Common Stock which such holder has the
right to receive pursuant to the provisions of this Article II plus cash in
lieu of fractional shares pursuant to Section 2.02(e) and any dividends or
distributions pursuant to Section 2.02(c), and the Certificate so
surrendered shall immediately be cancelled. In the event of a transfer of
ownership of Company Common Stock which is not registered in the transfer
records of the Company, a certificate representing the proper number of
shares of Parent Common Stock plus cash in lieu of fractional shares
pursuant to Section 2.02(e) and any dividends or distributions pursuant to
Section 2.02(c) may be issued or paid to a person other than the person in
whose name the Certificate so surrendered is registered, if the Certificate
representing such Company Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer
and by evidence that any applicable stock transfer taxes have been paid.
Until surrendered as contemplated by this Section 2.02, each Certificate
shall be deemed at any time after the Effective Time to represent only the
right to receive upon such surrender the certificate representing shares of
Parent Common Stock plus cash in lieu of fractional shares pursuant to
Section 2.02(e) and any dividends or distributions pursuant to Section
2.02(c) as contemplated by this Section 2.02.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect
to Parent Common Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock represented thereby and no cash payment in
lieu of fractional shares shall be paid to any such holder pursuant to
subsection (e) below until the holder of record of such Certificate shall
surrender such Certificate. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be paid to the
record holder of the certificates representing whole shares of Parent Common
Stock issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of any cash payable in lieu of a fractional share of
Parent Common Stock to which such holder is entitled pursuant to subsection
(e) below and the amount of dividends or other distributions with a record
date after the Effective Time with respect to such whole shares of Parent
Common Stock with a payment date on or prior to such time of surrender, and
(ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of Parent Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of Certificates
in accordance with the terms hereof (together with any cash or other
distributions paid pursuant to subsection (e) of this Section 2.02) shall be
deemed to have been issued in full satisfaction of all rights pertaining to
such shares of Company Common Stock, and from and after the Effective Time
there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the shares of
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<PAGE>
Company Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation or the Exchange Agent for any reason, they shall
be cancelled and exchanged as provided in this Article II.
(e) No Fractional Shares. No certificate or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender
for exchange of Certificates, and such fractional share interests will not
entitle the owner thereof to vote or to any other rights of a stockholder of
Parent. Notwithstanding any other provision of this Agreement, each holder
of shares of Company Common Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of Parent
Common Stock (after taking into account all Certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount
equal to such fractional part of a share of Parent Common Stock multiplied
by the average of the last reported sales prices of Parent Common Stock, as
reported on the Nasdaq National Market, during the ten consecutive trading
days ending on the last trading day prior to the Closing Date.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the stockholders of the Company for 180 days after
the Effective Time shall be delivered to Parent, upon demand, and any
stockholders of the Company who have not previously complied with this
Section 2.02 shall thereafter look only to Parent for payment of their claim
for Parent Common Stock, any cash in lieu of fractional shares of Parent
Common Stock and any dividends or distributions with respect to Parent
Common Stock.
(g) No Liability. To the extent permitted by applicable law, neither
Parent nor the Company shall be liable to any holder of shares of Company
Common Stock or Parent Common Stock, as the case may be, for such shares (or
dividends or distributions with respect thereto) properly delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificate shall not have been surrendered prior to two
years after the Effective Time (or immediately prior to such earlier date on
which any shares of Parent Common Stock, and any cash payable to the holder
of such Certificate pursuant to this Article II or any dividends or
distributions payable to the holder of such Certificate would otherwise
escheat to or become the property of any governmental body or authority),
any such shares of Parent Common Stock or cash, dividends or distributions
in respect of such Certificate shall, to the extent permitted by applicable
law, become the property of the Surviving Corporation, free and clear of all
claims or interest of any person previously entitled thereto.
(h) Withholding Rights. Each of Parent and the Surviving Corporation
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock such amounts as it is required to deduct and withhold with respect to
the making of such payment under the Code, or any provision of state, local
or foreign tax law. To the extent that amounts are so withheld by the
Surviving Corporation or Parent, as the case may be, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to
the holder of the shares of Company Common Stock in respect of which such
deduction and withholding was made by the Surviving Corporation or Parent,
as the case may be.
(i) Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required
by the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen
or destroyed Certificate the shares of Parent Common Stock and any cash in
lieu of fractional shares, and unpaid dividends and distributions on shares
of Parent Common Stock deliverable in respect thereof pursuant to this
Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub that the statements
contained in this Article III are true and correct, except as set forth herein
or in the disclosure schedule delivered by the Company to Parent on or before
the date of this Agreement (the "Company Disclosure Schedule"). The Company
Disclosure Schedule shall be arranged in sections corresponding to the numbered
and lettered sections contained in this Article III and the disclosure in any
section shall qualify other sections in this Article III only to the extent that
it is reasonably apparent from a reading of such disclosure that it also
qualifies or applies to such other sections.
Section 3.01 ORGANIZATION OF THE COMPANY. Each of the Company and its
Subsidiaries (as defined below), other than L&I Partners, L.P., a Delaware
limited partnership ("L&I Partners"), is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, has all requisite corporate power to own, lease and operate its
properties and assets and to carry on its business as now being conducted and as
proposed to be conducted, and is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the failure to
be so qualified, individually or in the aggregate, would be reasonably likely to
have a material adverse effect on the business, properties, financial condition,
results of operations or prospects of the Company and its Subsidiaries, taken as
a whole or to have a material adverse effect on the ability of the Company to
consummate the transactions contemplated by this Agreement (a "Company Material
Adverse Effect"); provided, however, that for purposes of this Agreement, any
adverse change in the stock price of the Company in and of itself, as quoted on
the Nasdaq National Market, shall not be taken into account in determining
whether there has been or would be a "Company Material Adverse Effect" on or
with respect to the Company and its Subsidiaries, taken as a whole. L&I Partners
is a limited partnership duly organized, validly existing and in good standing
under the laws of the State of Delaware, has all requisite partnership power to
own, lease and operate its properties and assets and to carry on its business as
now being conducted and as proposed to be conducted, and is duly qualified to do
business and is in good standing as a foreign limited partnership in each
jurisdiction in which the failure to be so qualified, individually or in the
aggregate, would be reasonably likely to have a Company Material Adverse Effect.
Except as set forth in the Company SEC Reports (as defined in Section 3.04)
filed prior to the date hereof, neither the Company nor any of its Subsidiaries
directly or indirectly owns any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any corporation,
partnership, joint venture or other business association or entity, excluding
securities in any publicly traded company held for investment by the Company and
comprising less than five percent (5%) of the outstanding stock of such company.
As used in this Agreement, the word "Subsidiary" means, with respect to a party,
any corporation or other organization, whether incorporated or unincorporated,
of which (i) such party or any other Subsidiary of such party is a general
partner or a managing member (excluding partnerships, the general partnership
interests of which held by such party or any Subsidiary of such party do not
have a majority of the voting interest in such partnership) or (ii) at least a
majority of the securities or other interests having by their terms ordinary
voting power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such party or by any one or more
of its Subsidiaries, or by such party and one or more of its Subsidiaries.
Without limiting or modifying the foregoing, and notwithstanding the foregoing
definition, L&I Partners shall also be deemed to be a Subsidiary of the Company.
Section 3.02 THE COMPANY CAPITAL STRUCTURE.
(a) The authorized capital stock of the Company consists of 25,000,000
shares of Company Common Stock and 5,000,000 shares of Preferred Stock ("Company
Preferred Stock"). As of the date of this Agreement, (i) 14,671,189 shares of
Company Common Stock are issued and outstanding, all of
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which are validly issued, fully paid and nonassessable, (ii) no shares of
Company Common Stock were held in the treasury of the Company or by Subsidiaries
of the Company, and (iii) no shares of Company Preferred Stock were issued and
outstanding. The Company Disclosure Schedule shows the number of shares of
Company Common Stock reserved for future issuance pursuant to stock options
granted and outstanding as of the date of this Agreement, and the plans under
which such options were granted (collectively, the "Company Stock Plans") and
sets forth a complete and accurate list of all holders of options outstanding as
of the date of this Agreement to purchase shares of Company Common Stock (such
outstanding options, the "Company Stock Options") under the Company Stock Plans,
indicating the number of shares of Company Common Stock subject to each Company
Stock Option, and the exercise price, the date of grant and the expiration date
thereof. The Company Disclosure Schedule shows the number of shares of Company
Common Stock reserved for future issuance pursuant to warrants or other
outstanding rights to purchase shares of Company Common Stock outstanding as of
the date of this Agreement (such outstanding warrants or other rights, the
"Company Warrants") and the agreement or other document under which such Company
Warrants were granted and sets forth a complete and accurate list of all holders
of Company Warrants indicating the number and type of shares of Company Common
Stock subject to each Company Warrant, and the exercise price, the date of grant
and the expiration date thereof. All shares of Company Common Stock are, and all
shares of Company Common Stock subject to issuance as specified above are, duly
authorized and, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be, validly issued, fully
paid and nonassessable and not subject to or issued in violation of any purchase
option, call option, right of first refusal, preemptive right, subscription
right or any similar right under any provision of the DGCL, the Company's
Certificate of Incorporation or By-Laws or any agreement to which the Company is
a party or is otherwise bound. There are no obligations, contingent or
otherwise, of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of Company Common Stock or any other capital stock
of the Company or any Subsidiary or to provide funds to or make any investment
(in the form of a loan, capital contribution or otherwise) in any such
Subsidiary or any other entity. All of the outstanding shares of capital stock
or other equity interests of each of the Company's Subsidiaries are duly
authorized, validly issued, fully paid and nonassessable and all such shares and
other equity interests in any Subsidiary are owned by the Company or another
Subsidiary of the Company free and clear of all security interests, liens,
claims, pledges, agreements, limitations in the Company's voting rights, charges
or other encumbrances of any nature.
(b) Except for the Company Stock Plans, the Company Warrants and shares of
capital stock and other securities of the Company issuable pursuant to the
foregoing, (i) there are no equity securities of any class of the Company or any
of its Subsidiaries, or any security exchangeable into or exercisable for such
equity securities, issued, reserved for issuance or outstanding, and (ii) there
are no options, warrants, equity securities, calls, rights, commitments or
agreements of any character to which the Company or any of its Subsidiaries is a
party or by which it or any of its Subsidiaries is bound obligating the Company
or any of its Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock of or other equity
interests in the Company or any of its Subsidiaries or obligating the Company or
any of its Subsidiaries to grant, extend, accelerate the vesting of, otherwise
modify or amend or enter into any such option, warrant, equity security, call,
right, commitment or agreement. To the best knowledge of the Company, other than
the Stockholder Voting Agreements, there are no voting trusts, proxies or other
voting agreements or understandings with respect to the shares of capital stock
of or other equity interests in the Company or any of its Subsidiaries. Without
limiting the foregoing, all rights, contingent or otherwise, of any person to
purchase the Company's direct and indirect interests in L & I Partners L.P. have
been terminated.
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Section 3.03 AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND
CONSENTS. (a) The Company has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement by the Company
have been duly authorized by all necessary corporate action on the part of the
Company, subject only to the approval of the Merger by the Company's
stockholders under the DGCL. This Agreement has been duly executed and delivered
by the Company and constitutes the valid and binding obligations of the Company,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles (the "Bankruptcy and Equity Exception").
(b) The execution and delivery of this Agreement by the Company does not,
and the consummation of the transactions contemplated by this Agreement will
not, (i) conflict with, or result in any violation or breach of, any provision
of the Certificate of Incorporation or Bylaws of the Company, or the charter,
by-laws, or other organizational document of any Subsidiary of the Company, (ii)
result in any violation or breach of, or constitute (with or without notice or
lapse of time, or both) a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any material benefit)
under, or require a consent or waiver under, or constitute a change in control
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract or other agreement, instrument or obligation
to which the Company or any of its Subsidiaries is a party or by which any of
them or any of their properties or assets may be bound, or (iii) conflict with
or violate any permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or any of
its Subsidiaries or any of its or their properties or assets, except in the case
of (ii) and (iii) for any such conflicts, violations, defaults, terminations,
cancellations or accelerations which are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect.
(c) No consent, approval, license, permit, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality, foreign or
domestic ("Governmental Entity") is required by or with respect to the Company
or any of its Subsidiaries in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for (i) the filing of a pre-merger notification report under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, ("HSR Act"),
(ii) the filing of the Certificate of Merger with the Delaware Secretary of
State, (iii) the filing of the Joint Proxy Statement (as defined in Section 3.18
below) with the Securities and Exchange Commission (the "SEC") in accordance
with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (iv)
such consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under applicable state securities laws and (v)
such other consents, licenses, permits, orders, authorizations, filings,
approvals and registrations which, if not obtained or made, would not be
reasonably likely, individually or in the aggregate, to have a Company Material
Adverse Effect. The Company stockholder vote required for the approval of the
Company Voting Proposal (as defined below) is the affirmative vote of a majority
of the outstanding shares of Company Common Stock on the record date for the
Company Meeting (as defined below).
Section 3.04 SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has filed and made available to Parent all forms, reports
and documents required to be filed by the Company with the SEC since June 27,
1997 (collectively, the "Company SEC Reports"). The Company SEC Reports (i) at
the time filed, complied in all material respects with the applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and the Exchange Act, as the case may be, and (ii) did not at the time they were
filed contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such Company SEC Reports or necessary in
order to make the statements in such Company SEC Reports, in the light
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of the circumstances under which they were made, not misleading. None of the
Company's Subsidiaries is required to file any forms, reports or other documents
with the SEC. Each of the Company SEC Reports was filed on a timely basis.
(b) Each of the consolidated financial statements (including, in each case,
any related notes and schedules) contained or to be contained in the Company SEC
Reports (i) complied or will comply as to form in all material respects with the
applicable published rules and regulations of the SEC with respect thereto,
(ii) were or will be prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes to such financial statements or, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) and (iii) fairly
presented or will fairly present the consolidated financial position of the
Company and its Subsidiaries as of the dates and the consolidated results of its
operations and cash flows for the periods indicated, consistent with the books
and records of the Company and its Subsidiaries, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in
amount. The unaudited balance sheet of the Company as of June 30, 1999 is
referred to herein as the "Company Balance Sheet."
Section 3.05 NO UNDISCLOSED LIABILITIES. Except as disclosed in the
Company SEC Reports filed prior to the date hereof, and except for normal or
recurring liabilities incurred since the date of the Company Balance Sheet in
the ordinary course of business and consistent with past practices, the Company
and its Subsidiaries do not have any liabilities, either accrued, contingent or
otherwise (whether or not required to be reflected in financial statements in
accordance with generally accepted accounting principles), and whether due or to
become due, which individually or in the aggregate are reasonably likely to have
a Company Material Adverse Effect.
Section 3.06 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the Company SEC Reports filed prior to the date hereof, since the date of the
Company Balance Sheet, the Company and its Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since such date, there has not been (i) any event, change or
development in the financial condition, results of operations, business,
properties or prospects of the Company and its Subsidiaries, taken as a whole
that individually or in the aggregate has had, or is reasonably likely to have,
a Company Material Adverse Effect; (ii) any damage, destruction or loss (whether
or not covered by insurance) with respect to the Company or any of its
Subsidiaries having a Company Material Adverse Effect; (iii) any material change
by the Company in its accounting methods not required pursuant to generally
accepted accounting principles, principles or practices to which Parent has not
previously consented in writing; (iv) any revaluation by the Company of any of
its assets having a Company Material Adverse Effect; or (v) any other action or
event that would have required the consent of Parent pursuant to Section 5.01 of
this Agreement had such action or event occurred after the date of this
Agreement.
Section 3.07 TAXES.
(a) For the purposes of this Agreement, a "Tax" or, collectively, "Taxes,"
means any and all material federal, state, local and foreign taxes, assessments
and other governmental charges, duties, impositions and liabilities, including
taxes based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, gains, franchise,
withholding, payroll, recapture, employment, excise, unemployment insurance,
social security, business license, occupation, business organization, stamp,
environmental and property taxes, together with all interest, penalties and
additions imposed with respect to such amounts and any obligations under any
agreements or arrangements with any other person with respect to such amounts
and including any liability for taxes of a predecessor entity.
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(b) The Company and each of its Subsidiaries have (i) filed all federal,
state, local and foreign tax returns and reports required to be filed by them
prior to the date of this Agreement (taking into account extensions) and all
such returns were complete and accurate in all respects, (ii) paid or accrued
all Taxes due and payable, whether or not so reflected on such returns or
reports, and (iii) paid or accrued all Taxes for which a notice of assessment or
collection has been received (other than amounts being contested in good faith
by appropriate proceedings), except in the case of clause (i), (ii) or
(iii) for any such filings, inaccuracies, payments or accruals which are not
reasonably likely, individually or in the aggregate, to have a Company Material
Adverse Effect. Unpaid Taxes for periods prior to the date hereof do not
materially exceed accruals and reserves for Taxes (exclusive of any accruals and
reserves for Taxes established to reflect timing differences between book and
Tax income) as set forth on the Company Balance Sheet. Neither the Internal
Revenue Service (the "IRS") nor any other taxing authority has asserted any
claim for Taxes, or to the actual knowledge of the chief executive officer or
the chief financial officer of the Company, is threatening to assert any claims
for Taxes, which claims, individually or in the aggregate, are reasonably likely
to have a Company Material Adverse Effect. The Company and each of its
Subsidiaries have withheld or collected and paid over to the appropriate
governmental authorities (or are properly holding for such payment) all Taxes
required by law to be withheld or collected, except for amounts which are not
reasonably likely, individually or in the aggregate, to have a Company Material
Adverse Effect. There are no liens for Taxes upon the assets of the Company or
any of its Subsidiaries (other than liens for Taxes that are not yet due or that
are being contested in good faith by appropriate proceedings), except for liens
which are not reasonably likely, individually or in the aggregate, to have a
Company Material Adverse Effect.
(c) Neither the Company nor any Subsidiary has any actual or potential
liability for any Taxes of any person (other than the Company and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of federal, state, local or foreign law, or as a transferee or
successor, by contract, or otherwise.
(d) Neither the Company nor any of its Subsidiaries is a "consenting
corporation" within the meaning of Section 341(f) of the Code, and none of the
assets of the Company or the Subsidiaries are subject to an election under
Section 341(f) of the Code.
(e) Neither the Company nor any of its Subsidiaries has been a United States
real property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code.
(f) Neither the Company nor any of its Subsidiaries has made any payments,
is obligated to make any payments, or is a party to any agreement that could
obligate it to make any payments that will be an "excess parachute payment"
under Section 280G of the Code.
Section 3.08 PROPERTIES. The Company Disclosure Schedule sets forth a true
and complete list of all real property leased by the Company or its Subsidiaries
(collectively "Lease(s)") and the location of the premises. The Company is not
in default under any of such leases, except where the existence of such
defaults, individually or in the aggregate, is not reasonably likely to have a
Company Material Adverse Effect. The Company does not own and has never owned
any real property.
Section 3.09 INTELLECTUAL PROPERTY.
(a) The Company Disclosure Schedule sets forth a true and complete list of
each of the following items: (1) all patents and applications therefor,
including any patent term extensions or supplementary protection certificates,
registrations of trademarks (including service marks) and applications therefor,
domain names and registrations of copyrights and applications therefor that are
owned by the Company or any of its Subsidiaries or that are licensed or
sublicensed to the Company or any of its Subsidiaries, (2) all licenses,
agreements and contracts relating to Intellectual Property Rights (as defined
below) pursuant to which the Company or any of its Subsidiaries are entitled to
use any Intellectual Property
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Rights owned by any third party (the "Third Party Licenses"), other than
commercially available, mass marketed shrink-wrap software, and (3) all
agreements under which the Company or any of its Subsidiaries has granted any
third party the right to use any Intellectual Property Rights.
(b) The Company and its Subsidiaries exclusively own, or are licensed,
sublicensed or otherwise possess legally enforceable rights to use, pursuant to
the licenses, agreements and contracts listed in Section 3.09(a)(2) of the
Company Disclosure Schedule, all Intellectual Property Rights that are used or
necessary to conduct the business of the Company and its Subsidiaries as
currently conducted, or would be used or necessary as such business is planned
to be conducted, and material, individually or in the aggregate, to the Company
and its Subsidiaries, taken as a whole, including without limitation all
Intellectual Property Rights used or necessary to conduct the clinical programs
for Campath, LDP01, LDP02, LDP977, LDP341 and LDP519 (each of which (the
"Ongoing Clinical Programs") is deemed to be material to the Company and its
Subsidiaries taken as a whole) and all Intellectual Property Rights that are now
used or planned to be used or are necessary to make, use or sell Campath, LDP01,
LDP02, LDP977, LDP341 and LDP519 after those products are approved for marketing
and sale by the appropriate health regulatory authorities (the "Company
Intellectual Property Rights"). For purposes hereof, "Intellectual Property
Rights" means all patents, including patent term extensions and supplementary
protection certificates, trademarks, trade names, domain names, service marks
and copyrights, any applications for and registrations of such patents,
trademarks, trade names, domain names, service marks and copyrights, and all
processes, formulae, methods, schematics, technology, know-how, computer
software programs or applications and tangible or intangible proprietary
information or material.
(c) The execution and delivery of this Agreement and consummation of the
Merger will not result in the breach of, or create on behalf of any third party
the right to terminate or modify, any license, sublicense or other agreement
relating to the Company Intellectual Property Rights, including any Third Party
License.
(d) All patents, including all patent term extensions and supplementary
protection certificates, registered trademarks, service marks and copyrights
under which the Company or any of its Subsidiaries holds any rights and which
are material to the business of the Company and its Subsidiaries, taken as a
whole, are valid and subsisting, and all applications for such patents,
trademarks, service marks and copyrights are subsisting and were filed in good
faith. The Company and its Subsidiaries have taken reasonable measures to
protect the proprietary nature of the Company Intellectual Property Rights that
are material to the business of the Company and its Subsidiaries, taken as a
whole, and to maintain in confidence all trade secrets and confidential
information owned or used by the Company or any of its Subsidiaries and that are
material to the business of the Company and its Subsidiaries, taken as a whole.
To the knowledge of the Company, no other person or entity is infringing,
violating or misappropriating any of the Company Intellectual Property Rights.
(e) None of the activities or business previously or currently conducted by
the Company or any of the Subsidiaries or planned to be conducted by the Company
or any of the Subsidiaries (including the manufacture, use and sale of the
future products which are the subject of Ongoing Clinical Programs for any
clinical indications) infringes, violates or constitutes a misappropriation of,
any Intellectual Property Rights of any other person or entity. Neither the
Company nor any of its Subsidiaries have received any complaint, claim or notice
alleging any such infringement, violation or misappropriation, present or
future.
(f) Neither the Company nor any of its Subsidiaries is a party to any
agreement under which, following the Closing, a third party would be entitled to
receive a license or any other right in or to Intellectual Property Rights of
Parent or any of Parent's Affiliates (other than the Company and its
Subsidiaries) or which, following the Closing, would restrict or limit the
business or operations of Parent or any of its Affiliates (other than the
Company and its Subsidiaries).
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Section 3.10 PRECLINICAL TESTING AND CLINICAL TRIALS. The human clinical
trials, animal studies and other preclinical tests conducted by the Company or
any of its Subsidiaries or in which the Company or any of its Subsidiaries has
participated, and such studies and tests conducted on behalf of the Company or
any of its Subsidiaries, were and, if still pending, are being conducted in all
material respects in accordance with experimental protocols, informed consents,
procedures and controls generally used by qualified experts in the preclinical
or clinical study of products comparable to those being developed by the Company
or any of its Subsidiaries. None of the Company, its Subsidiaries or any agent
or representative of the Company or any of its Subsidiaries has received any
notices or correspondence from the FDA or any other governmental agency
requiring the termination, suspension or modification (other than such
modifications as are normal in the regulatory process) of any animal studies,
preclinical tests or clinical trials conducted by or on behalf of the Company or
any of its Subsidiaries or in which the Company or any of its Subsidiaries has
participated. To the Company's knowledge, no clinical investigator acting for
the Company has been or is now, or is threatened to become, the subject of any
disbarment or disqualification proceedings by any regulatory agency.
Section 3.11 AGREEMENTS, CONTRACTS AND COMMITMENTS.
(a) There are no contracts or agreements that are material contracts (as
defined in Item 601(b)(10) of Regulation S-K) with respect to the Company and
its Subsidiaries ("Company Material Contracts") other than those Company
Material Contracts identified on the exhibit index of the Company's 10-K for the
year ended December 31, 1998 or the exhibit index of Forms 10-Q or 8-K filed by
the Company subsequent to April 5, 1999 and prior to October 12, 1999. No
Company Material Contract has expired by its terms and each Company Material
Contract is in full force and effect. Neither the Company nor any of its
Subsidiaries is in violation of or in default under (nor does there exist any
condition which, upon the passage of time or the giving of notice or both, would
cause such a violation of or default under) any lease, permit, concession,
franchise, license or other contract or agreement to which it is a party or by
which it or any of its properties or assets is bound, except for violations or
defaults that, individually or in the aggregate, have not resulted in and are
not reasonably likely to result in a Company Material Adverse Effect.
(b) The Company Disclosure Schedule sets forth a complete list of each
contract or agreement to which the Company or any Subsidiary is a party or bound
(i) with any Affiliate of the Company (other than any Subsidiary which is a
direct or indirect wholly owned subsidiary of the Company), other than any
agreements (A) which are or have been fully performed and under which neither
the Company nor any Subsidiary has any continuing right, liability or
obligation, (B) that are otherwise disclosed on the Company Disclosure Schedule
and marked with a footnote indicating that it is a contract or agreement with an
Affiliate of the Company or (C) Stockholder Voting Agreements, or (ii) that
includes any non-competition or similar provision imposing any restrictions or
undertakings on the Company or any Subsidiary of the Company.
To the Company's knowledge, none of the contracts or agreements referred to
in the foregoing clause (ii) would preclude Parent or any of its Affiliates from
engaging in any current activities of Parent or such Affiliates or any planned
activities of Parent or such Affiliates that Parent has disclosed to the
Company. Copies of all the agreements, contract and arrangements set forth in
the Company Disclosure Schedule (which shall include all contracts with
PaineWebber Incorporated and its affiliates) have heretofore been made available
to Parent and such copies are accurate and complete.
(c) The Company has not borrowed any funds pursuant to its Loan Agreement
with Genentech, Inc., dated December 18, 1997. The Limited Partners of L&I
Partners have each contributed the same amount to the capital thereof and have
not agreed to make contributions to the capital thereof in excess of $10,000,000
in the aggregate.
Section 3.12 LITIGATION. Except as described in the Company SEC Reports
filed prior to the date hereof, there is no action, suit or proceeding, claim,
arbitration or investigation against the Company or
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any of its Subsidiaries pending or as to which the Company or any of its
Subsidiaries has received any written notice of assertion, which, individually
or in the aggregate, is reasonably likely to have a Company Material Adverse
Effect.
Section 3.13 ENVIRONMENTAL MATTERS.
(a) Except as disclosed in the Company SEC Reports filed prior to the date
hereof and except for such matters that, individually or in the aggregate, are
not reasonably likely to have a Company Material Adverse Effect: (i) the Company
and its Subsidiaries have complied with all applicable Environmental Laws (as
defined in Section 3.13(b)); (ii) the properties currently owned or operated by
the Company and its Subsidiaries (including soils, groundwater, surface water,
buildings or other structures) are not contaminated with any Hazardous
Substances (as defined in Section 3.13(c)); (iii) the properties formerly owned
or operated by the Company or any of its Subsidiaries were not contaminated with
Hazardous Substances during the period of ownership or operation by the Company
or any of its Subsidiaries; (iv) neither the Company nor its Subsidiaries are
subject to liability for any Hazardous Substance disposal or contamination on
the property of any third party; (v) neither the Company nor any of its
Subsidiaries have released any Hazardous Substance; (vi) neither the Company nor
any of its Subsidiaries has received any notice, demand, letter, claim or
request for information alleging that the Company or any of its Subsidiaries may
be in violation of, liable under or have obligations under any Environmental
Law; (vii) neither the Company nor any of its Subsidiaries is subject to any
orders, decrees, injunctions or other arrangements with any Governmental Entity
or is subject to any indemnity or other agreement with any third party relating
to liability under any Environmental Law or relating to Hazardous Substances;
and (viii) there are no circumstances or conditions involving the Company or any
of its Subsidiaries that could reasonably be expected to result in any claims,
liability, obligations, investigations, costs or restrictions on the ownership,
use or transfer of any property of the Company or any of its Subsidiaries
pursuant to any Environmental Law.
(b) As used herein, the term "Environmental Law" means any federal, state,
local or foreign law, regulation, order, decree, permit, authorization, opinion,
common law or agency requirement relating to: (A) the protection, investigation
or restoration of the environment, health and safety, or natural resources, (B)
the handling, use, presence, disposal, release or threatened release of any
Hazardous Substance or (C) noise, odor, wetlands, pollution, contamination or
any injury or threat of injury to persons or property.
(c) As used herein, the term "Hazardous Substance" means any substance that
is: (A) listed, classified, regulated or which falls within the definition of a
"hazardous substance" or "hazardous material" pursuant to any Environmental Law;
(B) any petroleum product or by-product, asbestos-containing material, lead-
containing paint or plumbing, polychlorinated biphenyls, radioactive materials
or radon; or (C) any other substance which is the subject of regulatory action
by any Governmental Entity pursuant to any Environmental Law.
Section 3.14 EMPLOYEE BENEFIT PLANS.
(a) The Company has listed in Section 3.14 of the Company Disclosure
Schedule all employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) and all bonus,
stock option, stock purchase, incentive, deferred compensation, supplemental
retirement, severance and other similar employee benefit plans, and all
unexpired severance agreements, written or otherwise, for the benefit of, or
relating to, any current or former employee of the Company or any of its
Subsidiaries or any trade or business (whether or not incorporated) which is or
was ever a member of a controlled group of corporations or which is or was ever
under common control with the Company (an "ERISA Affiliate") within the meaning
of Section 414 of the Code, or any Subsidiary of the Company (together, the
"Company Employee Plans").
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(b) With respect to each Company Employee Plan, the Company has furnished or
made available to Parent, a true and correct copy of (i) the most recent annual
report (Form 5500) filed with the IRS, (ii) such Company Employee Plan,
(iii) each trust agreement and group annuity contract, if any, relating to such
Company Employee Plan and (iv) all reports regarding the satisfaction of the
nondiscrimination requirements of Sections 410(b), 401(k) and 401(m) of the
Code.
(c) With respect to the Company Employee Plans, no event has occurred, and
to the knowledge of the Company, there exists no condition or set of
circumstances in connection with which the Company, or any of its Subsidiaries
or any ERISA Affiliate, could be subject to any liability that is reasonably
likely, individually or in the aggregate to have a Company Material Adverse
Effect under ERISA, the Code or any other applicable law.
(d) With respect to the Company Employee Plans, there are no funded benefit
obligations for which contributions have not been made or properly accrued and
there are no unfunded benefit obligations which have not been accounted for by
reserves, or otherwise properly footnoted in accordance with generally accepted
accounting principles, on the financial statements of the Company, which
obligations are reasonably likely, individually or in the aggregate, to have a
Company Material Adverse Effect.
(e) Neither the Company, any Subsidiary of the Company nor any ERISA
Affiliate has (i) ever maintained a Company Employee Benefit Plan which was ever
subject to Title IV of ERISA or Section 412 of the Code or (ii) ever been
obligated to contribute to a multiemployer plan (as defined in Section
4001(a)(3) of ERISA).
(f) Except as disclosed in Company SEC Reports filed prior to the date of
this Agreement, and except as provided for in this Agreement, neither the
Company nor any of its Subsidiaries is a party to any oral or written (i)
agreement with any officer or other key employee of the Company or any of its
Subsidiaries, the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving the Company
of the nature contemplated by this Agreement, (ii) agreement with any employee
of the Company or any of its Subsidiaries providing any term of employment or
compensation guarantee extending for a period longer than one year from the date
hereof and for the payment of compensation in excess of $100,000 per annum, or
(iii) agreement or plan, including any stock option plan, stock appreciation
right plan, restricted stock plan or stock purchase plan, any of the benefits of
which will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement.
(g) Each Company Employee Plan intended to be qualified under Section
401(a) of the Code has either obtained from the IRS a favorable determination
letter as to its qualified status under the Code, including all amendments to
the Code effected by the Tax Reform Act of 1986 and subsequent legislation, or
has applied (or has time remaining in which to apply) to the IRS for such a
determination letter prior to the expiration of the requisite period under
applicable Treasury Regulations or IRS pronouncements in which to apply for such
determination letter and to make any amendments necessary to obtain a favorable
determination or has been established under a standardized prototype plan for
which an IRS opinion letter has been obtained by the plan sponsor and is valid
as to the adopting employer. The Company has furnished to Parent a copy of the
most recent IRS determination or opinion with respect to each such Company
Employee Plan and nothing has occurred since the inception of each such Company
Employee Plan which could reasonably be expected to cause the loss of the
tax-qualified status of any Company Employee Plan subject to Section 401(a) of
the Code.
(h) None of the Company Employee Plans promises or provides retiree medical
or other retiree welfare benefits to any person, except as required by
applicable law.
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Section 3.15 COMPLIANCE WITH LAWS. The Company and each of its
Subsidiaries has complied with, is not in violation of, and has not received any
notice alleging any violation with respect to, any foreign, federal, state or
local statute, law or regulation with respect to the conduct of its business, or
the ownership or operation of its properties or assets, except for failures to
comply or violations which, individually or in the aggregate, have not had and
are not reasonably likely to have a Company Material Adverse Effect.
Section 3.16 CERTAIN REGULATORY MATTERS.
(a) Section 3.16 of the Company Disclosure Schedule sets forth a complete
and accurate list of any written communications between the Company or any of
its Subsidiaries, on the one hand, and the FDA or any other governmental entity
on the other hand that describe matters that could have a material adverse
effect on the Company's currently projected sales or revenues attributable to
any contemplated compound, product or product line of the Company or its
Subsidiaries. The Company has made available to Parent copies of all such
documents, as well as copies of all complaints and other information required to
be maintained by the Company pursuant to the United States Federal Food, Drug
and Cosmetic Act and Comprehensive Drug Abuse Prevention and Control Act of 1970
and the corresponding laws of jurisdictions other than the United States.
(b) The Company and its Subsidiaries have filed with the FDA and all
applicable state and local regulatory bodies for and received approval of all
registrations, applications, licenses, requests for exemptions, permits and
other regulatory authorizations necessary to conduct the business of the Company
and its Subsidiaries as currently conducted, the absence of which would,
individually or in the aggregate, be reasonably likely to have a Company
Material Adverse Effect. The Company and its Subsidiaries and, to the Company's
knowledge any third party which is a manufacturer for the Company or its
Subsidiaries, are in compliance in all material respects with all such
registrations, applications, licenses, requests for exemptions, permits and
other regulatory authorizations. The Company is in compliance in all material
respect with all material FDA, state and local rules, regulations, guidelines
and policies, including, but not limited to, material FDA, state and local
rules, regulations and policies relating to good manufacturing practice ("GMP")
and good laboratory practice ("GLP"); and the Company has no reason to believe
that any party granting any such registration, application, license, request for
exemption, permit or other authorization is considering limiting, suspending or
revoking the same and knows of no basis for any such limitation, suspension or
revocation.
Section 3.17 TAX MATTERS. To its knowledge, after consulting with its
independent auditors, neither the Company nor any of its Affiliates (as defined
in Section 6.10) has taken or agreed to take any action which would prevent the
Merger from constituting a transaction qualifying as a reorganization under
368(a) of the Code.
Section 3.18 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The
information to be supplied by the Company for inclusion in the registration
statement on Form S-4 pursuant to which shares of Parent Common Stock issued in
the Merger will be registered under the Securities Act (the "Registration
Statement"), shall not at the time the Registration Statement is declared
effective by the SEC contain any untrue statement of a material fact or omit to
state any material fact required to be stated in the Registration Statement or
necessary in order to make the statements in the Registration Statement not
misleading. The information to be supplied by the Company for inclusion in the
joint proxy statement/prospectus to be sent to the stockholders of Parent and
the Company in connection with the meeting of the Company's stockholders to
consider this Agreement and the Merger (the "Company Meeting") and in connection
with the meeting of Parent's stockholders (the "Parent Meeting") to consider the
issuance of shares of Parent Common Stock pursuant to the Merger (the "Joint
Proxy Statement") shall not, on the date the Joint Proxy Statement is first
mailed to stockholders of the Company or Parent, at the time of the Company
Stockholders' Meeting and the Parent
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Stockholders' Meeting and at the Effective Time, contain any statement which, at
such time and in light of the circumstances under which it shall be made, is
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements made in the Joint Proxy
Statement not false or misleading; or omit to state any material fact necessary
to correct any statement in any earlier communication with respect to the
solicitation of proxies for the Company Meeting or the Parent Meeting which has
become false or misleading. If at any time prior to the Effective Time any event
relating to the Company or any of its Affiliates, officers or directors should
be discovered by the Company which should be set forth in an amendment to the
Registration Statement or a supplement to the Joint Proxy Statement, the Company
shall promptly inform Parent.
Section 3.19 LABOR MATTERS. Neither the Company nor any of its
Subsidiaries is a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization. Neither the Company nor any of its Subsidiaries is the
subject of any proceeding asserting that the Company or any of its Subsidiaries
has committed an unfair labor practice or is seeking to compel it to bargain
with any labor union or labor organization or that, individually or in the
aggregate, is reasonably likely to have a Company Material Adverse Effect, nor
is there pending or, to the knowledge of the Company, threatened, any labor
strike, dispute, walkout, work stoppage, slow-down or lockout involving the
Company or any of its Subsidiaries that, individually or in the aggregate, is
reasonably likely to have a Company Material Adverse Effect.
Section 3.20 INSURANCE. All fire and casualty, general liability, business
interruption, product liability, clinical trial and sprinkler and water damage
insurance policies maintained by the Company or any of its Subsidiaries are with
reputable insurance carriers, provide full and adequate coverage for all normal
risks incident to the business of the Company and its Subsidiaries and their
respective properties and assets, and are in character and amount at least
equivalent to that carried by persons engaged in similar businesses and subject
to the same or similar perils or hazards, except for any such failures to
maintain insurance policies that, individually or in the aggregate, are not
reasonably likely to have a Company Material Adverse Effect. The Company
Disclosure Schedule sets forth the insurance coverages maintained by the Company
and a history of any claims paid.
Section 3.21 NO EXISTING DISCUSSIONS. As of the date hereof, neither the
Company nor any of its Subsidiaries is engaged, directly or indirectly, in any
discussions or negotiations with any other party with respect to an Acquisition
Proposal (as defined in Section 6.01).
Section 3.22 OPINION OF FINANCIAL ADVISOR. The financial advisor of the
Company, PaineWebber Incorporated, has delivered to the Company an opinion dated
on or about the date of this Agreement to the effect, as of such date, that the
Exchange Ratio is fair to the holders of Company Common Stock from a financial
point of view.
Section 3.23 SECTION 203 OF THE DGCL NOT APPLICABLE. The Board of
Directors of the Company has taken all actions so that the restrictions
contained in Section 203 of the DGCL applicable to a "business combination" (as
defined in Section 203) will not apply to the execution, delivery or performance
of this Agreement or the Stockholder Voting Agreements or the consummation of
the Merger or the other transactions contemplated by this Agreement or the
Stockholder Voting Agreements.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company that the statements
contained in this Article IV are true and correct, except as set forth herein or
in the disclosure schedule delivered by Parent to the Company on or before the
date of this Agreement (the "Parent Disclosure Schedule"). The Parent Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
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lettered paragraphs contained in this Article IV and the disclosure in any
paragraph shall qualify other paragraphs in this Article IV only to the extent
that it is reasonably apparent from a reading of such document that it also
qualifies or applies to such other paragraphs.
Section 4.01 ORGANIZATION OF PARENT AND SUB. Each of Parent and Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, has all requisite corporate power to
own, lease and operate its properties and assets and to carry on its business as
now being conducted and as proposed to be conducted, and is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
in which the failure to be so qualified, individually or in the aggregate, would
be reasonably likely to have a material adverse effect on the business,
properties, financial condition, results of operations or prospects of Parent
and its Subsidiaries, taken as a whole or to have a material adverse effect on
the ability of Parent to consummate the transactions contemplated by this
Agreement (a "Parent Material Adverse Effect"); provided, however, that for
purposes of this Agreement, any adverse change in the stock price of Parent in
and of itself, as quoted on the Nasdaq National Market, shall not be taken into
account in determining whether there has been or would be a "Parent Material
Adverse Effect" on or with respect to Parent and its Subsidiaries, taken as a
whole.
Section 4.02 PARENT CAPITAL STRUCTURE. As of the date of this Agreement,
the authorized capital stock of Parent consists of (i) 100,000,000 shares of
Common Stock, $.001 par value ("Parent Common Stock"), and (ii) 5,000,000 shares
of Preferred Stock, $.001 par value. As of October 13, 1999, there were issued
and outstanding 36,689,903 shares of Parent Common Stock, all of which are
validly issued, fully paid and nonassessable, and no shares of Preferred Stock.
The Parent Disclosure Schedule shows the number of shares of Parent Common Stock
reserved for future issuance pursuant to stock options granted and outstanding
as of the date of this Agreement, and the plans under which such options were
granted (collectively, the "Parent Stock Plans"). All shares of Parent Common
Stock subject to issuance as specified above are duly authorized and, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, shall be validly issued, fully paid and nonassessable.
Section 4.03 AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Each of Parent and Sub has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of each of Parent and
Sub, subject only to the approval of the Parent Voting Proposal (as defined in
Section 6.05) by Parent's stockholders. This Agreement has been duly executed
and delivered by each of Parent and Sub and constitutes the valid and binding
obligation of each of Parent and Sub, enforceable in accordance with its terms,
subject to the Bankruptcy and Equity Exception.
(b) The execution and delivery of this Agreement by each of Parent and Sub
does not, and the consummation of the transactions contemplated by this
Agreement will not, (i) conflict with, or result in any violation or breach of,
any provision of the Certificate of Incorporation or Bylaws of Parent or Sub,
(ii) result in any violation or breach of, or constitute (with or without notice
or lapse of time, or both) a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any material benefit)
under, or require a consent or waiver under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract or
other agreement, instrument or obligation to which Parent or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound, or (iii) conflict with or violate any permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent or any of its Subsidiaries or any of its or
their properties or assets, except in the case of (ii) and (iii) for any such
conflicts, violations, defaults, terminations, cancellations or
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accelerations which are not, individually or in the aggregate, reasonably likely
to have a Parent Material Adverse Effect.
(c) No consent, approval, license, permit, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Parent or any of its Subsidiaries in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of the pre-merger notification
report under the HSR Act, (ii) the filing of the Registration Statement with the
SEC in accordance with the Securities Act, (iii) the filing of the Certificate
of Merger with the Delaware Secretary of State, (iv) the filing of the Joint
Proxy Statement with the SEC in accordance with the Exchange Act, (v) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable state securities laws, (vi) the
approval by the Nasdaq National Market of the listing of the shares of Parent
Common Stock to be issued in the transactions contemplated by this Agreement,
and (vii) such other consents, licenses, permits, orders, authorizations,
filings, approvals and registrations which, if not obtained or made, would not
be reasonably likely, individually or in the aggregate, to have a Parent
Material Adverse Effect. The Parent stockholder vote required for the approval
of the Parent Voting Proposal (as defined below) is the affirmative vote of the
holders of a majority of the shares of Parent Common Stock voted at the Parent
Meeting (as defined below) at which a quorum of the holders of the outstanding
shares of Parent Common Stock on the record date for the Parent Meeting is
present.
Section 4.04 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has filed all forms, reports and documents required to be filed
by Parent with the SEC since January 1, 1998 (collectively, the "Parent SEC
Reports"). The Parent SEC Reports (i) at the time filed, complied in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act, as the case may be, and (ii) did not at the time they were filed
contain any untrue statement of a material fact or omit to state a material fact
required to be stated in such Parent SEC Reports or necessary in order to make
the statements in such Parent SEC Reports, in the light of the circumstances
under which they were made, not misleading. None of Parent's Subsidiaries is
required to file any forms, reports or other documents with the SEC. Each of
Parent's SEC Reports was filed on a timely basis.
(b) Each of the consolidated financial statements (including, in each case,
any related notes and schedules) contained or to be contained in the Parent SEC
Reports (i) complied or will comply as to form in all material respects with the
applicable published rules and regulations of the SEC with respect thereto,
(ii) were or will be prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes to such financial statements or, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) and (iii) fairly
presented or will fairly present the consolidated financial position of Parent
and its Subsidiaries as of the dates and the consolidated results of its
operations and cash flows for the periods indicated, consistent with the books
and records of Parent and its Subsidiaries, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount. The
unaudited balance sheet of Parent as of June 30, 1999 is referred to as the
"Parent Balance Sheet".
Section 4.05 NO UNDISCLOSED LIABILITIES. Except as disclosed in the Parent
SEC Reports filed prior to the date hereof, and except for normal or recurring
liabilities incurred since the date of the Parent Balance Sheet in the ordinary
course of business consistent with past practices, Parent and its Subsidiaries
do not have any liabilities, either accrued, contingent or otherwise (whether or
not required to be reflected in financial statements in accordance with
generally accepted accounting principles), and whether due or to become due,
which individually or in the aggregate, are reasonably likely to have a Parent
Material Adverse Effect.
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Section 4.06 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the Parent SEC Reports filed prior to the date hereof, since the date of the
Parent Balance Sheet, Parent and its Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since such date, there has not been (i) any event, change or
development in the financial condition, results of operations, business,
properties or prospects of Parent and its Subsidiaries, taken as a whole, that,
individually or in the aggregate, has had, or is reasonably likely to have, a
Parent Material Adverse Effect; (ii) any damage, destruction or loss (whether or
not covered by insurance) with respect to Parent or any of its Subsidiaries
having a Parent Material Adverse Effect; (iii) any material change by Parent in
its accounting methods not required pursuant to generally accepted accounting
principles, principles or practices to which the Company has not previously
consented in writing; or (iv) any revaluation by Parent of any of its assets
having a Parent Material Adverse Effect.
Section 4.07 LITIGATION. Except as described in the Parent SEC Reports
filed prior to the date hereof, there is no action, suit or proceeding, claim,
arbitration or investigation against Parent pending or as to which Parent has
received any written notice of assertion, which, individually or in the
aggregate, is reasonably likely to have a Parent Material Adverse Effect or a
material adverse effect on the ability of Parent to consummate the transactions
contemplated by this Agreement.
Section 4.08 COMPLIANCE WITH LAWS. Parent and each of its Subsidiaries has
complied with, is not in violation of, and has not received any notices of
violation with respect to, any foreign, federal, state or local statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its properties or assets, except for failures to comply or
violations which, individually or in the aggregate, have not had and are not
reasonably likely to have a Parent Material Adverse Effect.
Section 4.09 TAX MATTERS. To its knowledge, after consulting with its
independent auditors, neither Parent nor any of its Affiliates has taken or
agreed to take any action which would prevent the Merger from constituting a
transaction qualifying as a reorganization under Section 368(a) of the Code.
Section 4.10 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The
information in the Registration Statement (except for information supplied by
the Company for inclusion in the Registration Statement, as to which Parent
makes no representation and which shall not constitute part of a Parent SEC
Report for purposes of this Agreement) shall not at the time the Registration
Statement is declared effective by the SEC contain any untrue statement of a
material fact or omit to state any material fact required to be stated in the
Registration Statement or necessary in order to make the statements in the
Registration Statement not misleading. The information (except for information
to be supplied by the Company for inclusion in the Joint Proxy Statement, as to
which Parent makes no representation) in the Joint Proxy Statement shall not, on
the date the Joint Proxy Statement is first mailed to stockholders of Parent or
the Company, at the time of the Parent Meeting and the Company Meeting and at
the Effective Time, contain any statement which, at such time and in light of
the circumstances under which it shall be made, is false or misleading with
respect to any material fact, or omit to state any material fact necessary in
order to make the statements made in the Joint Proxy Statement not false or
misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Parent Meeting or the Company Meeting which has become false or
misleading. If at any time prior to the Effective Time any event relating to
Parent or any of its Affiliates, officers or directors should be discovered by
Parent which should be set forth in an amendment to the Registration Statement
or a supplement to the Joint Proxy Statement, Parent shall promptly inform the
Company.
Section 4.11 OPERATIONS OF SUB. Sub was formed solely for the purpose of
engaging in the transactions contemplated by this Agreement, has engaged in no
other business activities and has conducted its operations only as contemplated
by this Agreement.
Section 4.12 OPINION OF FINANCIAL ADVISOR. The financial advisor of
Parent, BancBoston Robertson Stephens Inc., has delivered to Parent an opinion
dated the date of this Agreement, to the effect that, as of such date, the
Exchange Ratio was fair to Parent from a financial point of view.
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ARTICLE V
CONDUCT OF BUSINESS
Section 5.01 COVENANTS OF THE COMPANY. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, the Company agrees as to itself and its
Subsidiaries (except to the extent that Parent shall otherwise consent in
writing), to carry on its business in the usual, regular and ordinary course in
substantially the same manner as previously conducted, to pay its debts and
Taxes and perform other obligations when due subject to good faith disputes over
such debts, Taxes or obligations, and, to the extent consistent with such
business, use commercially reasonable efforts consistent with past practices and
policies to preserve intact its present business organization, keep available
the services of its present officers and key employees and preserve its
relationships with customers, suppliers, distributors, and others having
business dealings with it; provided, however, that the Company shall not be
obligated to increase the compensation of or otherwise make additional payments
to such persons. Except as expressly contemplated by this Agreement or set forth
in the Company Disclosure Schedule, the Company shall not (and shall not permit
any of its Subsidiaries to), without the written consent of Parent:
(a) Accelerate, amend or change the period of exercisability of any
Company Warrant or any outstanding option or restricted stock granted under
any Company Stock Plan or authorize cash payments in exchange for any
Company Warrant or any option granted under any of such plans, except as
required by the terms of such plans or any related agreements in effect as
of the date of this Agreement;
(b) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital stock,
or split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock;
(c) Issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or securities
convertible into shares of its capital stock, or subscriptions, rights,
warrants or options to acquire, or other agreements or commitments of any
character obligating it to issue any such shares or other convertible
securities, other than the issuance of shares of Company Common Stock
pursuant to the exercise of the Company Warrants or options outstanding on
the date of this Agreement under the Company Stock Plans;
(d) Acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership or other business organization or division, or otherwise acquire
or agree to acquire any assets (other than inventory and other items in the
ordinary course of business and consistent with past practice);
(e) Sell, lease, license or otherwise dispose of any of its properties
or assets;
(f) (i) Increase or agree to increase the compensation payable or to
become payable to its officers or employees, (ii) grant any severance or
termination pay to, or enter into any employment or severance agreements
with, any employees or officers, (iii) enter into any collective bargaining
agreement, (iv) establish, adopt, enter into or amend any bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination or severance or
other plan, trust, fund, policy or arrangement for the benefit of any
directors, officers or employees or (v) forgive any indebtedness of any
employee to the Company or any of its Subsidiaries;
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(g) Amend or propose to amend its charter or bylaws, except as
contemplated by this Agreement;
(h) Incur any indebtedness for borrowed money, make any loans to any
person or entity or guarantee any debt securities of others;
(i) Initiate, compromise, or settle any material litigation or
arbitration proceeding;
(j) Modify, amend or terminate any contract that is material to the
Company and its Subsidiaries taken as a whole, or waive, release or assign
any material rights or claims;
(k) Make or rescind any Tax election, settle or compromise any Tax
liability or amend any Tax return;
(l) Change its methods of accounting as in effect at June 30, 1999
except as required by generally accepted accounting principles;
(m) Make or commit to make any capital expenditures that exceed the
capital budget furnished by the Company to Parent;
(n) License any intellectual property rights to or from any third party;
(o) Close any facility or office;
(p) Invest funds in debt securities or other instruments maturing more
than 90 days after the date of investment;
(q) Initiate any new clinical trials or any new phase of any ongoing
clinical trials;
(r) Adopt or implement any stockholder rights plan that could have the
effect of impeding or restricting the consummation of the transactions
contemplated hereby; or
(s) Take, or agree in writing or otherwise to take, any of the actions
described in paragraphs (a) through (r) above.
Section 5.02 COOPERATION. Subject to compliance with applicable law, from
the date hereof until the Effective Time, the Company and each of its
Subsidiaries shall make its officers available to confer on a regular and
frequent basis with one or more representatives of Parent to report on the
general status of ongoing operations and shall promptly provide Parent or its
counsel with copies of all filings made by such party with any Governmental
Entity in connection with this Agreement, the Merger and the transactions
contemplated hereby and thereby.
Section 5.03 CONFIDENTIALITY. The parties acknowledge that Parent and the
Company have previously executed a Confidential Disclosure Agreement dated as of
October 4, 1999 (the "Confidentiality Agreement"), which Confidentiality
Agreement will continue in full force and effect in accordance with its terms,
except as expressly modified herein.
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ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.01 NO SOLICITATION.
(a) From and after the date of this Agreement until the earlier of the
Effective Time or termination of this Agreement pursuant to its terms, the
Company and its Subsidiaries shall not, directly or indirectly, through any
officer, director, employee, financial advisor, representative or agent of such
party (i) solicit, initiate, or encourage any inquiries or proposals that
constitute, or could reasonably be expected to lead to, a proposal or offer for
a merger, consolidation, business combination, sale of substantial assets,
tender offer, sale of shares of capital stock (excluding sales pursuant to
existing employee and director stock plans) or similar transaction involving the
Company or any of its Subsidiaries, other than the transactions contemplated by
this Agreement (any of the foregoing inquiries or proposals being referred to in
this Agreement as an "Acquisition Proposal"), (ii) engage in negotiations or
discussions concerning, or provide any non-public information to any person or
entity relating to, any Acquisition Proposal, or (iii) agree to or recommend any
Acquisition Proposal; provided, however, that so long as the Company and its
Subsidiaries have not breached this Section 6.01, nothing contained in this
Agreement shall prevent the Company or its Board of Directors, from:
(A) furnishing non-public information to, or entering into discussions
or negotiations with, any person or entity in connection with an unsolicited
bona fide written Acquisition Proposal that would result in the acquisition
of more than 50% of the combined voting power of the shares of the Company
then outstanding or all or substantially all of the consolidated assets of
the Company and its Subsidiaries by such person or entity or recommending
such an unsolicited bona fide written Acquisition Proposal to the
stockholders of the Company, if and only to the extent that
(1) the Board of Directors of the Company believes in good faith
(after consultation with its financial advisor) that such Acquisition
Proposal is reasonably capable of being completed on the terms proposed
and would, if consummated, result in a transaction more favorable than
the transaction contemplated by this Agreement (any such more favorable
Acquisition Proposal being referred to in this Agreement as a "Superior
Proposal") and the Company's Board of Directors determines in good faith
after consultation with outside legal counsel that such action is
necessary for such Board of Directors to comply with its fiduciary duties
to stockholders under applicable law;
(2) prior to furnishing such non-public information to, or entering
into discussions or negotiations with, such person or entity, such Board
of Directors receives from such person or entity an executed
confidentiality agreement with terms no less favorable to such party than
those contained in the Confidentiality Agreement; and
(3) prior to recommending a Superior Proposal, the Company provides
Parent with at least five business days' prior notice of its proposal to
do so, during which time Parent may make, and in such event the Company
shall consider, a counterproposal to such Superior Proposal, and the
Company shall itself and shall cause its financial and legal advisors to
negotiate on its behalf in good faith with Parent with respect to the
terms and conditions of such counterproposal; or
(B) complying with Rule 14d-9 and 14e-2 promulgated under the Exchange
Act with regard to an Acquisition Proposal.
(b) The Company will, and will cause its representatives and agents to,
immediately cease any and all existing activities, discussions or negotiations
with any parties conducted heretofore of the nature described in Section 6.01(a)
and will use reasonable efforts to obtain the return of any confidential
information furnished to any such parties.
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(c) The Company shall notify Parent immediately after receipt by the Company
(or its advisors) of any Acquisition Proposal or any request for nonpublic
information in connection with an Acquisition Proposal or for access to the
properties, books or records of the Company by any person or entity that informs
the Company that it is considering making, or has made, an Acquisition Proposal.
Such notice shall be made orally and in writing and shall indicate in reasonable
detail the identity of the offeror and the terms and conditions of such
proposal, inquiry or contact. The Company shall continue to keep Parent
informed, on a current basis, of the status of any such discussions or
negotiations and the terms being discussed or negotiated.
(d) Nothing in this Section 6.01 shall (i) permit the Company to terminate
this Agreement (except as specifically provided in Section 8.01 hereof),
(ii) permit the Company to enter into any agreement with respect to an
Acquisition Proposal during the term of this Agreement (it being agreed that
during the term of this Agreement, the Company shall not enter into any
agreement with any person that provides for, or in any way facilitates, an
Acquisition Proposal (other than a confidentiality agreement of the type
referred to in Section 6.01(a) above)) or (iii) affect any other obligation of
the Company under this Agreement.
(e) Without limiting the foregoing, it is agreed that any violation of the
restrictions set forth in this Section 6.01 by any representative or affiliates
of the Company, whether or not such person is purporting to act on behalf of the
Company or otherwise, shall be deemed to be a breach of this Section 6.01 by the
Company.
Section 6.02 PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT.
(a) As promptly as practical after the execution of this Agreement, Parent
and the Company shall prepare and file with the SEC the Joint Proxy Statement,
and Parent shall prepare and file with the SEC the Registration Statement, in
which the Joint Proxy Statement will be included as a prospectus, provided that
Parent may delay the filing of the Registration Statement until approval of the
Joint Proxy Statement by the SEC. Parent and the Company shall use all
reasonable efforts to cause the Registration Statement to become effective as
soon after such filing as practicable. Each of Parent and the Company will
respond to any comments of the SEC and will use its respective commercially
reasonable efforts to have the Joint Proxy Statement cleared by the SEC and the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filings and will cause the Joint Proxy Statement and
the prospectus contained within the Registration Statement to be mailed to its
stockholders at the earliest practicable time after both the Proxy Statement is
cleared by the SEC and the Registration Statement is declared effective under
the Securities Act. Each of Parent and the Company will notify the other
promptly upon the receipt of any comments from the SEC or its staff or any other
government officials and of any request by the SEC or its staff or any other
government officials for amendments or supplements to the Registration
Statement, the Joint Proxy Statement or any filing pursuant to Section 6.02(b)
or for additional information and will supply the other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the Registration Statement, the Joint Proxy Statement, the
Merger or any filing pursuant to Section 6.02(b). Each of Parent and the Company
will cause all documents that it is responsible for filing with the SEC or other
regulatory authorities under this Section 6.02 to comply in all material
respects with all applicable requirements of law and the rules and regulations
promulgated thereunder. Whenever any event occurs which is required to be set
forth in an amendment or supplement to the Joint Proxy Statement, the
Registration Statement or any filing pursuant to Section 6.02(b), Parent or the
Company, as the case may be, will promptly inform the other of such occurrence
and cooperate in filing with the SEC or its staff or any other government
officials, and/or mailing to stockholders of Parent and/or the Company, such
amendment or supplement.
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(b) Parent and the Company shall make all necessary filings with respect to
the Merger under the Securities Act, the Exchange Act, applicable state blue sky
laws and the rules and regulations thereunder.
Section 6.03 NASDAQ QUOTATION. The Company agrees to use commercially
reasonable efforts to continue the quotation of Company Common Stock on the
Nasdaq National Market during the term of this Agreement.
Section 6.04 ACCESS TO INFORMATION. Upon reasonable notice, the Company
shall (and shall cause each of its Subsidiaries to) afford to Parent's officers,
employees, accountants, counsel and other representatives, reasonable access,
during normal business hours during the period prior to the Effective Time, to
all its properties, books, contracts, commitments and records and, during such
period, the Company shall (and shall cause each of its Subsidiaries to) furnish
promptly to Parent (a) a copy of each report, schedule, registration statement
and other document filed or received by it during such period pursuant to the
requirements of federal securities laws and (b) all other information concerning
its business, properties and personnel as Parent may reasonably request. Unless
otherwise required by law, Parent will hold any such information which is
nonpublic in confidence in accordance with the Confidentiality Agreement. No
information or knowledge obtained in any investigation pursuant to this Section
6.04 or otherwise shall affect or be deemed to modify any representation or
warranty contained in this Agreement or the conditions to the obligations of the
parties to consummate the Merger.
Section 6.05 STOCKHOLDERS MEETINGS.
(a) The Company, acting through its Board of Directors, shall, subject to
and in accordance with applicable law and its Certificate of Incorporation and
Bylaws, promptly and duly call, give notice of, convene and hold as soon as
practicable following the date on which the Registration Statement becomes
effective the Company Meeting for the purpose of voting to approve and adopt
this Agreement and the Merger (the "Company Voting Proposal"). The Board of
Directors of the Company shall (i) recommend approval and adoption of the
Company Voting Proposal by the stockholders of the Company and include in the
Joint Proxy Statement such recommendation and (ii) take all reasonable and
lawful action to solicit and obtain such approval; provided, however, that in
the context of an Acquisition Proposal the Board of Directors of the Company may
withdraw such recommendation if (but only if) (i) the Board of Directors of the
Company has received a Superior Proposal, (ii) such Board of Directors upon
advice of its outside legal counsel determines that it is required, in order to
comply with its fiduciary duties under applicable law, to recommend such
Superior Proposal to the stockholders of the Company, and (iii) the Company has
complied with the provisions of Section 6.01.
(b) Parent, acting through its Board of Directors, shall, subject to and in
accordance with applicable law and its Certificate of Incorporation and Bylaws,
promptly and duly call, give notice of, convene and hold as soon as practicable
following the date on which the Registration Statement becomes effective, the
Parent Meeting for the purpose of voting to approve the issuance of the shares
of Parent Common Stock to be issued in the Merger (the "Parent Voting
Proposal"). The Board of Directors of Parent shall (i) recommend approval of the
Parent Voting Proposal and include in the Joint Proxy Statement such
recommendation and (ii) take all reasonable and lawful action to solicit and
obtain such approval; provided that Parent may withdraw such recommendation if
the Board of Directors upon advice of its outside legal counsel determines that
it is required to do so to comply with its fiduciary duties.
(c) The persons listed on Schedule 6.05(c) have each executed and delivered
a Stockholder Voting Agreement to Parent and Sub concurrently with the signing
of this Agreement.
Section 6.06 LEGAL CONDITIONS TO MERGER.
(a) Subject to the terms hereof, the Company and Parent shall use their
respective commercially reasonable efforts to (i) take, or cause to be taken,
all appropriate action, and do, or cause to be done,
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all things necessary and proper under applicable law to consummate and make
effective the transactions contemplated hereby as promptly as practicable,
(ii) obtain from any Governmental Entity or any other third party any consents,
licenses, permits, waivers, approvals, authorizations, or orders required to be
obtained or made by the Company or Parent or any of their Subsidiaries in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby including, without
limitation, the Merger, (iii) as promptly as practicable, make all necessary
filings, and thereafter make any other required submissions, with respect to
this Agreement and the Merger required under (A) the Securities Act and the
Exchange Act, and any other applicable federal or state securities laws,
(B) the HSR Act and any related governmental request thereunder, and (C) any
other applicable law and (iv) execute or deliver any additional instruments
necessary to consummate the transactions contemplated by, and to fully carry out
the purposes of, this Agreement. The Company and Parent shall cooperate with
each other in connection with the making of all such filings, including
providing copies of all such documents to the non-filing party and its advisors
prior to filing and, if requested, to accept all reasonable additions, deletions
or changes suggested in connection therewith. The Company and Parent shall use
their respective commercially reasonable efforts to furnish to each other all
information required for any application or other filing to be made pursuant to
the rules and regulations of any applicable law (including all information
required to be included in the Joint Proxy Statement and the Registration
Statement) in connection with the transactions contemplated by this Agreement.
(b) Subject to the terms hereof, Parent and the Company agree, and shall
cause each of their respective Subsidiaries, to cooperate and to use their
respective commercially reasonable efforts to obtain any government clearances
or approvals required for Closing under the HSR Act, the Sherman Act, as
amended, the Clayton Act, as amended, the Federal Trade Commission Act, as
amended, and any other federal, state or foreign law or, regulation or decree
designed to prohibit, restrict or regulate actions for the purpose or effect of
monopolization or restraint of trade (collectively "Antitrust Laws"), to respond
to any government requests for information under any Antitrust Law, and to
contest and resist any action, including any legislative, administrative or
judicial action, and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order (whether temporary, preliminary or
permanent) (an "Order") that restricts, prevents or prohibits the consummation
of the Merger or any other transactions contemplated by this Agreement under any
Antitrust Law. The parties hereto will consult and cooperate with one another,
and consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted by or on behalf of any party hereto in connection
with proceedings under or relating to any Antitrust Law. Parent shall be
entitled to direct any proceedings or negotiations with any Governmental Entity
relating to any of the foregoing, provided that it shall afford the Company a
reasonable opportunity to participate therein. Notwithstanding anything to the
contrary in this Section 6.06, neither Parent nor any of its Subsidiaries shall
be required to (i) divest any of their respective businesses, product lines or
assets, or to take or agree to take any other action or agree to any limitation,
that could reasonably be expected to have a material adverse effect on Parent or
on Parent combined with the Company after the Effective Time, or (ii) take any
action under this Section 6.06 if the United States Department of Justice or the
United States Federal Trade Commission authorizes its staff to seek a
preliminary injunction or restraining order to enjoin consummation of the
Merger.
(c) Each of the Company and Parent shall give (or shall cause their
respective Subsidiaries to give) any notices to third parties, and use, and
cause their respective Subsidiaries to use, their commercially reasonable
efforts to obtain any third party consents related to or required in connection
with the Merger that are (A) necessary to consummate the transactions
contemplated hereby, (B) disclosed or required to be disclosed in the Company
Disclosure Schedule or the Parent Disclosure Schedule, as the case may be, or
(C) required to prevent a Company Material Adverse Effect or a Parent Material
Adverse Effect from occurring prior to or after the Effective Time.
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Section 6.07 PUBLIC DISCLOSURE. Parent and the Company shall consult with
each other before issuing any press release or otherwise making any public
statement with respect to the Merger or this Agreement and shall not issue any
such press release or make any such public statement, except as may be required
by law.
Section 6.08 TAX-FREE REORGANIZATION. Parent and the Company shall each
use its best efforts to cause the Merger to be treated as a reorganization
within the meaning of Section 368(a) of the Code. The parties hereto hereby
adopt this Agreement as a plan of reorganization.
Section 6.09 AFFILIATE AGREEMENTS. Upon the execution of this Agreement,
the Company will provide Parent with a list of those persons who are, in the
Company's respective reasonable judgment, "affiliates" of the Company, within
the meaning of Rule 145 (each such person who is an "affiliate" of the Company
within the meaning of Rule 145 is referred to as an "Affiliate") promulgated
under the Securities Act ("Rule 145"). The Company shall provide Parent such
information and documents as Parent shall reasonably request for purposes of
reviewing such list and shall notify Parent in writing regarding any change in
the identity of its Affiliates prior to the Closing Date. The Company shall
deliver or cause to be delivered to Parent by October 31, 1999 (and in any case
prior to the mailing of the Joint Proxy Statement) from each of its Affiliates,
an executed Affiliate Agreement, in substantially the form appended hereto as
Exhibit C (collectively, the "Affiliate Agreements"). Parent shall be entitled
to place appropriate legends on the certificates evidencing any Parent Common
Stock to be received by such Affiliates of the Company pursuant to the terms of
this Agreement, and to issue appropriate stop transfer instructions to the
transfer agent for the Parent Common Stock, consistent with the terms of the
Affiliate Agreements (provided that such legends or stop transfer instructions
shall be removed, two years after the Effective Date, upon the request of any
stockholder that is not then an Affiliate of Parent).
Section 6.10 NASDAQ LISTING. Parent shall use commercially reasonable
efforts to cause the shares of Parent Common Stock to be issued in the Merger to
be listed on the Nasdaq National Market, subject to official notice of issuance,
on or prior to the Closing Date.
Section 6.11 STOCK PLANS AND WARRANTS.
(a) At the Effective Time, by virtue of the Merger, the Company Stock Plans
shall be assumed by Parent. At the Effective Time, each outstanding option to
purchase shares of the Company Common Stock ( "Company Stock Option") under the
Company Stock Plans, whether vested or unvested, and each Company Warrant, shall
be deemed to constitute an option or warrant to acquire, on the same terms and
conditions as were applicable under such Company Stock Option or Company
Warrant, the same number of shares of Parent Common Stock as the holder of such
Company Stock Option or Company Warrant would have been entitled to receive
pursuant to the Merger had such holder exercised such option or Company Warrant
in full immediately prior to the Effective Time (rounded downward to the nearest
whole number), at a price per share (rounded upward to the nearest whole cent)
equal to (y) the aggregate exercise price for the shares of Company Common Stock
purchasable pursuant to such Company Stock Option or Company Warrant immediately
prior to the Effective Time divided by (z) the number of full shares of Parent
Common Stock deemed purchasable pursuant to such Company Stock Option or Company
Warrant in accordance with the foregoing.
(b) As soon as practicable after the Effective Time, Parent shall deliver to
the participants in Company Stock Plans and holders of Company Warrants
appropriate notice setting forth such participants' rights pursuant thereto and
the grants pursuant to Company Stock Plans shall continue in effect on the same
terms and conditions (subject to the adjustments required by this Section 6.11
after giving effect to the Merger).
(c) Parent shall reserve for issuance a sufficient number of shares of
Parent Common Stock for delivery under Company Stock Plans assumed in accordance
with this Section 6.11. As soon as practicable after the Effective Time, Parent
shall file a registration statement on Form S-8 (or any successor or other
appropriate forms), or another appropriate form with respect to the shares of
Parent
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Common Stock subject to such options and shall use its best efforts to maintain
the effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as such options remain outstanding.
(d) The Company shall terminate its Employee Stock Purchase Plan in
accordance with its terms as of or prior to the Effective Time. The Company
shall not commence a new offering under its Employee Stock Purchase Plan after
the date of this Agreement.
(e) The Company shall, prior to December 31, 1999, accelerate unvested
non-statutory options held by Christopher K. Mirabelli and Augustine Lawlor as
and to the extent requested by Parent and consented to by the Company, such
consent not to be unreasonably withheld.
Section 6.12 BROKERS OR FINDERS. Each of Parent and the Company
represents, as to itself, its Subsidiaries and its Affiliates, that no agent,
broker, investment banker, financial advisor or other firm or person is or will
be entitled to any broker's or finder's fee or any other commission or similar
fee in connection with any of the transactions contemplated by this Agreement
except as set forth on the Company's Disclosure Schedule (in the case of the
Company) or in Schedule 6.12 (in the case of Parent).
Section 6.13 INDEMNIFICATION.
(a) From and after the Effective Time, Parent shall, to the fullest extent
permitted by law, cause the Surviving Corporation, for a period of six years
from the Effective Time, to honor all of the Company's obligations to indemnify
and hold harmless each present and former director and officer of the Company
(the "Indemnified Parties"), against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities or amounts paid in
settlement incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the extent that such obligations to indemnify and hold harmless exist
on the date of this Agreement.
(b) For a period of three years after the Effective Time, Parent shall cause
the Surviving Corporation to maintain (to the extent available in the market) in
effect a directors' and officers' liability insurance policy covering those
persons who are currently covered by the Company's directors' and officers'
liability insurance policy (a copy of which has been heretofore delivered to
Parent) with coverage in amount and scope at least as favorable to such persons
as the Company's existing coverage; provided, that in no event shall Parent or
the Surviving Corporation be required to expend in excess of 150% the annual
premium currently paid by the Company for such coverage.
Section 6.14 NOTIFICATION OF CERTAIN MATTERS. The Parent will give prompt
notice to the Company, and the Company will give prompt notice to Parent, of the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be reasonably likely to cause (a) any representation or warranty of
such party contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date of this Agreement to the Effective
Time, or (b) any material failure of Parent and Sub or the Company, as the case
may be, or of any officer, director, employee or agent thereof, to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement. Notwithstanding the above, the delivery of any
notice pursuant to this Section will not limit or otherwise affect the remedies
available hereunder to the party receiving such notice or the conditions to such
party's obligation to consummate the Merger.
Section 6.15 COMFORT LETTERS FROM THE COMPANY'S ACCOUNTANTS. The Company
shall use reasonable efforts to cause to be delivered to Parent and the Company
a letter of Arthur Andersen LLP, the Company's independent auditors, dated a
date within two business days before the date on which the Registration
Statement shall become effective and addressed to Parent, in form reasonably
satisfactory to Parent and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Registration Statement.
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Section 6.16 STOCKHOLDER LITIGATION. Until the earlier of the termination
of this Agreement in accordance with its terms or the Effective Time, the
Company shall give Parent the opportunity to participate in the defense or
settlement of any stockholder litigation against the Company or its Board of
Directors relating to this Agreement or any of the transactions contemplated by
this Agreement, and shall not settle any such litigation without Parent's prior
written consent, which will not be unreasonably withheld or delayed.
Section 6.17 RELATIONSHIP WITH PARTNERS. The Company shall use
commercially reasonable efforts to preserve the goodwill of its license and
collaboration partners through the Closing Date.
Section 6.18 EMPLOYEE MATTERS.
(a) Applicability. The provisions of this Section 6.18 shall apply to each
employee of the Company as of the Effective Time (each a "Company Employee" and,
collectively, the "Company Employees"), except Christopher K. Mirabelli and
Augustine Lawlor whose employment with the Parent shall in all respects be
governed by the employment agreements referred to in Section 7.02(f). Nothing in
this Section 6.18 shall be construed to limit the right of Parent to (i)
terminate, for any reason or no reason, with or without cause, at any time after
the Effective Time, the employment of any Company Employee who remains an
employee of the Surviving Corporation or becomes an employee of Parent or (ii)
change the terms or conditions of employment of any Company Employee who remains
an employee of the Surviving Corporation or becomes an employee of Parent.
(b) Employee Benefit Plans. Parent shall enroll the Company Employees in
Parent's employee benefit plans, effective as of the Effective Time (or as soon
as practicable thereafter), including, as applicable, its medical plan, dental
plan, life insurance plan and disability plan, under the same coverage
applicable to similarly situated employees of Parent, giving such Company
Employees service credit for their employment with the Company for eligibility
and vesting purposes for all of Parent's employee benefit plans (including
without limitation health coverage and vacation plans), as if such service had
been performed with Parent and waiving any preexisting condition exclusion with
respect to Parent's medical plan, to the extent that such preexisting condition
would have been covered under the Company's plan. Parent shall use commercially
reasonable efforts to credit each Company Employee with deductible payments and
co-payments paid by such Company Employee under the Company's healthcare plans
in 2000 prior to the Effective Time for purposes of determining the extent to
which any such Company Employee has satisfied his or her deductible and whether
he or she has reached the out-of-pocket maximum under Parent's medical plan for
such plan year. Parent shall give credit to each Company Employee that becomes
an employee of Parent for earned but unused vacation and accrued vacation.
(c) Severance. In the event that, at any time on or after the Effective Date
and prior to the first anniversary of the date on which the Effective Time
occurs, Parent or the Surviving Corporation shall terminate without Cause (as
defined in Section 6.18(d) below) the employment of any Company Employee or any
Company Employee terminates his or her employment with Parent or the Surviving
Corporation for Good Reason (as defined in Section 6.18(d)), then Parent shall
provide to any such Company Employee during his or her Applicable Severance
Period (as defined in Section 6.18(d)) the following severance benefits:
(1) Parent shall continue to pay to any such Company Employee his or her
salary at the level in effect on the effective date of termination; and
(2) To the extent permissible under law and the terms of the applicable
plan, Parent shall continue to provide to any such Company Employee all
employee benefits to which such Company Employee was entitled or in which
such Company Employee was participating on the effective date of
termination;
provided, however, that Parent and the Surviving Corporation shall not be
obligated to provide the foregoing severance benefits to any Company Employee
unless such Company Employee executes and
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delivers to Parent an agreement containing non-solicitation provisions in the
form attached to the Parent Disclosure Schedule as Section 6.18 thereof and
appropriate releases of claims by the Company Employee.
(d) Definitions. For purposes of this Agreement, the following terms shall
have the meaning provided therefor below:
"Applicable Severance Period" shall mean (1) in the case of any Company
Employee that is listed on Schedule 6.18 as a Senior Vice President of the
Company on the date hereof, a period of 12 months after the effective date
of termination of his or her employment, (2) in the case of any Company
Employee that is listed on Schedule 6.18 as a Vice President of the Company
on the date hereof, a period of nine months after the effective date of
termination of his or her employment, (3) in the case of any Company
Employee that is listed on Schedule 6.18 as a Director of the Company on the
date hereof, a period of six months after the effective date of termination
of his or her employment, and (4) in the case of any other Company Employee,
a period of three months after the effective date of termination of his or
her employment.
"Cause" shall mean that any one or more of the following has occurred:
(i) the Employee shall have committed an act of theft, dishonesty,
gross dereliction of duty, fraud, embezzlement, misappropriation or
breach of fiduciary duty against Parent or the Surviving Corporation, or
has disclosed trade secrets or proprietary information of or committed
any other act of material misconduct against Parent or the Surviving
Corporation; or
(ii) the Employee shall have been convicted by a court of competent
jurisdiction of, or pleaded guilty or nolo contendere to, any felony or
any crime involving dishonesty; or
(iii) the Employee shall have failed to carry out his or her
reasonably assigned duties after written notice of such failure and a
reasonable opportunity (which shall not exceed 10 days) to cure such
failure.
"Good Reason" shall mean (i) any reduction in the Employee's salary as
in effect immediately prior to such reduction or (ii) the relocation of the
Employee, without the Employee's consent, outside the vicinity of the
greater Boston area in Massachusetts.
(e) Third Party Beneficiaries. Each Company Employee is an intended third
party beneficiary of the provisions of Section 6.18(c) and shall be entitled to
enforce the provisions of Section 6.18(c) to the same extent as if such Company
Employee were a party to this Agreement.
Section 6.19 BOARD REPRESENTATION. At the effective Time, Parent shall
expand the Board of Directors by one director and Christopher K. Mirabelli shall
be elected by the Board of Directors of Parent as a Class I director to fill the
vacancy created thereby. In addition, subject to its fiduciary duties under the
DGCL, the Board of Directors of the Company shall nominate Mr. Mirabelli for
reelection as a Class I director at the Company's annual meeting of stockholders
in 2000. If Mr. Mirabelli shall for any reason cease to be a director of the
Company prior to the Company's annual meeting of stockholders in 2003, the Board
of Directors of Parent shall in good faith consider replacing Mr. Mirabelli with
another person who is serving as a director of the Company on the date of this
Agreement.
Section 6.20 401(K) PLAN. Prior to the Effective Time, the Company shall
take all action required to amend its 401(k) Plan such that such 401(k) Plan
does not cover any of the employees of Parent or its ERISA Affiliates other than
the Company or any of the Company's Subsidiaries.
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ARTICLE VII
CONDITIONS TO MERGER
Section 7.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to this Agreement to effect
the Merger shall be subject to the satisfaction prior to the Closing Date of the
following conditions:
(a) Stockholder Approvals. The Company Voting Proposal shall have been
approved and adopted by the affirmative vote of the holders of a majority of
the shares of Company Common Stock outstanding on the record date for the
Company Meeting and the Parent Voting Proposal shall have been approved by
the affirmative vote of the holders of a majority of the shares of Parent
Common Stock voted at the Parent Meeting at which a quorum is present.
(b) HSR Act. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
(c) Governmental Approvals. Other than the filing provided for by
Section 1.02, all authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by,
any Governmental Entity, the failure of which to file, obtain or occur is
reasonably likely to have a Parent Material Adverse Effect or a Company
Material Adverse Effect, shall have been filed, been obtained or occurred.
(d) Registration Statement. The Registration Statement shall have become
effective under the Securities Act and shall not be the subject of any stop
order or proceedings seeking a stop order.
(e) No Injunctions. No Governmental Entity of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any order,
executive order, stay, decree, judgment or injunction (each an "Order") or
statute, rule or regulation which is in effect and which has the effect of
making the Merger illegal or otherwise prohibiting consummation of the
Merger.
(f) Nasdaq. The shares of Parent Common Stock to be issued in the Merger
shall have been approved for listing on the Nasdaq National Market, subject
only to official notice of issuance.
Section 7.02 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND SUB. The
obligations of Parent and Sub to effect the Merger are subject to the
satisfaction of each of the following conditions, any of which may be waived in
writing exclusively by Parent and Sub:
(a) Representations and Warranties. The representations and warranties
of the Company set forth in this Agreement shall be true and correct as of
the date of this Agreement and (except to the extent such representations
and warranties speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date, except (other than with respect to
Section 3.02) for (i) changes contemplated by this Agreement and (ii) where
the failures to be true and correct, individually or in the aggregate and
without regard to any qualifications as to materiality or Company Material
Adverse Effect contained in such representations and warranties, have not
had and are not reasonably likely to have a Company Material Adverse Effect;
and Parent shall have received a certificate signed on behalf of the Company
by the chief executive officer and the chief financial officer of the
Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date; and Parent shall
have received a certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company to such
effect.
(c) Tax Opinion. Parent shall have received a written opinion from Hale
and Dorr LLP, counsel to Parent, to the effect that the Merger will be
treated for federal income tax purposes as a tax-free reorganization within
the meaning of Section 368(a) of the Code; provided that if Hale
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and Dorr LLP does not render such opinion, this condition shall nonetheless
be deemed satisfied if Bingham Dana LLP renders such opinion to Parent (it
being agreed that Parent and the Company shall each provide reasonable
cooperation, including making reasonable representations, to Bingham Dana
LLP or Hale and Dorr LLP, as the case may be, to enable them to render such
opinion).
(d) Third Party Consents. The Company shall have obtained (i) all
consents and approvals of third parties referred to in Section 3.03(c) and
3.09(c) of the Company Disclosure Schedule and (ii) any other consent or
approval of any third party (other than a Governmental Entity) the failure
of which to obtain, individually or in the aggregate, is reasonably likely
to have a Company Material Adverse Effect.
(e) Resignations. Parent shall have received copies of the resignations,
effective as of the Effective Time, of each director of the Company and its
Subsidiaries.
(f) Employment Agreements. The Employment Agreements between Parent and
each of Messrs. Mirabelli and Lawlor, dated as of the date hereof, shall be
in full force and effect.
Section 7.03 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligation of the Company to effect the Merger is subject to the satisfaction of
each of the following conditions, any of which may be waived, in writing,
exclusively by the Company:
(a) Representations and Warranties. The representations and warranties
of Parent and Sub set forth in this Agreement shall be true and correct as
of the date of this Agreement and (except to the extent such representations
speak as of an earlier date) as of the Closing Date as though made on and as
of the Closing Date, except for, (i) changes contemplated by this Agreement
and (ii) where the failures to be true and correct, individually or in the
aggregate and without regard to any qualifications as to materiality or
Parent Material Adverse Effect contained in such representations and
warranties, have not had and are not reasonably likely to have a Parent
Material Adverse Effect; and the Company shall have received a certificate
signed on behalf of Parent by the chief executive officer or the chief
financial officer of Parent to such effect.
(b) Performance of Obligations of Parent and Sub. Parent and Sub shall
have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date, and
the Company shall have received a certificate signed on behalf of Parent by
the chief executive officer or the chief financial officer of Parent to such
effect.
(c) Tax Opinion. The Company shall have received the opinion of Bingham
Dana LLP, counsel to the Company, to the effect that the Merger will be
treated for Federal income tax purposes as a tax-free reorganization within
the meaning of Section 368(a) of the Code; provided that if Bingham Dana,
LLP does not render such opinion, this condition shall nonetheless be deemed
satisfied if Hale and Dorr LLP renders such opinion to the Company (it being
agreed that Parent and the Company shall each provide reasonable
cooperation, including making reasonable representations, to Bingham Dana
LLP or Hale and Dorr LLP, as the case may be, to enable them to render such
opinion).
ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.01 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time (with respect to Sections 8.01(b) through 8.01(g),
by written notice by the terminating party to the other party), whether before
or after approval of the matters presented in connection with the Merger by the
stockholders of the Company or Parent:
(a) by mutual written consent of Parent and the Company; or
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(b) by either Parent or the Company if the Merger shall not have been
consummated on or before April 30, 2000 (the "Outside Date") (provided that
the right to terminate this Agreement under this Section 8.01(b) shall not
be available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of the Merger to
occur on or before such date); or
(c) by either Parent or the Company if a Governmental Entity of
competent jurisdiction shall have issued a nonappealable final order, decree
or ruling or taken any other nonappealable final action, in each case having
the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger; or
(d) by Parent or the Company if (x) at the Company Meeting (including
any adjournment or postponement), the requisite vote of the stockholders of
the Company in favor of the Company Voting Proposal shall not have been
obtained; or if (y) at the Parent Meeting (including any adjournment or
postponement), the requisite vote of the stockholders of Parent in favor of
the Parent Voting Proposal shall not have been obtained (provided that the
right to terminate this Agreement under this Section 8.01(d) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure to obtain the
approval of the Company Voting Proposal or Parent Voting Proposal, as
applicable); or
(e) by Parent, if (i) the Board of Directors of the Company shall have
failed to recommend approval of the Company Voting Proposal in the Joint
Proxy Statement or shall have withdrawn or modified its recommendation of
the Company Voting Proposal; (ii) Parent requests in writing that the Board
of Directors of the Company reconfirm its recommendation of this Agreement
or the Merger and the Board of Directors of the Company fails to do so
within five business days after its receipt of Parent's request; (iii) the
Board of Directors of the Company shall have approved or recommended to the
stockholders of the Company an Acquisition Proposal; (iv) a tender offer or
exchange offer for outstanding shares of Company Common Stock is commenced
(other than by Parent or an Affiliate of Parent) and the Board of Directors
of the Company recommends that the stockholders of the Company tender their
shares in such tender or exchange offer or, within 10 days after such tender
or exchange offer, fails to recommend against acceptance of such offer or
takes no position with respect to the acceptance thereof; (v) the Company
shall have breached (or be deemed to have breached) the provisions of
Section 6.01; or (vi) for any reason the Company fails to call and hold the
Company Meeting as required by Section 6.05(a); or
(f) by the Company, if (i) the Board of Directors of Parent shall have
failed to recommend approval of the Parent Voting Proposal in the Joint
Proxy Statement or shall have withdrawn or modified its recommendation of
the Parent Voting Proposal; (ii) the Company requests in writing that the
Board of Directors of Parent reconfirm its recommendation of the Parent
Voting Proposal and the Board of Directors of Parent fails to do so within
five business days after its receipt of the Company's request; or (iii) for
any reason Parent fails to call and hold the Parent Meeting as required by
Section 6.05(b); or
(g) by Parent or the Company, if there has been a breach of any
representation, warranty, covenant or agreement on the part of the other
party set forth in this Agreement, which breach (i) causes the conditions
set forth in Section 7.02(a) or (b) (in the case of termination by Parent)
or 7.03(a) or (b) (in the case of termination by the Company) not to be
satisfied, and (ii) shall not have been, or is not capable of being, cured
within 15 days following receipt by the breaching party of written notice of
such breach from the other party.
Section 8.02 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 8.01, this Agreement shall immediately become
void and there shall be no liability or obligation on the part of Parent, the
Company, Sub or their respective officers, directors, stockholders or
Affiliates, except as set forth in Sections 5.03, 6.12, 8.03 and Article IX;
provided that any such
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termination shall not limit liability for any willful breach of this Agreement
(which includes without limitation the making of any representation or warranty
by a party in this Agreement that the party knew was not true and accurate when
made) and the provisions of Sections 5.03, 6.12, 8.03 and Article IX of this
Agreement and the Confidentiality Agreement shall remain in full force and
effect and survive any termination of this Agreement.
Section 8.03 FEES AND EXPENSES.
(a) Except as set forth in this Section 8.03, all fees and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expenses, whether or not the Merger is
consummated; provided however, that the Company and Parent shall share equally
all fees and expenses, other than attorneys' fees, incurred with respect to the
printing and filing of the Joint Proxy Statement (including any related
preliminary materials) and the Registration Statement (including financial
statements and exhibits) and any amendments or supplements thereto.
(b) The Company shall pay Parent up to $1,500,000 as reimbursement for
expenses of Parent actually incurred relating to the transactions contemplated
by this Agreement prior to termination (including, but not limited to, fees and
expenses of Parent's counsel, accountants and financial advisors, but excluding
any discretionary fees paid to such financial advisors), upon the termination of
this Agreement (i) by Parent or the Company pursuant to Section 8.01(d)(x),
(ii) by Parent pursuant to Section 8.01(e), (iii) by Parent or the Company
pursuant to Section 8.01(b) if the failure to satisfy the condition set forth in
Section 7.02(a) by the Outside Date shall have resulted in the Closing not
occurring, or (iv) by Parent pursuant to Section 8.01(g).
(c) The Company shall pay Parent a termination fee of $25,600,000 upon
(except as otherwise provided in the proviso to clause (iii) below) the earliest
to occur of the following events:
(i) the termination of this Agreement by Parent pursuant to Section
8.01(e); or
(ii) the termination of this Agreement by Parent pursuant to Section
8.01(g) after a breach by the Company of this Agreement; or
(iii) the termination of the Agreement by Parent or the Company pursuant
to Section 8.01(d)(x) as a result of the failure to receive the requisite
vote for approval of the Company Voting Proposal by the stockholders of the
Company at the Company Meeting if, at the time of such failure, there shall
have been announced an Alternative Transaction relating to the Company which
shall not have been absolutely and unconditionally withdrawn and abandoned;
provided, however, that if (A) the Alternative Transaction is a tender offer
or exchange offer, (B) neither the Company nor any of its Affiliates enters
into any contract or agreement with the bidder or any Affiliate of the
bidder relating to such tender offer or exchange offer and (C) the Board of
Directors of the Company recommends against acceptance of such tender offer
or exchange offer, then the termination fee specified in this Section
8.03(c) shall only be payable by the Company if, within one year of the date
of termination pursuant to this Section 8.03(c)(iii), (x) an Alternative
Transaction is closed or (y) the Company enters into a binding agreement
relating to an Alternative Transaction, in which event the termination fee
shall be payable by the Company on the first to occur of (x) or (y).
(d) Parent shall pay the Company up to $1,500,000 as reimbursement for
expenses of the Company actually incurred relating to the transactions
contemplated by this Agreement prior to termination (including, but not limited
to, but excluding any discretionary fees paid to such financial advisors), upon
the termination of this Agreement (i) by the Company or Parent pursuant to
Section 8.01(d)(y), (ii) by the Company pursuant to Section 8.01(f), (iii) by
Parent or the Company pursuant to Section 8.01(b) if the failure to satisfy the
condition set forth in Section 7.03(a) by the Outside Date shall have resulted
in the Closing not occurring, or (iv) by the Company pursuant to Section
8.01(g).
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(e) Parent shall pay the Company a termination fee of $25,600,000 upon the
termination of this Agreement by the Company pursuant to Section 8.01(f) or
pursuant to Section 8.01(g) after a breach by Parent of this Agreement.
(f) The expenses and fees, if applicable, payable pursuant to Section
8.03(b), 8.03(c), 8.03(d) and 8.03(e) shall be paid within one business day
after demand therefor following the first to occur of the events giving rise to
the payment obligation described in Section 8.03(b), 8.03(c)(i), (ii) or (iii),
8.03(d) or 8.03(e). If one party fails to promptly pay to the other any expense
reimbursement or fee due hereunder, the defaulting party shall pay the costs and
expenses (including legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, taken to collect
payment, together with interest on the amount of any unpaid fee at the publicly
announced prime rate of Fleet Bank, N.A. plus five percent per annum, compounded
quarterly, from the date such expense reimbursement or fee was required to be
paid.
(g) As used in this Agreement, "Alternative Transaction" means (i) a
transaction pursuant to which any person (or group of persons) other than Parent
or its affiliates (a "Third Party"), acquires more than 10% of the outstanding
shares of Company Common Stock pursuant to a tender offer or exchange offer or
otherwise, (ii) a merger or other business combination involving the Company
pursuant to which any Third Party acquires more than 10% of the outstanding
shares of Company Common Stock or of the entity surviving such merger or
business combination, (iii) any other transaction pursuant to which any Third
Party acquires control of assets (including for this purpose the outstanding
equity securities of Subsidiaries of the Company and the entity surviving any
merger or business combination including any of them) of the Company having a
fair market value equal to more than 10% of the fair market value of all the
assets of the Company immediately prior to such transaction, or (iv) any public
announcement by a Third Party of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
Section 8.04 AMENDMENT. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the stockholders of the Company or of Parent, but, after any such
approval, no amendment shall be made which by law requires further approval by
such stockholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
Section 8.05 EXTENSION; WAIVER. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
Section 9.01 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. None of the representations, warranties and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for the agreements contained in Articles I
and II, Sections 6.11, 6.12, 6.13, 6.18(c), 6.18(e), 6.20 and Article IX, and
the agreements of the Affiliates delivered pursuant to Section 6.09. The
Confidentiality Agreement shall survive the execution and delivery of this
Agreement.
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Section 9.02 NOTICES. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly delivered three business
days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, or one business day after it is sent via a reputable nationwide
overnight courier service for next business day delivery, in each case to the
intended recipient as set forth below:
(a) if to Parent or Sub, to
Millennium Pharmaceuticals, Inc.
75 Sidney Street
Cambridge, MA 02139
Attn: Jack Douglas, Esq.
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: David E. Redlick, Esq.
Telecopy: (617) 526-5000
(b) if to the Company, to
Leukosite, Inc.
215 First Street
Cambridge, MA 01748
Attn: Christopher K. Mirabelli
with a copy to:
Bingham Dana LLP
150 Federal Street
Boston, MA 02110-1713
Attn: Julio E. Vega, Esq.
Telecopy: (617) 951-8736
Any party may give any notice, request, demand, claim or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail or electronic mail), but no
such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by the party for
whom it is intended. Any party may change the address to which notices,
requests, demands, claims and other communications hereunder are to be delivered
by giving the other parties notice in the manner herein set forth.
Section 9.03 INTERPRETATION. When a reference is made in this Agreement to
Articles or Sections, such reference shall be to an Article or a Section of this
Agreement unless otherwise indicated. The table of contents, table of defined
terms and headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
The phrases "the date of this Agreement", "the date hereof," and terms of
similar import, unless the context otherwise requires, shall be deemed to refer
to October 14, 1999. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation."
Section 9.04 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more
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counterparts have been signed by each of the parties and delivered to the other
parties, it being understood that all parties need not sign the same
counterpart.
Section 9.05 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement (including the documents and the instruments referred to herein) (a)
constitute the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) except as expressly provided in Sections 6.11,
6.13, 6.18(c), 6.18(e) and 6.20 are not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder; provided that the
Confidentiality Agreement shall remain in full force and effect until the
Effective Time. Each party hereto agrees that, except for the representations
and warranties contained in this Agreement, neither the Company nor Parent makes
any other representations or warranties, and each hereby disclaims any other
representations and warranties made by itself or any of its officers, directors,
employees, agents, financial and legal advisors or other representatives, with
respect to the execution and delivery of this Agreement or the transactions
contemplated hereby, notwithstanding the delivery or disclosure to the other or
the other's representatives of any documentation or other information with
respect to any one or more of the foregoing.
Section 9.06 GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law.
Section 9.07 OTHER REMEDIES; SPECIFIC PERFORMANCE. Except as otherwise
provided herein, any and all remedies herein expressly conferred upon a party
will be deemed cumulative with and not exclusive of any other remedy conferred
hereby, or by law or equity upon such party, and the exercise by a party of any
one remedy will not preclude the exercise of any other remedy. The parties
hereto agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
Section 9.08 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
Section 9.09 SEVERABILITY. In the event that any provision of this
Agreement or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further agree
to replace such void or unenforceable provision of this Agreement with a valid
and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
Section 9.10 WAIVER OF JURY TRIAL. EACH OF PARENT, THE COMPANY AND SUB
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, THE COMPANY OR SUB IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
Section 9.11 ELIMINATION OF PARENT VOTING PROPOSAL. Notwithstanding
anything in this Agreement to the contrary, in the event that no vote of
Parent's stockholders is required for the issuance of Parent
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Common Stock pursuant to Section 2.01 above, then, at the election of the Parent
in its sole discretion: (i) the provisions of this Agreement which require
Parent to call, give notice of, convene and hold a stockholders meeting, and
Section 7.01(a), to the extent relating to the approval of the Parent Voting
Proposal, shall be deemed satisfied, and all references in this Agreement to a
Joint Proxy Statement shall be deemed to refer only to the Proxy Statement to be
sent to Company stockholders; (ii) for all purposes of this Agreement, Parent
shall be treated as having recommended approval of the Parent Voting Proposal at
all times and the stockholders of Parent will be deemed to have approved the
Parent Voting Proposal; and (iii) no representation or warranty of Parent
stating that the Parent Voting Proposal is required will be treated as untrue.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized as of the
date first written above.
Millennium Pharmaceuticals, Inc.
By: /S/ MARK LEVIN
-----------------------------------
Name: Mark Levin
Title: Chief Executive Officer
ANM, Inc.
By: /S/ JOHN MARAGANORE
-----------------------------------
Name: John Maraganore
Title: President
Leukosite, Inc.
By: /s/ Christopher K. Mirabelli
-----------------------------------
Name: Christopher K. Mirabelli
Title: Chief Executive Officer
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The undersigned, being the duly elected Secretary or Assistant Secretary of
Sub, hereby certifies that this Agreement has been adopted by a majority of the
votes represented by the outstanding shares of capital stock of Sub entitled to
vote on this Agreement.
/S/ JOHN DOUGLAS
--------------------------------------
Name: John Douglas
Title: Secretary
The undersigned, being the duly elected Secretary or Assistant Secretary of
the Company, hereby certifies that this Agreement has been adopted by a majority
of the votes represented by the outstanding shares of capital stock of the
Company entitled to vote on this Agreement.
--------------------------------------
Name:
Title:
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APPENDIX B
BancBoston Robertson Stephens Inc.
Floor 36
590 Madison Avenue
New York, NY 10022
212-319-8900
[LOGO]
October 14, 1999
Board of Directors
Millennium Pharmaceuticals, Inc.
75 Sidney Street
Cambridge, MA 02139
Members of the Board:
We understand that LEUKOSITE, INC. (the "Company"), MILLENNIUM
PHARMACEUTICALS, INC. ("Parent") and ANM, INC., a wholly owned subsidiary of
Parent ("Sub"), are proposing to enter into an Agreement and Plan of Merger (the
"Agreement"), which will provide, among other things, for the merger (the
"Merger") of Sub with and into the Company. Upon consummation of the Merger, the
Company will become a wholly owned subsidiary of Parent. Under the terms set
forth in a draft of the Agreement dated October 13, 1999 (the "Draft
Agreement"), at the effective time of the Merger, each outstanding share of
common stock of the Company, $.01 par value per share ("Company Common Stock"),
other than shares to be canceled in accordance with the Agreement, will be
converted into the right to receive 0.4296 shares (the "Exchange Ratio") of
common stock of Parent, $.001 par value per share ("Parent Common Stock"). The
terms and conditions of the Merger are set out more fully in the Agreement.
You have asked us whether, in our opinion, the Exchange Ratio is fair from a
financial point of view and as of the date hereof to Parent.
For purposes of this opinion we have, among other things:
(i) reviewed certain publicly available financial statements and other
business and financial information of the Company and Parent,
respectively;
(ii) reviewed certain internal financial statements and other financial and
operating data concerning the Company and Parent prepared by the
managements of the Company and Parent;
(iii) reviewed certain financial forecasts prepared by the managements of the
Company and Parent;
(iv) held discussions with the respective managements of the Company and
Parent concerning the businesses, past and current operations,
financial condition and future prospects of both the Company and
Parent, independently and combined, including discussions with the
managements of the Company and Parent concerning the benefits of
combining the Company and Parent, as well as their views regarding the
strategic rationale for the Merger;
(v) reviewed the financial terms and conditions set forth in the Draft
Agreement;
(vi) reviewed the stock price and trading history of the Company and Parent;
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(vii) compared the financial performance of the Company and Parent and the
prices and trading activity of Company Common Stock and Parent Common
Stock with those of certain other publicly traded companies comparable
with the Company and Parent, respectively;
(viii) compared the financial terms of the Merger with the financial terms, to
the extent publicly available, of other transactions that we deemed
relevant;
(ix) prepared a pro forma merger analysis;
(x) prepared a discounted cash flow analysis of the Company; and
(xi) made such other studies and inquiries, and reviewed such other data, as
we deemed relevant.
In our review and analysis, and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to us (including information furnished to us orally or
otherwise discussed with us by the managements of the Company and Parent) or
publicly available and have neither attempted to verify, nor assumed
responsibility for verifying, any of such information. We have relied upon the
assurances of management of the Company and Parent that they are not aware of
any facts that would make such information inaccurate or misleading.
Furthermore, we did not obtain or make, or assume any responsibility for
obtaining or making, any independent evaluation or appraisal of the properties,
assets or liabilities (contingent or otherwise) of the Company or Parent, nor
were we furnished with any such evaluation or appraisal. With respect to the
financial forecasts (and the assumptions and bases therefor) for each of the
Company and Parent that we have reviewed, upon the advice of the managements of
the Company and Parent, we have assumed that such forecasts have been reasonably
prepared in good faith on the basis of reasonable assumptions and reflect the
best currently available estimates and judgments as to the future financial
condition and performance of the Company and Parent, respectively, and we have
further assumed that such forecasts will be realized in the amounts and in the
time periods currently estimated. We have assumed that the Merger will be
consummated upon the terms set forth in the Draft Agreement without material
alteration thereof, including, among other things, that the Merger will be
accounted for as a "purchase method" business combination in accordance with
U.S. generally accepted accounting principles ("GAAP") and that the Merger will
be treated as a tax-free reorganization pursuant to the Internal Revenue Code of
1986, as amended. In addition, we have assumed that the historical financial
statements of each of the Company and Parent reviewed by us have been prepared
and fairly presented in accordance with GAAP consistently applied. We have
relied as to all legal matters relevant to rendering our opinion on the advice
of counsel.
This opinion is necessarily based upon market, economic and other conditions
as in effect on, and information made available to us as of, the date hereof. It
should be understood that subsequent developments may affect the conclusion
expressed in this opinion and that we disclaim any undertaking or obligation to
advise any person of any change in any matter affecting this opinion which may
come or be brought to our attention after the date of this opinion. Our opinion
is limited to the fairness, from a financial point of view and as to the date
hereof, to Parent of the Exchange Ratio. We do not express any opinion as to (i)
the value of any employee agreement or other arrangement entered into in
connection with the Merger, (ii) any tax or other consequences that might result
from the Merger or (iii) what the value of Parent Common Stock will be when
issued to the Company's stockholders pursuant to the Merger or the price at
which shares of Parent Common Stock may be traded in the future. Our opinion
does not address the relative merits of the Merger and the other business
strategies that Parent's Board of Directors has considered or may be
considering, nor does it address the decision of Parent's Board of Directors to
proceed with the Merger.
We will receive a fee contingent upon the delivery of this opinion, and
Parent has agreed to indemnify us for certain liabilities that may arise out of
the rendering of this opinion. From time to time in the past, we have provided,
and may continue to provide, financial advisory and other services
B-2
<PAGE>
to Parent, for which we receive customary fees. We maintain a market in the
shares of Parent Common Stock. In the ordinary course of business, we may trade
in the securities of Parent and the Company for our own account and the account
of our customers and, accordingly, may at any time hold a long or short position
in such securities.
Our opinion expressed herein is provided for the information of the Board of
Directors of Parent in connection with its evaluation of the Merger. Our opinion
is not intended to be and does not constitute a recommendation to any
stockholder of Parent or the Company as to how such stockholder should vote, or
take any other action, with respect to the Merger. This opinion may not be
summarized, described or referred to or furnished to any party except with our
express prior written consent.
Based upon and subject to the foregoing considerations, it is our opinion
that, as of the date hereof, the Exchange Ratio is fair to Parent from a
financial point of view.
/s/ BANCBOSTON ROBERTSON STEPHENS INC.
B-3
<PAGE>
APPENDIX C
[LOGO]
October 14, 1999
CONFIDENTIAL
Board of Directors
LeukoSite, Inc.
215 First Street
Cambridge, Massachusetts 02142
Ladies and Gentlemen:
LeukoSite, Inc. (the "Company") and Millennium Pharmaceuticals, Inc. (the
"Acquiring Company") propose to enter into an agreement and plan of merger (the
"Agreement") pursuant to which the Company will be merged with a wholly-owned
subsidiary of the Acquiring Company in a transaction (the "Merger") in which
each share of the Company's common stock, par value $0.01 per share (the
"Shares"), will be converted into the right to receive 0.4296 (the "Exchange
Ratio") shares of common stock, par value $0.001 per share ("Acquiring Company
Stock"), of the Acquiring Company. In connection with the Merger, certain
stockholders of the Company holding in the aggregate approximately 28% of the
Shares propose to enter into agreements with the Acquiring Company (the "Voting
Agreements") pursuant to which such stockholders will agree to vote for the
approval of the Merger and to refrain from selling their Shares pending the
Merger.
You have asked us whether or not, in our opinion, the Exchange Ratio in the
Merger is fair to the holders of Company Shares from a financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed the Company's Annual Reports, Forms 10-K and related
financial information for the three fiscal years ended December 31,
1998; and the Company's Form 10-Q and the related unaudited financial
information for the six months ended June 30, 1999;
(2) Reviewed the Acquiring Company's Annual Reports, Forms 10-K and
related financial information for the three fiscal years ended
December 31, 1998; and the Acquiring Company's Form 10-Q and the
related unaudited financial information for the six months ended
June 30, 1999;
(3) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets and prospects of the
Company and the Acquiring Company, respectively, furnished to us by
the Company and the Acquiring Company, respectively;
(4) Conducted discussions with members of senior management of the Company
and the Acquiring Company concerning their respective businesses and
prospects;
(5) Reviewed the historical market prices and trading activity for the
Shares and the Acquiring Company Stock and compared them with that of
certain publicly traded companies which we deemed to be relevant;
(6) Compared the financial position and results of operations of the
Company and the Acquiring Company with that of certain companies which
we deemed to be relevant;
C-1
<PAGE>
(7) Compared the proposed financial terms of the transactions contemplated
by the Agreement with the financial terms of certain other mergers and
acquisitions which we deemed to be relevant;
(8) Reviewed a draft of the Agreement dated October 13, 1999;
(9) Reviewed drafts of the Voting Agreements dated October 13, 1999; and,
(10) Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed necessary, including our assessment of general economic, market
and monetary conditions.
In preparing our opinion, we have relied on the accuracy and completeness of
all information publicly available, supplied or otherwise communicated to us by
the Company and the Acquiring Company, and we have not assumed any
responsibility to independently verify such information. With respect to the
financial forecasts examined by us, we have assumed that they were reasonably
prepared on bases reflecting the best currently available estimates and good
faith judgments of the management of the Company and the Acquiring Company,
respectively, as to the future performance of the Company and the Acquiring
Company, respectively. We have also relied upon assurances of the management of
the Company and the Acquiring Company, respectively, that they are unaware of
any facts that would make the information or financial forecasts provided to us
incomplete or misleading. We have not been engaged to make, and have not made,
any independent evaluation or appraisal of the assets or liabilities (contingent
or otherwise) of the Company or the Acquiring Company nor have we been furnished
with any such evaluations or appraisals. We have also assumed with your consent,
that (i) the Merger will be accounted for under the purchase method of
accounting under U.S. generally accepted accounting principles, (ii) the Merger
will be a tax-free reorganization and (iii) any material liabilities (contingent
or otherwise, known or unknown) of the Company and the Acquiring Company are as
set forth in the consolidated financial statements of the Company and the
Acquiring Company, respectively.
This opinion is directed to the Board of Directors of the Company and does
not constitute a recommendation to any stockholder of the Company as to how any
such stockholder should vote on the Merger. This opinion does not address the
relative merits of the Merger and any other transactions or business strategies
discussed by the Board of Directors of the Company as alternatives to the Merger
or the decision of the Board of Directors of the Company to proceed with the
Merger. We were not requested to, and did not, solicit third party indications
of interest in acquiring all or any portion of the Company.
No opinion is expressed herein as to the price at which the securities to be
issued in the Merger to the stockholders of the Company may trade at any time.
Our opinion is based on economic, monetary and market conditions existing on the
date hereof.
In the ordinary course of business, PaineWebber Incorporated may trade in
the securities of the Company and the Acquiring Company for our own account and
for the accounts of our customers and, accordingly, may at any time hold long or
short positions in such securities.
PaineWebber Incorporated is currently acting as financial advisor to the
Company in connection with the Merger and will be receiving a fee in connection
with the rendering of this opinion and upon consummation of the Merger.
On the basis of, and subject to the foregoing, we are of the opinion that
the proposed Exchange Ratio in the Merger is fair to the holders of Company
Shares from a financial point of view.
C-2
<PAGE>
This opinion has been prepared for the information of the Board of Directors
of the Company in connection with the Merger and shall not be reproduced,
summarized, described or referred to, provided to any person or otherwise made
public or used for any other purpose without the prior written consent of
PaineWebber Incorporated, PROVIDED, HOWEVER, that this letter may be reproduced
in full in the Proxy Statement/Prospectus related to the Merger.
Very truly yours,
/s/ PAINEWEBBER INCORPORATED
-----------------------------------------------------------------
PAINEWEBBER INCORPORATED
C-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102 of the Delaware General Corporation Law allows a corporation to
eliminate the personal liability of directors of a corporation to the
corporation or its stockholders for monetary damages for a breach of fiduciary
duty as a director, except where the director breached his duty of loyalty,
failed to act in good faith, engaged in intentional misconduct or knowingly
violated a law, authorized the payment of a dividend or approved a stock
repurchase in violation of Delaware corporate law or obtained an improper
personal benefit. The Registrant has included such a provision in its
Certificate of Incorporation.
Section 145 of the General Corporation Law of Delaware provides that a
corporation has the power to indemnify a director, officer, employee or agent of
the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he is or is threatened to be
made a party by reason of such position, if such person shall have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, in any criminal proceeding, if such person
had no reasonable cause to believe his conduct was unlawful; provided that, in
the case of actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the adjudicating court determines that such indemnification is
proper under the circumstances.
Article NINTH of the Registrant's Amended and Restated Certificate of
Incorporation provides that a director or officer of the Registrant (a) shall be
indemnified by the Registrant against all expenses (including attorneys' fees),
judgements, fines and amounts paid in settlement incurred in connection with any
litigation or other legal proceeding (other than an action by or in the right of
the Registrant) brought against him by virtue of his position as a director or
officer of the Registrant if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interest of the
registrant, and, with respect to any criminal action or proceeding, has no
reasonable cause to believe his conduct was unlawful and (b) shall be
indemnified by the Registrant against all expenses (including attorneys' fees),
judgment, fines and amounts paid in settlement incurred in connection with any
action by or in the right of the Registrant brought against him by virtue of his
position as a director or officer of the Registrant if he acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the Registrant, except that no indemnification shall be made with
respect to any matter as to which such person shall have been adjudged to be
liable to the Registrant, unless a court determines that, despite such
adjudication but in view of all of the circumstances, he is entitled to
indemnification of such expenses. Notwithstanding the foregoing, to the extent
that a director or officer has been successful, on the merits or otherwise,
including, without limitation, the dismissal of an action without prejudice, he
is required to be indemnified by the Registrant against all expenses (including
attorneys' fees) incurred in connection therewith. Expenses shall be advanced to
a Director or officer at his request, provided that he undertakes to repay the
amount advanced if it is ultimately determined that he is not entitled to
indemnification for such expenses.
Indemnification is required to be made promptly unless the Registrant
determines that the applicable standard of conduct required for indemnification
has not been met. In the event the Registrant denies a request for
indemnification, or if the Registrant fails to dispose of a request for
indemnification within 60 days after such payment is claimed by the indemnitee,
such person is permitted to petition the court to make an independent
determination as to whether such person is entitled to indemnification. As a
condition precedent to the right of indemnification, the director or
II-1
<PAGE>
officer must give the Registrant notice of the action for which indemnity is
sought and the Registrant has the right to participate in such action or assume
the defense thereof.
Article NINTH of the Registrant's Amended and Restated Certificate of
Incorporation further provides that the indemnification provided herein is not
exclusive.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS:
<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger, dated as of October 14, 1999
among Millennium Pharmaceuticals, Inc., ANM, Inc. and
LeukoSite, Inc. (included as Appendix A to the Proxy
Statement/Prospectus which is part of the Registration
Statement).
4.1 Form of Stock Certificate of Millennium Pharmaceuticals,
Inc. Common Stock (incorporated by reference to the
Registrant's Registration Statement on Form S-1, as
amended (file no. 333-2490)
5.1 Opinion of Hale and Dorr LLP as to the legality of the
shares being issued (including consent).
8.1 Opinion of Bingham Dana LLP regarding the federal income tax
consequences of the merger (including consent)
*23.1 Consent of Ernst & Young LLP relating to the audited
financial statements of the Registrant.
*23.2 Consent of Arthur Andersen LLP relating to the audited
financial statements of LeukoSite.
*23.3 Consent of PricewaterhouseCoopers LLP relating to the
audited financial statements of CytoMed
23.4 Consent of Hale and Dorr LLP (included in
Exhibit No. 5.1).
23.5 Consent of Bingham Dana LLP (included in Exhibit No. 8.2).
*24.1 Power of Attorney
99.1 Opinion of PaineWebber Incorporated (included as Appendix C
to the Proxy Statement/ Prospectus which is part of this
Registration Statement)
99.2 Opinion of BancBoston Robertson Stephens Inc. (included as
Appendix B to the Proxy Statement/Prospectus which is part
of this Registration Statement)
*99.3 Consent of PaineWebber Incorporated
*99.4 Consent of BancBoston Robertson Stephens Inc.
99.5 Form of proxy for LeukoSite stockholders
</TABLE>
- ------------------------
* Previously filed
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate,
II-2
<PAGE>
the changes in volume and price represent no more than
20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change in such information in the
Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(c) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(d) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(e) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (d) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the Registration Statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offering
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(f) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail
II-3
<PAGE>
or other equally prompt means. This includes information contained in the
documents filed subsequent to the effective date of the Registration Statement
through the date of responding to the request.
(g) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Cambridge, Commonwealth of Massachusetts, on this 17(th) day of November, 1999.
<TABLE>
<S> <C> <C>
MILLENNIUM PHARMACEUTICALS, INC..
By: /s/ KEVIN P. STARR
-----------------------------------------
Kevin P. Starr
Chief Financial Officer
</TABLE>
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act, this Amendment No. 1 to
the Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURES CAPACITY DATE
---------- -------- ----
<C> <S> <C>
Chairman of the Board and
/s/ MARK J. LEVIN* Chief Executive Officer
------------------------------------------- (Principal Executive November 17, 1999
Mark J. Levin Officer)
/s/ KEVIN P. STARR Chief Financial Officer
------------------------------------------- (Principal Financial and November 17, 1999
Kevin P. Starr Accounting Officer)
/s/ JOSHUA BOGER, PH.D.*
------------------------------------------- Director November 17, 1999
Joshua Boger, Ph.D.
/s/ EUGENE CORDES, PH.D.*
------------------------------------------- Director November 17, 1999
Eugene Cordes, Ph.D.
/s/ A. GRANT HEIDRICH, III*
------------------------------------------- Director November 17, 1999
A. Grant Heidrich, III
/s/ RAJU S. KUCHERLAPATI, PH.D.*
------------------------------------------- Director November 17, 1999
Raju S. Kucherlapati, Ph.D.
/s/ ERIC S. LANDER, PH.D.*
------------------------------------------- Director November 17, 1999
Eric S. Lander, Ph.D.
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: Kevin P. Starr, Attorney-in-fact
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------------------- -----------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of October 14, 1999
among Millennium Pharmaceuticals, Inc., ANM, Inc. and
LeukoSite, Inc. (included as Appendix A to the Proxy
Statement/Prospectus which is part of the Registration
Statement).
4.1 Form of Stock Certificate of Millennium Pharmaceuticals,
Inc. Common Stock (incorporated by reference to the
Registrant's Registration Statement on Form S-1, as
amended (file no. 333-2490)
5.1 Opinion of Hale and Dorr LLP as to the legality of the
shares being issued (including consent).
8.1 Opinion of Bingham Dana LLP regarding the federal income tax
consequences of the merger (including consent)
*23.1 Consent of Ernst & Young LLP relating to the audited
financial statements of the Registrant.
*23.2 Consent of Arthur Andersen LLP relating to the audited
financial statements of LeukoSite.
*23.3 Consent of PricewaterhouseCoopers LLP relating to the
audited financial statements of CytoMed
23.4 Consent of Hale and Dorr LLP (included in
Exhibit No. 5.1).
23.5 Consent of Bingham Dana LLP (included in Exhibit No. 8.2).
*24.1 Power of Attorney (See page II-4 of this Registration
Statement).
99.1 Opinion of PaineWebber Incorporated (included as Appendix C
to the Proxy Statement/ Prospectus which is part of this
Registration Statement)
99.2 Opinion of BancBoston Robertson Stephens Inc. (included as
Appendix B to the Proxy Statement/Prospectus which is part
of this Registration Statement)
*99.3 Consent of PaineWebber Incorporated
*99.4 Consent of BancBoston Robertson Stephens Inc.
99.5 Form of proxy for LeukoSite stockholders
</TABLE>
- ------------------------
* Previously filed
<PAGE>
Exhibit 5.1
HALE AND DORR LLP
COUNSELORS AT LAW
60 STATE STREET, BOSTON, MASSACHUSETTS 02109
617-526-6000 * Fax 617-526-5000
November 17, 1999
Millennium Pharmaceuticals, Inc.
75 Sidney Street
Cambridge, MA 02139
Re: Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
This opinion is furnished to you in connection with a Registration
Statement on Form S-4 (the "Registration Statement") filed with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"), for the registration of 7,600,178 shares of
Common Stock, $.001 par value per share (the "Shares"), of Millennium
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), issuable pursuant
to the Agreement and Plan of Merger by and among the Company, ANM, Inc. and
LeukoSite, Inc., a Delaware corporation, dated as of October 14, 1999 (the
"Merger Agreement").
We are acting as counsel for the Company in connection with the
issuance by the Company of the Shares. We have examined signed copies of the
Registration Statement as filed with the Commission. We have also examined and
relied upon the Merger Agreement, minutes of meetings of the stockholders and
the Board of Directors of the Company as provided to us by the Company, record
books of the Company as provided to us by the Company, the Certificate of
Incorporation and By-Laws of the Company, each as restated and/or amended to
date, and such other documents as we have deemed necessary for purposes of
rendering the opinions hereinafter set forth.
In our examination of the foregoing documents, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as copies, the authenticity of the originals of such latter documents and the
legal competence of all signatories to such documents.
We assume that the appropriate action will be taken, prior to the offer
and sale of the Shares in accordance with the Merger Agreement, to register and
qualify the Shares for sale under all applicable state securities or "blue sky"
laws.
We express no opinion herein as to the laws of any state or
jurisdiction other than the state laws of the Commonwealth of Massachusetts, the
Delaware General Corporation Law statute and the federal
<PAGE>
Millennium Pharmaceuticals, Inc.
November 17, 1999
Page 2
laws of the United States of America. To the extent that any other laws govern
the matters as to which we are opining herein, we have assumed that such laws
are identical to the state laws of the Commonwealth of Massachusetts, and we are
expressing no opinion herein as to whether such assumption is reasonable or
correct.
Based upon and subject to the foregoing, we are of the opinion that the
Shares have been duly authorized for issuance and, when the Shares are issued in
accordance with the terms and conditions of the Merger Agreement, the Shares
will be validly issued, fully paid and nonassessable.
It is understood that this opinion is to be used only in connection
with the issuance of the Shares while the Registration Statement is in effect.
Please note that we are opining only as to the matters expressly set
forth herein, and no opinion should be inferred as to any other matters. This
opinion is based upon currently existing statutes, rules, regulations and
judicial decisions, and we disclaim any obligation to advise you of any change
in any of these sources of law or subsequent legal or factual developments which
might affect any matters or opinions set forth herein.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act and to the use of our
name therein and in the related Prospectus under the caption "Legal Matters." In
giving such consent, we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act or the
rules and regulations of the Commission.
Very truly yours,
/s/ Hale and Dorr LLP
HALE AND DORR LLP
<PAGE>
[Bingham Dana LLP letterhead]
Exhibit 8.1
November 18, 1999
LeukoSite, Inc.
215 First Street
Cambridge, MA 02142
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 7.03(c) of the
Agreement and Plan of Merger dated as of October 14, 1999 (the "Agreement"),
among Millennium Pharmaceuticals, Inc., a Delaware corporation
("Millennium"), ANM, Inc., a Delaware corporation and a direct wholly-owned
subsidiary of Millennium ("Merger Sub"), and LeukoSite, Inc., a Delaware
corporation ("LeukoSite"). Under the Agreement and a letter agreement between
Millennium and LeukoSite dated November 18, 1999 (the "Letter Agreement"):
(i) Merger Sub will merge with and into LeukoSite, and as a result of that
merger the existing stockholders of LeukoSite will receive Millennium voting
common stock in exchange for all issued and outstanding shares of LeukoSite
stock, LeukoSite will become a wholly-owned subsidiary of Millennium and the
separate corporate existence of Merger Sub will cease, and (ii) as soon as
practicable thereafter, and pursuant to an integrated plan, LeukoSite will
merge with and into Millennium, with no resulting change in the stock
ownership of Millennium (steps (i) and (ii), collectively, the
"Transaction"). You have requested our opinion as to certain federal income
tax consequences anticipated to follow from the Transaction. Capitalized
terms not defined herein have the respective meanings set forth in the
Agreement.
For purposes of our opinion, we have examined and relied upon the
originals or copies, certified or otherwise identified to us to our
satisfaction, of the Agreement, the Letter Agreement, the proxy
statement/prospectus dated November 18, 1999 included in the Registration
Statement on Form S-4 filed with the Securities and Exchange Commission by
Millennium in connection with the Transaction, and related documents
(collectively, the "Documents"). In that examination, we have assumed the
genuineness of all signatures, the authenticity and completeness of all
documents purporting to be originals (whether reviewed by us in original or
copy form) and the conformity to the originals of all documents purporting to
be copies, including electronic copies.
As to certain factual matters, we have relied with your consent
upon, and our opinion is limited by, the representations and statements of
the various parties set forth in the Documents and in the certificates from
Millennium, Merger Sub, and LeukoSite dated the date hereof, copies of which
are attached hereto (the "Certificates"). Our opinion assumes (i) that all
representations and statements set forth in the Documents and in the
Certificates are true, correct, and complete as of the dates made and as of
the date hereof, and (ii) that those representations and statements can and
will be reconfirmed as of the Effective Time and as of the consummation of
the Transaction. Our opinion is limited solely to the provisions of the
federal Internal Revenue Code as now in effect (the "Code"), and the
regulations, rulings, and interpretations thereof in force as of this date
and we assume no obligation to advise you of changes in the law or fact that
occur after the date of this opinion.
<PAGE>
LeukoSite, Inc.
November 18, 1999
Page 2
On the basis of and subject to the foregoing, assuming due adoption
and implementation of the Agreement and the Letter Agreement in accordance
with their terms and consistent with the representations set out in the
Documents and Certificates (and without any waiver or modification of any
thereof), we are of the opinion that for federal income tax purposes, the
Transaction will constitute a reorganization within the meaning of Section
368(a) of the Code.
This opinion is being delivered solely to you for your use in
connection with the Transaction. It may not be made available to or relied
upon by any other person or entity or used for any other purpose without our
prior written consent.
Very truly yours,
/s/ Bingham Dana LLP
BINGHAM DANA LLP
<PAGE>
Exhibit 99.5
LEUKOSITE, INC.
Proxy solicited by the Board of Directors for
Special Meeting of Stockholders to be held on December 22, 1999,
10:00 a.m., 215 First Street, Cambridge, Massachusetts 02142
The undersigned hereby appoints Christopher K. Mirabelli and
Augustine Lawlor and each of them proxies, each with the power of
substitution, to vote at the Special Meeting of Stockholders of LEUKOSITE,
INC., to be held on December 22, 1999 (including any adjournments or
postponements thereof), with all the powers the undersigned would possess if
personally present as specified on the reverse side and, in accordance with
their discretion, on any other business that may come before the meeting, and
revokes all proxies previously given by the undersigned with respect to the
shares covered hereby.
This proxy when properly executed will be voted in the manner
directed herein by the stockholder. If no contrary specification is made,
this proxy will be voted FOR the approval of the merger agreement and the
merger.
(CONTINUED ON REVERSE SIDE)
- -------------------------------------------------------------------------------
Please date, sign and mail your
proxy card back as soon as possible!
Special Meeting of Stockholders
LEUKOSITE, INC.
December 22, 1999
10:00 a.m.
215 First Street
Cambridge, Massachusetts 02142
PLEASE DETACH AND MAIL
IN THE ENVELOPE PROVIDED
- -------------------------------------------------------------------------------
<PAGE>
Please mark your votes
as in this example using
dark ink only.
THE BOARD OF DIRECTORS OF LEUKOSITE UNANIMOUSLY RECOMMENDS A VOTE FOR THE
FOLLOWING:
The Board of Directors recommends a vote FOR the proposal to approve
the merger agreement, dated as of October 14, 1999, among LeukoSite,
Inc., Millennium Pharmaceuticals, Inc., and ANM, Inc., a wholly-owned
subsidiary of Millennium Pharmaceuticals, and the merger described
therein. The merger agreement provides for the merger of ANM with and
into LeukoSite, the result of which LeukoSite will become a wholly-
owned subsidiary of Millennium Pharmaceuticals. If the merger is
approved, each outstanding share of LeukoSite common stock will
convert into the right to receive 0.4296 shares of Millennium
Pharmaceuticals common stock.
/ / FOR / / AGAINST / / ABSTAIN
The undersigned hereby acknowledge(s) receipt of a copy of the
accompanying Notice of Special Meeting and related proxy statement/prospectus.
Please date, sign as name appears below, and return this proxy in the
enclosed envelope, whether or not you expect to attend the meeting. You may
nevertheless vote in person if you do attend.
Please Sign Here:__________ Signature, if held jointly______ Date:_____, 1999
NOTE: (EXECUTORS, ADMINISTRATORS, TRUSTEES, CUSTODIANS, ETC., SHOULD
INDICATE CAPACITY IN WHICH SIGNING. WHEN STOCK IS HELD IN THE NAME OF
MORE THAN ONE PERSON, EACH PERSON SHOULD SIGN THE PROXY).
