<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities and Exchange Act of 1934
Filed by the Registrant[X]
Filed by a Party other than the Registrant[ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional materials
[ ] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
ALKERMES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Persons(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item
22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
ALKERMES, INC.
Cambridge, Massachusetts 02139
____________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
July 25, 1996
____________________
TO THE SHAREHOLDERS:
The annual meeting of shareholders of Alkermes, Inc. will be held at the
offices of the Company, 64 Sidney Street, Cambridge, Massachusetts 02139, on
Thursday, July 25, 1996, at 10:00 A.M. for the following purposes:
1. To elect eight members of the Board of Directors, each to serve until
the next annual meeting of shareholders and until their respective successors
are duly elected and qualified.
2. To approve the adoption of the Stock Option Plan for Non-Employee
Directors.
3. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed June 7, 1996 as the record date for
determining the holders of Common Stock entitled to notice of and to vote at the
meeting. Consequently, only holders of Common Stock of record on the transfer
books of the Company at the close of business on June 7, 1996 will be entitled
to notice of and to vote at the meeting.
Please complete, date and sign the enclosed proxy and return it promptly.
If you attend the meeting, you may vote in person.
Morris Cheston, Jr.
Secretary
June 28, 1996
<PAGE>
ALKERMES, INC.
PROXY STATEMENT
INTRODUCTION
The accompanying proxy is solicited by the Board of Directors of Alkermes,
Inc. ("Alkermes" or the "Company") in connection with its 1996 annual meeting of
shareholders to be held at the offices of the Company, 64 Sidney Street,
Cambridge, Massachusetts 02139, at 10:00 a.m., on July 25, 1996 (the "Meeting").
Copies of this Proxy Statement and the accompanying proxy are being mailed on or
after July 1, 1996 to the holders of record of Common Stock on June 7, 1996 (the
"Record Date"). The proxy may be revoked by a shareholder at any time prior to
its use by giving notice of such revocation to the Secretary of the Company, by
appearing at the Meeting and voting in person or by returning a later dated
proxy. The expense of this solicitation will be paid by the Company. Some of
the officers and regular employees of the Company may solicit proxies personally
and by telephone.
Unless specific instructions are given to the contrary, the persons named
in the accompanying proxy will vote FOR the named nominees to the Company's
Board of Directors and FOR approval of the Stock Option Plan for Non-Employee
Directors. With respect to all other matters referred to in this Proxy
Statement, the persons named in the accompanying proxy will vote as stated
herein. See "Other Business."
Holders of Common Stock of record at the close of business on the Record
Date will be entitled to cast one vote per share so held of record on such date
on all items of business properly presented at the Meeting, except that the
holders have cumulative voting rights in the election of directors. Therefore,
each shareholder is entitled to cast as many votes in the election of directors
as shall be equal to the number of shares of Common Stock held by such
shareholder on the Record Date, multiplied by the number of directors to be
elected. A shareholder may cast all such votes for a single nominee or may
distribute votes among nominees as the shareholder sees fit.
The Company had 18,348,306 shares of Common Stock outstanding on the Record
Date. The presence at the Meeting in person or by proxy of the holders of a
majority of the shares of Common Stock outstanding on the Record Date will
constitute a quorum at the Meeting. Broker non-votes received with respect to
the proposals to be acted upon at the Meeting will be counted for purposes of
determining whether a quorum is present at the Meeting, but will not be
considered as votes cast, and thus will have no effect on the result of the
votes.
ELECTION OF DIRECTORS
Eight directors are to be elected at the Meeting to serve one-year terms
until the 1997 annual meeting of shareholders and until their respective
successors are elected and shall qualify. The persons named in the accompanying
proxy intend to vote for the election of Floyd E. Bloom, Robert A. Breyer, John
K. Clarke, Robert S. Langer, Richard F. Pops, Alexander Rich, Paul Schimmel and
Michael A.
<PAGE>
Wall, unless authority to vote for one or more of such nominees is specifically
withheld in the proxy. All of the nominees are currently directors of the
Company. The persons named in the proxy will have the right to vote
cumulatively and to distribute their votes among such nominees as they consider
advisable. The Board of Directors is informed that all the nominees are willing
to serve as directors, but if any of them should decline to serve or become
unavailable for election at the Meeting, an event which the Board of Directors
does not anticipate, the persons named in the proxy will vote for such nominee
or nominees as may be designated by the Board of Directors, unless the Board of
Directors reduces the number of directors accordingly.
The eight nominees for director receiving the highest number of votes cast
by shareholders entitled to vote thereon will be elected to serve on the Board
of Directors. Abstentions received with respect to the election of directors
will be counted for purposes of determining whether a quorum is present at the
Meeting, but will not be counted as votes cast and will have no effect on the
result of the vote.
Set forth below is information regarding the nominees, as of June 7, 1996,
including their recent employment, positions with the Company, other
directorships and age.
Dr. Bloom, age 59, is a founder of Alkermes and has been a director of
Alkermes since 1987. Dr. Bloom has been active in neuropharmacology for more
than 30 years, holding positions at Yale University, the National Institute of
Mental Health and The Salk Institute. Since 1983, he has been at The Scripps
Research Institute where he is currently Chairman, Department of
Neuropharmacology. Dr. Bloom serves as Editor in Chief of Science. He holds an
A.B. (Phi Beta Kappa) from Southern Methodist University and an M.D. (Alpha
Omega Alpha) from Washington University School of Medicine in St. Louis.
Mr. Breyer, age 52, has been a director and President and Chief Operating
Officer of Alkermes since July 1994. From August 1991 to December 1993, Mr.
Breyer was President and General Manager of Eli Lilly Italy, a subsidiary of Eli
Lilly & Co. From September 1987 to August 1991, he was Senior Vice President,
Marketing and Sales of IVAC Corporation, a medical device company and a
subsidiary of Eli Lilly & Co.
Mr. Clarke, age 42, has served as a director of Alkermes since 1987. He is
a general partner of DSV Partners III and DSV Management, the general partner of
DSV Partners IV. DSV Partners III and DSV Partners IV are venture capital
investment partnerships. Mr. Clarke has been associated with DSV since 1982.
Mr. Clarke is also a director of DNX Corporation, Inc., a biopharmaceutical
company, and a number of private healthcare companies.
Professor Langer, age 47, has served as a director of the Company since
1993. He is the Kenneth J. Germeshausen Professor of Chemical and Biomedical
Engineering at the Massachusetts Institute of Technology and has been a member
of the Massachusetts Institute of Technology faculty since July 1977. In 1989,
Professor Langer was elected to the Institute of Medicine of the National
Academy of Sciences and in 1992 was elected to both the National Academy of
Engineering and the National Academy of Sciences. Professor Langer received his
bachelor's degree from Cornell University in 1970 and a Ph.D. from Massachusetts
Institute of Technology in 1974, both in chemical engineering.
2
<PAGE>
Mr. Pops, age 34, has been a director and the Chief Executive Officer of
Alkermes since February 1991. From February 1991 to June 1994, Mr. Pops was
also President of Alkermes. Mr. Pops currently serves on the Board of Directors
of the Biotechnology Industry Organization (BIO), and The Brain Tumor Society (a
non-profit organization).
Dr. Rich, age 71, is a founder of Alkermes and has been a director of
Alkermes since 1987. Dr. Rich has been a professor at the Massachusetts
Institute of Technology since 1958, and is the William Thompson Sedgwick
Professor of Biophysics and Biochemistry. Dr. Rich earned both an A.B. (magna
cum laude) and an M.D. (cum laude) from Harvard University. Dr. Rich is Co-
Chairman of the Board of Directors of Repligen Corporation, a biopharmaceutical
company.
Dr. Schimmel, age 55, is a founder of Alkermes and has been a director of
Alkermes since 1987. Dr. Schimmel is the John D. and Catherine T. MacArthur
Professor of Biophysics and Biochemistry at the Massachusetts Institute of
Technology, where he has been employed since 1967. A graduate of Ohio Wesleyan
University, Dr. Schimmel completed his doctorate at Cornell University and the
Massachusetts Institute of Technology, and did post doctoral work at Stanford
University. Dr. Schimmel is Co-Chairman of the Board of Directors of Repligen
Corporation and is a director of Cubist Pharmaceuticals, Inc.
Mr. Wall, age 67, is a founder of Alkermes and has been Chairman of the
Board of Alkermes since 1987. From April 1992 until June 30, 1993, he was a
director and Chairman of the Executive Committee of Centocor, Inc. ("Centocor"),
a biopharmaceutical company. From November 1987 to June 30, 1993, he was
Chairman Emeritus of Centocor. Mr. Wall is a director of Kopin Corporation, a
manufacturer of high definition imaging products, and Sugen, Inc., a
biopharmaceutical company.
The Board of Directors held six meetings during the last fiscal year. Each
of the Company's directors attended at least 75% of the aggregate of all
meetings of the Board and of all committees of which he was a member held during
the year. The standing committees of the Board are the Audit Committee and the
Compensation Committee. The Board does not have a standing nominating
committee. The Audit Committee, consisting of John K. Clarke and Alexander
Rich, met twice during the last fiscal year. The Audit Committee is responsible
for determining the adequacy of the Company's internal accounting and financial
controls. The Compensation Committee, consisting of John K. Clarke, Robert S.
Langer, Paul Schimmel and Michael A. Wall, met twice during the last fiscal
year. The Compensation Committee is responsible for reviewing matters
pertaining to the compensation of employees of, and consultants to, the Company
and for administering, and making grants and awards under the Company's stock
option and restricted stock award plans.
3
<PAGE>
APPROVAL OF STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
At the Meeting, a proposal will be presented for the shareholders to
approve the Stock Option Plan for Non-Employee Directors (the "Director Plan"),
under which options to purchase up to 150,000 shares of Common Stock of the
Company may be granted to non-employee directors. The purpose of the Director
Plan is to attract and retain independent directors and to strengthen the
mutuality of interests between such directors and the Company's shareholders.
The Director Plan is attached as Exhibit A to this Proxy Statement and is
incorporated herein by reference.
The Board of Directors adopted the Director Plan on March 18, 1996,
and directed that the Director Plan be submitted to the shareholders for
approval.
The proposal to approve the Director Plan will become effective if it
receives the affirmative vote of the holders of a majority of the shares of
Common Stock present, or represented by proxy, and entitled to vote at the
Meeting. Abstentions received with respect to the adoption of the Director Plan
will be counted for purposes of determining whether a quorum is present at the
Meeting and as votes cast, and will have the effect of a no vote.
The Board of Directors recommends that you vote FOR the approval of
the Director Plan.
Principal Features of the Plan
Administration
The Director Plan will be administered and interpreted by the Board of
Directors. The Board of Directors, subject to the provisions of the Director
Plan, has the authority to (i) adopt, alter and repeal such rules, guidelines
and practices as it deems advisable, (ii) interpret the terms and provisions of
the Director Plan and any option granted under the Director Plan and (iii)
otherwise administer the Director Plan. In addition, the Board of Directors may
correct any defect, supply any omission or reconcile any inconsistency in the
Director Plan or in any option granted in the manner and to the extent it shall
deem necessary to carry the Director Plan into effect. Any decision,
interpretation or other action of the Board of Directors will be final, binding
and conclusive upon all persons in interest.
Eligible Participants
Members of the Board of Directors who are not officers or employees of
the Company or any of its subsidiaries ("Eligible Directors") are eligible to be
granted options under the Director Plan.
Number of Shares Subject to the Director Plan
Up to 150,000 shares of Common Stock may be issued under the Director
Plan. The shares of Common Stock that may be issued under the Director Plan may
be either authorized and unissued shares or issued shares that have been
reacquired by the Company. The aggregate number of shares of Common
4
<PAGE>
Stock issuable under the Director Plan and the number of shares subject to
grants made under the Director Plan are subject to adjustment in the event of a
merger, reorganization, consolidation, recapitalization, dividend (other than a
regular cash dividend), stock split, or other change in corporate structure
affecting the Common Stock. If any option granted under the Director Plan
expires, terminates or is cancelled for any reason without having been exercised
in full, the number of unpurchased shares will again be available for the
purposes of the Director Plan.
Granting of Options Under the Director Plan
On the date the Director Plan was approved by the Board of Directors,
each Eligible Director who was not a consultant to the Company was automatically
granted an option to purchase 10,000 shares of Common Stock, subject to
shareholder approval of the Director Plan. As of that date, one director was
eligible for the one-time automatic grant. In addition, subject to shareholder
approval of the Director Plan, on the date of the Meeting and on the date of
each annual meeting of the Company's shareholders thereafter, for as long as the
Director Plan remains in effect, each Eligible Director will automatically be
granted an option to purchase 2,500 shares of Common Stock.
On June 20, 1996, the average of the high and low sales price of a
share of the Company's Common Stock as reported on the Nasdaq National Market
was $13.25. As of that date, six directors of the Company would have been
eligible to participate in the Director Plan.
Stock Options
The exercise price of each option granted under the Director Plan will
be equal to the fair market value of the Common Stock on the date of grant.
Options will be exercisable in full six months after the date of the grant. The
term of each option will be ten years from the date of grant. The option price
due upon exercise of any option may be paid to the Company in full in cash.
Unless determined otherwise by the Board of Directors in its discretion, payment
of the exercise price may also be made by tendering previously acquired shares
of Common Stock or reducing the number of shares issuable upon such exercise, in
each case based on the fair market value of the Common Stock on the last trading
date preceding payment.
Options are not transferable (other than by will or the laws of
descent and distribution) and during the participant's lifetime are exercisable
only by the participant. If a participant ceases to be a member of the Board of
Directors because of death or disability, any then exercisable option held by
the participant may be exercised by the participant, or in the case of death by
his legal representative, for one year after ceasing to be a member of the Board
of Directors or until the earlier expiration of the option term, and all other
options are forfeited. If a participant ceases to be a member of the Board of
Directors for any reason other than death or disability, any then exercisable
stock option held by the participant may be exercised by the participant for the
lesser of three months after ceasing to be a member of the Board of Directors or
until the expiration of the option term, and all other options are forfeited.
5
<PAGE>
Federal Tax Consequences
The Federal income tax discussion set forth below is intended for
general information only. State and local income tax consequences are not
discussed and may vary from locality to locality.
Under present Treasury regulations, an optionee who is granted a non-
qualified option will not realize taxable income at the time the option is
granted. In general, an optionee will be subject to tax for the year of
exercise on an amount of ordinary income equal to the excess of the fair market
value of the shares on the date of exercise over the option price, and the
Company will receive a corresponding deduction. The optionee's basis in the
shares so acquired will be equal to the option price plus the amount of ordinary
income upon which he is taxed. Upon subsequent disposition of the shares, the
optionee will realize capital gain or loss, long-term or short-term, depending
upon the length of time the shares are held after the option is exercised.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary Compensation Table
The following table sets forth a summary of the compensation paid by
the Company during its last three fiscal years to its Chief Executive Officer
and to each of the four other most highly compensated executive officers of the
Company whose total annual salary and bonus exceeded $100,000 during the fiscal
year ended March 31, 1996 and William F. Graney, an executive officer whose
employment with the Company ceased on February 14, 1996 (collectively, the
"Named Executive Officers").
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
Securities
Name and Restricted Underlying
Principal Stock Options/ All Other
Position Year Salary ($) Bonus ($) Awards ($)(1) LSARs (#) Compensation ($)
- ---------------------- ---- ----------- ------------ --------------- ----------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard F. Pops 1996 266,346 15,000 0 87,500 0
Chief Executive 1995 249,423 0 35,000 127,500(2) 0
Officer 1994 223,173 15,000 92,500 35,000(3) 0
Robert A. Breyer 1996 204,231 10,000 0 50,000 1,500(4)
President and Chief 1995 143,077(5) 30,000(6) 0 207,500 16,735(7)
Operating Officer 1994 0 0 0 0 0
Raymond T. Bartus 1996 190,692 0 0 17,500 0
Senior Vice 1995 189,000 0 10,500 75,000(8) 0
President, 1994 181,904 0 27,750 0 0
Neurobiology
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Michael J. Landine 1996 179,231 0 0 51,500 0
Senior Vice 1995 175,000 0 21,000 57,000(9) 0
President and 1994 167,115 5,000 55,500 21,000(3) 0
Chief Financial
Officer
Scott D. Putney 1996 169,192 0 0 17,500 0
Vice President, 1995 167,500 0 10,500 75,000 0
Molecular Biology 1994 157,644 0 27,750 0 0
William F. Graney 1996 175,962 0 0 15,000 0
Senior Vice 1995 190,000 0 10,500 81,250(10) 0
President, 1994 182,116 0 27,750 0 0
Medical Affairs
</TABLE>
- -------------------------
(1) All restricted stock awards have been made pursuant to the Company's 1991
Restricted Common Stock Award Plan (the "Award Plan"). All awards cease to
be subject to forfeiture on an annual basis in 20% increments beginning on
the first anniversary of the date of award, provided the grantee has
remained an employee of the Company since the date of grant. Stock
certificates are issued to the grantees on the date each portion of their
award ceases to be subject to forfeiture. For purposes of the above table,
the value of an award was determined by multiplying the total shares
subject to the award by the closing price for the Company's Common Stock as
reported on the Nasdaq National Market on the date of the award. To the
extent the Company declares any dividends on its Common Stock, dividends
shall be payable on awards only to the extent forfeiture restrictions with
respect to such awards have lapsed and shares have been issued. The
aggregate number and value (based on the closing price of the Company's
Common Stock on the Nasdaq National Market on March 31, 1996) of the
restricted stock awards as of June 7, 1996 of each Named Executive Officer
(except for Mr. Breyer and Dr. Graney who have no awards) are as follows:
Mr. Pops, 16,000 shares, $146,000; Dr. Bartus, 4,200 shares, $38,325; Mr.
Landine, 9,600 shares, $87,600; Dr. Putney, 5,400, $49,275.
(2) Includes options to purchase 120,000 shares of the Company's Common Stock
granted, in tandem with Limited Stock Appreciation Rights ("LSARs"), in
exchange for certain outstanding options previously granted to Mr. Pops.
See "Ten Year Option/SAR Repricings" and "Compensation Committee Report on
Repriced Options." For a discussion of the LSARs held by Mr. Pops, see
"Employment Contracts and Termination of Employment and Change in Control
Arrangements."
(3) All options indicated were granted, in tandem with LSARs, in exchange for
new options granted in fiscal 1995. For a discussion of the LSARs held by
such person, see "Employment Contracts and Termination of Employment and
Change in Control Arrangements."
(4) Consists of payment to Mr. Breyer for opting out of the Company's health
insurance plan.
7
<PAGE>
(5) Represents cash compensation paid to Mr. Breyer for 39 weeks of employment
in the fiscal year ended March 31, 1995.
(6) Consists of a signing bonus paid to Mr. Breyer upon commencement of his
employment in July 1994.
(7) Consists of temporary living and moving expenses reimbursed to Mr. Breyer
in connection with his relocation to Cambridge, Massachusetts upon
commencement of his employment and a $1,154 payment to Mr. Breyer for
opting out of the Company's health insurance plan.
(8) Includes options to purchase 67,500 shares of the Company's Common Stock
granted in exchange for all outstanding options previously granted to Dr.
Bartus. See "Ten Year Option/SAR Repricings" and "Compensation Committee
Report on Repriced Options." Of such options, options to purchase 56,250
shares were granted in tandem with LSARs. For a discussion of the LSARs
held by Dr. Bartus, see "Employment Contracts and Termination of Employment
and Change in Control Arrangements."
(9) Includes options to purchase 49,500 shares of the Company's Common Stock
granted, in tandem with LSARs, in exchange for certain outstanding options
previously granted to Mr. Landine. See "Ten Year Option/SAR Repricings"
and "Compensation Committee Report on Option Repricing." For a discussion
of the LSARs held by Mr. Landine, see "Employment Contracts and Termination
of Employment and Change in Control Arrangements."
(10) Includes options to purchase 48,750 shares of the Company's Common Stock
granted in exchange for all outstanding options previously granted to Dr.
Graney. See "Compensation Committee Report on Option Repricing."
8
<PAGE>
Options/LSAR Grants in Last Fiscal Year
The following table sets forth information concerning stock options and
LSARs granted during the fiscal year ended March 31, 1996 to each of the Named
Executive Officers.
<TABLE>
<CAPTION>
Potential Realizable
Shares % of Total Value at Assumed
Underlying Options/LSARs Annual Rates of
Options/ Granted to Exercise Stock Price
LSARs Employees in or Base Expiration Appreciation for
Name Granted (#) Fiscal Year Price ($/Sh) Date Option Term
- ---- ----------- ------------- ------------ ---------- --------------------
<S> <C> <C> <C> <C> <C> <C>
5% ($) 10% ($)
Richard F. Pops 47,500 11.8 3.50 6/26/05 104,554 264,960
35,000 8.7 6.50 12/14/05 143,074 362,576
5,000 1.2 6.50 12/14/05 20,439 51,797
Robert A. Breyer 30,000 7.5 3.50 6/26/05 66,034 167,343
20,000 5.0 6.50 12/14/05 81,756 207,187
Raymond T. Bartus 10,000 2.5 3.50 6/26/05 22,011 55,781
7,500 1.9 6.50 12/14/05 30,659 77,695
Michael J. Landine 35,000 8.7 3.50 6/26/05 77,040 195,233
16,500 4.1 6.50 12/14/05 67,449 170,929
Scott D. Putney 10,000 2.5 3.50 6/26/05 22,011 55,781
7,500 1.9 6.50 12/14/05 30,659 77,695
William F. Graney 5,000 1.2 3.50 6/26/05 11,006 27,890
10,000 2.5 6.50 12/14/05 40,878 103,593
</TABLE>
9
<PAGE>
Number/Value of Unexercised Options
None of the Named Executive Officers exercised any options during the last
fiscal year. The following table sets forth information concerning the number
of unexercised options held by such persons at the end of the last fiscal year
and the value of such unexercised options as of such date.
<TABLE>
<CAPTION>
Number of Shares Underlying Value of Unexercised In-the-Money
Unexercised Options/LSARS FY-End Options/LSARS at FY-End (1)
-------------------------------- ---------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- -------------------- --------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Richard F. Pops 216,875 173,125 $1,722,391 $ 846,334
Robert A. Breyer 51,875 205,625 269,366 1,029,347
Raymond T. Bartus 24,375 68,125 135,403 359,860
Michael J. Landine 43,375 90,125 316,918 458,890
Scott D. Putney 24,375 68,125 135,403 359,860
William F. Graney 24,375 0 135,403 0
</TABLE>
____________________
(1) Value is measured by the difference between the closing price for the
Company's Common Stock on the Nasdaq National Market on March 31, 1996 and
the exercise price of the option.
10
<PAGE>
TEN YEAR OPTION/SAR REPRICINGS
The following table sets forth certain information with respect to the
stock options held by the Company's current executive officers that have been
repriced since the formation of the Company in 1987.
<TABLE>
<CAPTION>
Length of
Number of Original
Securities Market Price of Term
Underlying Stock at Time Exercise Price Remaining
Options/SARS of Repricing at Time of New at Date of
Repriced or or Repricing or Exercise Repricing or
Name Date Amended Amendment($) Amendment($) Price($) Amendment
- ------------------------ -------- --------------- ------------ --------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Richard F. Pops 7/21/94 50,000(1) $ 3.69 $11.375 $ 3.69 7 years 125 days
Chief Executive 7/21/94 75,000(1) 3.69 9.00 3.69 8 years 153 days
Officer 7/21/94 35,000(1) 3.69 7.94 3.69 9 years 182 days
11/25/91 50,000 11.375 15.875 11.375 9 years 324 days
Raymond T. Bartus 7/21/94 75,000(1) 3.69 9.00 3.69 8 years 102 days
Senior Vice President, 7/21/94 15,000(1) 3.69 9.00 3.69 8 years 153 days
Neurobiology
Michael J. Landine 7/21/94 25,000(1) 3.69 11.375 3.69 7 years 125 days
Senior Vice President 7/21/94 20,000(1) 3.69 9.00 3.69 8 years 153 days
and Chief Financial 7/21/94 21,000(1) 3.69 7.94 3.69 9 years 182 days
Officer 11/25/91 25,000 11.375 15.875 11.375 9 years 324 days
Don G. Burstyn 7/21/94 30,000(1) 3.69 7.875 3.69 9 years 151 days
Vice President,
Regulatory Affairs
Scott D. Putney 7/21/94 75,000(1) 3.69 9.56 3.69 7 years 9 days
Vice President, 7/21/94 15,000(1) 3.69 9.00 3.69 8 years 153 days
Molecular Biology
</TABLE>
____________________
(1) All options indicated were exchanged for options to purchase 25% fewer
shares.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
Under an agreement between Mr. Pops and the Company, dated February 7,
1991, in the event Mr. Pops' employment with the Company is terminated for any
reason other than as a result of his taking certain actions against or that have
a significant deleterious effect on the Company, Mr. Pops shall be entitled to
receive a payment equal to two-thirds of his then current annual base salary.
Under an agreement between Mr. Breyer and the Company, dated June 13, 1994, in
the event Mr. Breyer's employment with the Company is terminated by Alkermes for
any reason other than as a result of his taking certain actions against or that
have a significant deleterious effect on the Company, Mr. Breyer
11
<PAGE>
shall be entitled to receive payments at the monthly rate of his then current
annual base salary for up to nine months. The Company and Mr. Landine have
agreed that, in the event Mr. Landine's employment with the Company is
terminated for any reason other than as a result of his taking certain actions
against or that have a significant deleterious effect on the Company, Mr.
Landine shall be entitled to receive payments for the following six months
aggregating 50% of his then current annual salary.
Messrs. Pops and Landine and Dr. Bartus have been granted LSARs in
connection with a portion of the stock options previously granted to them. Each
LSAR provides that after the occurrence of one of several triggering events,
including a reorganization or merger of the Company, a sale of the assets of the
Company or the acquisition by a person or group of more than 51% of the Common
Stock of the Company, the optionee will receive an amount in cash equal to the
amount by which the fair market value per share of the Company's Common Stock
issuable upon exercise of the option on the date such a triggering event occurs
exceeds the exercise price per share of the option to which the LSAR relates. A
triggering event shall be deemed to have occurred only when the fair market
value of the shares subject to the underlying option exceeds the exercise price
of such option. When a triggering event occurs, the related option will cease
to be exercisable.
Compensation of Directors
Except for stock options under the Director Plan which is being submitted
for approval by the shareholders at the Meeting, directors do not receive
compensation for services on the Board of Directors or any committee thereof.
All of the directors, however, are reimbursed for their expenses for each Board
and committee meeting attended. In addition, Floyd E. Bloom, Alexander Rich,
Paul Schimmel and Michael A. Wall receive consulting fees from Alkermes and
Robert S. Langer receives consulting fees from Alkermes Controlled Therapeutics,
Inc. ("ACTI"), a wholly owned subsidiary of the Company. During the fiscal year
ended March 31, 1996, Alkermes paid consulting fees to Drs. Bloom, Rich and
Schimmel and Mr. Wall aggregating $30,000, $30,000, $48,000 and $80,000,
respectively, and ACTI paid consulting fees to Dr. Langer aggregating $84,744.
Consulting fees are currently being paid to each of Drs. Bloom and Rich at the
rate of $2,500 per month, to Dr. Schimmel at the rate of $4,000 per month, to
Mr. Wall at the rate of $6,667 per month and to Professor Langer at the rate of
$7,214 per month. Alkermes believes that the terms of such consulting
arrangements are no less favorable to Alkermes and ACTI than those they could
have received from an independent third party.
Compensation Committee Interlocks and Insider Participation
During the last fiscal year, the Compensation Committee consisted of John
K. Clarke, Robert S. Langer, Paul Schimmel and Michael A. Wall. Mr. Wall and
Dr. Schimmel are consultants to Alkermes and Professor Langer is a consultant to
ACTI. See "Compensation of Directors."
12
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee"), which consists entirely of
non-employee directors, is responsible for reviewing and establishing the
compensation of the Company's executive officers, including compensation in the
form of stock options or restricted stock awards.
Executive Compensation Policies
The Company's executive compensation program is designed to attract, retain
and motivate experienced and well qualified executive officers who will promote
the Company's research and product development efforts. In establishing
executive compensation levels, the Committee is guided by a number of
considerations. Because the Company is still in the process of developing its
portfolio of product candidates, and because of the volatile nature of
biotechnology stocks, the Committee believes that traditional performance
criteria, such as revenue growth, profit margins and stock price are
inappropriate for evaluating and rewarding the efforts of the Company's
executive officers. Rather, the Committee bases executive compensation on the
achievement of certain product development, financial, strategic planning and
other goals of the Company and the executive officer. In establishing
compensation levels, the Committee also evaluates each officer's individual
performance using certain subjective criteria, including an evaluation of each
officer's initiative, contribution to overall corporate performance and
managerial ability. No specific numerical weight is given to any of the above-
noted subjective or objective performance criteria. In making its evaluations,
the Committee consults on an informal basis with other members of the Board and,
with respect to officers other than the Chief Executive Officer, reviews the
recommendations of the Chief Executive Officer.
Another consideration which affects the Committee's decisions regarding
executive compensation is the high demand for well-qualified personnel in the
biotechnology industry. Given such demand, the Committee strives to maintain
compensation levels which are competitive with the compensation of other
executives in the industry. To that end, the Committee reviews data obtained
from a generally available outside survey of compensation and benefits in the
biotechnology industry and from proxy statements or personal knowledge regarding
executive compensation at a limited number of comparable companies, some of
which are included in the Nasdaq Pharmaceutical Index shown in the Performance
Graph on page 17.
A third factor which affects compensation levels is the Committee's belief
that stock ownership by management is beneficial in aligning management's and
shareholders' interests in the enhancement of shareholder value. In accordance
with such belief, the Committee seeks to provide a significant portion of
executive compensation in the form of stock options or restricted stock awards.
The Committee has not, however, targeted a range or specific number of options
or awards for each executive position, but makes its decisions based on the
above-mentioned survey and the general experience of Committee members.
Compensation Mix
The Company's executive compensation packages generally include three
components: base salary; a discretionary annual cash bonus; and stock options
and restricted stock awards. The Committee
13
<PAGE>
generally reviews, and makes any changes to, the base salary and bonus of each
executive officer as of the beginning of each calendar year.
Base Salary
The Committee seeks to establish base salaries which are competitive for
each position and level of responsibility with those of executive officers at
various other biotechnology companies of comparable size and stage of
development.
Discretionary Cash Bonus
The Committee believes that discretionary cash bonuses are useful on a case
by case basis to motivate executive officers. However, cash bonuses have not
been a significant element of the Company's executive compensation program, as
the Committee believes long-term incentives are more appropriate and help to
conserve cash. Bonuses for executive officers are not guaranteed, but are
awarded from time to time only in the discretion of the Committee. Bonuses were
awarded to only two of the executive officers during the fiscal year at rates
equal to 5% and 6% of such executive's base salary.
Stock Options and Restricted Stock Awards
Grants of stock options and awards of restricted stock under the Company's
stock option and restricted stock award plans are designed to promote the
identity of the long-term interests between the Company's executives and its
shareholders and to assist in the retention of executives. Since stock options
granted by the Company generally become exercisable over either a three-year or
four-year period and restricted stock awards made by the Company cease to be
subject to forfeiture on an annual basis over a five-year period, their ultimate
value is dependent upon the long-term appreciation of the Company's stock price
and the executive's continued employment with the Company. In addition, grants
of stock options and awards of restricted stock may result in an increase in
executive officers' equity interests in the Company, thereby providing such
persons with the opportunity to share in the future value they are responsible
for creating.
When granting stock options or making restricted stock awards, the
Committee considers the relative performance and contributions of each officer
compared to that of other officers within the Company with similar levels of
responsibility. The number of options granted or shares awarded to each
executive officer are generally determined by the Committee on the basis of the
general experience and subjective judgment of its members.
Section 162(m) of the Code limits the deductibility of annual compensation
over $1 million to the Chief Executive Officer and the other Named Executive
Officers unless certain conditions are met. The Company's Chief Executive
Officer and the other Named Executive Officers have not received annual
compensation over $1 million, and the Company has not yet determined what
measures, if any, it should take to comply with Section 162.
14
<PAGE>
Compensation of the Chief Executive Officer
In establishing Mr. Pops' compensation package, the Committee seeks to
maintain a level of total current compensation that is competitive with that of
chief executives of certain other companies in the biotechnology industry at
comparable stages of development. In addition, in order to align Mr. Pops'
interests with the long-term interests of the Company's shareholders, the
Committee attempts to make a substantial portion of the value of his total
compensation dependent on the long-term appreciation of the Company's stock
price.
At the Company's current stage of development, the Committee believes that
Mr. Pops' performance as Chief Executive Officer of the Company must be
evaluated almost exclusively using subjective criteria, including the
Committee's evaluation of the Company's progress in attracting and retaining
senior management, identifying new product candidates, identifying and securing
corporate collaborators for the Company's existing product candidates,
identifying and acquiring new product development and technology opportunities,
advancing the Company's existing product candidates through the complex drug
development and regulatory approval process and raising the necessary capital to
fund its research and development efforts.
In evaluating and establishing Mr. Pops' current compensation package, the
Committee considered the following accomplishments of the Company during
calendar 1995. The Company met its primary product development objective for
the year with respect to RMP-7. The Company, on behalf of Alkermes Clinical
Partners, L.P., initiated three Phase II clinical trials of RMP-7 and the
chemotherapeutic agent carboplatin in patients with brain tumor. The Company
also initiated a Phase I/II clinical trial of RMP-7 and carboplatin administered
intra-arterially. In January 1995, the Company entered into a collaborative
agreement with Genentech, Inc. with respect to a ProLease formulation of human
growth hormone (hGH) and one other molecule for total research funding and
milestone payments of up to $20 million. In July 1995, the Company entered into
an expanded collaboration agreement with Schering-Plough Corporation resulting
in approximately $7 million of funding in fiscal 1996. In September and October
1995, the Company completed an underwritten public offering of common stock with
net proceeds to the Company of approximately $15 million. In November 1995, the
Company filed an Investigational New Drug application (IND) for a ProLease
formulation of Genentech's hGH. The Company initiated a Phase I clinical trial
of this formulation in early 1996.
Given the significant role played by Mr. Pops in each of the above-noted
accomplishments, the Committee increased Mr. Pops' annual base salary in January
1996 from $260,000 to $290,000 and granted Mr. Pops a cash bonus of $15,000. As
additional recognition of Mr. Pops' efforts in 1995, and in furtherance of the
Committee's belief that a substantial portion of Mr. Pops' total compensation
should be dependent on the long-term appreciation of the Company's stock price,
in June and December 1995 the Committee granted Mr. Pops options to purchase
47,500 and 40,000 shares of Common Stock, respectively. The Committee believes
that each of these actions was particularly appropriate given Mr. Pops'
performance during 1995 and in order to maintain his compensation at a
competitive level compared to that of the chief executive officers of other
similarly sized and positioned biotechnology companies.
Compensation Committee
John K. Clarke Paul Schimmel
Robert S. Langer Michael A. Wall
15
<PAGE>
COMPENSATION COMMITTEE REPORT ON REPRICED OPTIONS
In July 1994, the Committee granted each of the Company's employees and
officers who had previously been granted options to purchase shares of Common
Stock the right to exchange such options for new stock options to purchase fewer
shares of Common Stock at a lower exercise price with a revised vesting schedule
(the "Option Exchange Offer"). The overwhelming majority of the Company's
outstanding stock options contained exercise prices that were substantially
above the current market price of the Common Stock. Although such options did
have some financial value based on a mathematical formula used in the investment
banking community for valuing options, the Committee believed that the Company's
employees did not place any value on options which were significantly out-of-the
money. The Committee concluded that such options therefore were no longer
effective in either aligning the interests of the Company's employees with those
of its shareholders or encouraging option holders to remain in the employ of the
Company.
In determining to make the Option Exchange Offer, the Committee considered
the fairness of such exchange in relation to the Company's other shareholders.
The Committee concluded that, instead of issuing a large number of new options
at the current fair market value and thereby causing further shareholder
dilution, it was in the shareholders' long-term best interests to make the
Option Exchange Offer so that the Company could more effectively motivate and
retain its employees and officers. In this light, the Committee decided that
non-officers of the Company should be given the option to exchange any of their
outstanding options for a new option to purchase 10% fewer shares with a new
exercise price set at the fair market value of the Company's Common Stock at the
date of the Option Exchange Offer, or $3.69 per share. In order to maximize the
incentive for such persons to remain in the employ of the Company, however, the
Committee required that any new options issued be subject to a new vesting
schedule, with options vesting ratably on an annual basis over a three-year
period following the date of the Option Exchange Offer. The Committee also
determined that officers of the Company should be given the option to exchange
any of their outstanding options for a new option to purchase 25% fewer shares
with a new exercise price of $3.69 per share. Like the new options issued to
employees, any new options issued to officers were subject to a new vesting
schedule, with options vesting ratably on an annual basis over a three-year
period following the date of the Option Exchange Offer.
It is the opinion of the Compensation Committee that the Option Exchange
Offer succeeded in its objectives of minimizing shareholder dilution and
providing strong incentives for the Company's employees and management.
Compensation Committee
John K. Clarke Paul Schimmel
Robert S. Langer Michael A. Wall
16
<PAGE>
Performance Graph
- -----------------
The following graph compares the yearly percentage change in the cumulative
total shareholder return on the Company's Common Stock for the last five fiscal
years, with the cumulative total return on the Nasdaq Stock Market (U.S.) Index
and the Nasdaq Pharmaceutical Index, which includes biotechnology companies.
The comparison assumes $100 was invested on March 31, 1992 in the Company's
Common Stock and in each of the foregoing indices and further assumes
reinvestment of any dividends. The Company did not declare or pay any dividends
during the comparison period.
<TABLE>
<CAPTION>
[GRAPH APPEARS HERE]
PERFORMANCE GRAPH
Nasdaq
Measurement Period Nasdaq Stock Market Pharmaceutical
(Fiscal Year Ended March 31,) (U.S.) Index Index Alkermes, Inc.
- ----------------------------- ------------------- -------------- --------------
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 114.98 69.19 46.67
1994 124.05 69.88 41.48
1995 138.04 69.61 16.30
1996 187.37 122.76 54.07
</TABLE>
17
<PAGE>
MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of June 7, 1996 by (i) each person who is known
by the Company to be the owner of 5% or more of the Company's outstanding shares
of Common Stock, (ii) each director of the Company, (iii) each of the Named
Executive Officers, and (iv) all the directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
Number of Shares Percentage
Beneficially Beneficially
Names or Group Owned(1) Owned
- -------------------------------------- --------------------- -------------
<S> <C> <C>
Amerindo Investment Advisors Inc...... 2,715,000(2) 14.80%
One Embarcadero, Ste. 2300
San Francisco, CA 94111
Pioneering Management Corporation..... 1,174,000 6.40%
60 State Street
Boston, MA 02109
Floyd E. Bloom........................ 163,500 *
Robert A. Breyer...................... 109,375(3) *
John K. Clarke........................ 352,034(4)(5) 1.92%
Robert S. Langer...................... 223,189(6) 1.22%
Richard F. Pops....................... 281,341(7) 1.51%
Alexander Rich........................ 181,700(8) *
Paul Schimmel......................... 300,700(8) 1.64%
Michael A. Wall....................... 516,250 2.81%
Raymond T. Bartus..................... 55,375(9) *
Michael J. Landine.................... 123,525(10) *
Scott D. Putney....................... 54,175(11) *
William F. Graney..................... 3,000 *
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Percentage
Beneficially Beneficially
Names or Group Owned(1) Owned
- -------------------------------------- --------------------- -------------
<S> <C> <C>
All directors and executive officers
as a group (15 persons)............. 2,408,239(4)(12) 12.71%
</TABLE>
____________________
* Represents less than 1% of the outstanding shares of the Company's Common
Stock.
(1) Except as indicated in footnotes to this table, the persons named in this
table have sole voting and investment power with respect to all shares of
Common Stock owned.
(2) Amerindo Investment Advisors Inc. holds these shares in its capacity as
investment advisor for various fiduciary accounts.
(3) Includes 109,375 shares of Common Stock subject to options which are
exercisable or will become exercisable within 60 days of June 7, 1996.
(4) Includes 350,000 shares of Common Stock owned by DSV Partners IV, as to
which Mr. Clarke disclaims beneficial ownership. Mr. Clarke is a general
partner of DSV Management, the general partner of DSV Partners IV. No
other general partner of DSV Management is affiliated with the Company.
(5) Includes 850 shares of Common Stock issuable upon exercise of warrants
which are exercisable.
(6) Includes 222,357 Shares of Common Stock held by The Wetmann Trust (the
"Trust"). Professor Langer is a beneficiary of the Trust, but has no
voting or investment power with respect to the shares held by the Trust.
The remaining shares are held by a trust, of which Professor Langer's wife
is trustee, for the benefit of his children.
(7) Includes 268,750 shares of Common Stock subject to options which are
exercisable or which will become exercisable within 60 days of June 7,
1996.
(8) Includes 1,700 shares of Common Stock issuable upon exercise of warrants
which are exercisable.
(9) Includes 49,375 shares of Common Stock subject to options which are
exercisable or which will become exercisable within 60 days of June 7,
1996.
(10) Includes 68,625 shares of Common Stock subject to options which are
exercisable or which will become exercisable within 60 days of June 7,
1996.
(11) Includes 49,375 shares of Common Stock subject to options which are
exercisable or which will become exercisable within 60 days of June 7,
1996. Also includes 1,200 shares of Common Stock awarded under the Award
Plan which will cease to be subject to forfeiture within 60 days of June 7,
1996.
19
<PAGE>
(12) Includes 591,625 shares of Common Stock subject to options or issuable upon
exercise of warrants which are exercisable or which will become exercisable
within 60 days of June 7, 1996. Also includes 1,800 shares of Common Stock
awarded under the Award Plan which will cease to be subject to forfeiture
within 60 days of June 7, 1996. Also includes 222,357 shares of Common
Stock held by the Trust.
CERTAIN TRANSACTIONS
Stock Options and Awards
During the last fiscal year, various executive officers and a director were
granted options to purchase shares of Common Stock pursuant to the Amended and
Restated Omnibus Stock Option Plan, the Amended and Restated 1989 Non-Qualified
Stock Option Plan or the Director Plan (subject to shareholder approval).
Product Development Agreement with Alkermes Clinical Partners, L.P.
Pursuant to a Product Development Agreement dated March 6, 1992 between the
Company and Alkermes Clinical Partners, L.P. (the "Partnership"), the Company
conducts certain research and development on behalf of the Partnership.
Alkermes Development Corporation II ("ADC II"), a wholly owned subsidiary of the
Company, is the general partner of the Partnership. Richard F. Pops, a director
and the Chief Executive Officer of the Company, is a director and the President
and Chief Executive Officer of ADC II. The Company is reimbursed by the
Partnership for its actual costs incurred in conducting such research and
development, and also receives a management fee of 10% of such costs. For the
fiscal year ended March 31, 1996, the Company recorded revenue of $11,182,741
from the Partnership pursuant to the Product Development Agreement.
Loan to Partnership
In April 1992, the Company loaned to the Partnership the aggregate
principal amount of $4,735,000 (the "Alkermes Loan") to fund certain initial
expenditures of the Partnership. The Alkermes Loan was paid in full on April
15, 1995 and bore interest at the rate of seven and one-half percent (7 1/2%)
per annum which was paid on April 15, 1993, April 15, 1994 and April 15, 1995.
OTHER BUSINESS
The Board of Directors does not intend to present to the Meeting any
business other than the election of directors and the approval of the Director
Plan. If any other matter is presented to the Meeting which under applicable
proxy regulations need not be included in this Proxy Statement or which the
Board of Directors did not know a reasonable time before this solicitation would
be presented, the persons named in the accompanying proxy will have
discretionary authority to vote proxies with respect to such matter in
accordance with their best judgment.
20
<PAGE>
INDEPENDENT AUDITORS
Deloitte & Touche LLP, independent auditors, audited the consolidated
financial statements of the Company for the fiscal year ended March 31, 1996.
Representatives of Deloitte & Touche LLP are expected to attend the Meeting,
will have the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions. The Board of
Directors has selected Deloitte & Touche LLP as the independent auditors to
audit the Company's consolidated financial statements for the fiscal year ending
March 31, 1997.
DEADLINE FOR SHAREHOLDERS PROPOSALS
The Company must receive any proposal which a shareholder wishes to submit
at the 1997 annual meeting of shareholders before March 1, 1997 if the proposal
is to be considered by the Board of Directors for inclusion in the proxy
material for that meeting.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who beneficially own more than ten percent of
the Company's Common Stock, to file with the Securities and Exchange Commission
("SEC") initial reports of ownership and reports of changes in ownership of
Common Stock. Executive officers, directors and greater than ten percent
shareholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file. Mr. Clarke and Drs. Rich and Schimmel
participated in an exchange offer completed by the Company on January 27, 1995
with respect to warrants issued in 1992 in connection with the formation of the
Partnership, whereby limited partners had the option to exchange their warrants
received in 1992 for warrants to purchase fewer shares of Common Stock at a
lower exercise price. Although these directors reported the initial acquisition
of the warrants in 1992 on a timely filed Form 4, they did not report the
exchange of these warrants for new warrants until June 1996. In addition, Dr.
Putney made a gift of warrants to purchase shares of Common Stock of the Company
to his father in January 1995 which was not reported until June 1996. To the
Company's knowledge, based solely on review of the copies of such reports
furnished to the Company and written representations that no other reports were
required, for the fiscal year ended March 31, 1996, all Section 16(a) filing
requirements applicable to its executive officers, directors, officers and
greater than ten percent shareholders were complied with.
By Order of the Board of Directors
Morris Cheston, Jr.
Secretary
June 28, 1996
21
<PAGE>
Appendix A
ALKERMES, INC.
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
ARTICLE I
Purpose
The purpose of the Stock Option Plan for Non-Employee Directors (the
"Plan") is to enable Alkermes, Inc. (the "Company") to attract and retain
independent directors and to strengthen the mutuality of interests between such
directors and the Company's shareholders.
ARTICLE II
Definitions
For purposes of the Plan, the following terms shall have the following
meanings:
2.1 "Board" shall mean the Board of Directors of the Company.
-----
2.2 "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
2.3 "Common Stock" shall mean the Common Stock, par value $.01 per share,
------------
of the Company.
2.4 "Disability" shall mean a disability that results in a director's
----------
inability to carry out his or her duties as a director, as determined in the
reasonable judgment of the Board.
2.5 "Effective Date" shall mean the date on which the Plan is approved by
--------------
the Board.
2.6 "Eligible Director" shall mean any member of the Board who, on the
-----------------
date on which Options are to be granted, is not an officer or employee of the
Company or any of the Company's subsidiaries.
2.7 "Fair Market Value" for purposes of the Plan, unless otherwise
-----------------
required by any applicable provision of the Code or any regulations issued
thereunder, shall mean, as of any date, the average of the high and low sales
prices of a share of Common Stock as reported on the principal national
securities exchange on which the Common Stock is listed or admitted to trading,
or, if not listed or traded on any such exchange, the Nasdaq National Market
("Nasdaq"), or, if such sales prices are not available,
A-1
<PAGE>
the average of the bid and asked prices per share reported on Nasdaq, or, if
such quotations are not available, the fair market value as determined by the
Board, which determination shall be conclusive.
2.8 "Optionee" shall mean an individual to whom a Stock Option has been
--------
granted under the Plan.
2.9 "Stock Option" or "Option" shall mean any option to purchase shares of
------------ ------
Common Stock granted pursuant to Article VI.
ARTICLE III
Administration
3.1 Guidelines. The Plan shall be administered by the Board. Subject to
----------
the express provisions of the Plan, the Board shall have the authority to adopt,
alter and repeal such administrative rules, guidelines and practices governing
the Plan as it shall, from time to time, deem advisable; to interpret the terms
and provisions of the Plan and any Option granted under the Plan (and any
agreements relating thereto); and to otherwise administer the Plan. The Board
may correct any defect, supply any omission or reconcile any inconsistency in
the Plan or in any Option in the manner and to the extent it shall deem
necessary to carry the Plan into effect. Notwithstanding the foregoing, no
action of the Board under this Section 3.1 shall impair the rights of any
Optionee without such person's consent, unless otherwise required by law.
3.2 Decisions Final. Any decision, interpretation or other action made or
---------------
taken in good faith by the Board arising out of or in connection with the Plan
shall be final, binding and conclusive on the Company, all members of the Board
and their respective heirs, executors, administrators, successors and assigns.
ARTICLE IV
Share Limitation
4.1 Shares. The maximum aggregate number of shares of Common Stock that
------
may be issued under the Plan shall be 150,000 shares of Common Stock (subject to
any increase or decrease pursuant to Section 4.2), which may be either
authorized and unissued shares of Common Stock or issued Common Stock that has
been reacquired by the Company. If any Option granted under the Plan shall
expire, terminate or be cancelled for any reason without having been exercised
in full, the number of unpurchased shares shall again be available for the
purposes of the Plan.
4.2 Changes. In the event of any merger, reorganization, consolidation,
-------
recapitalization, dividend (other than a regular cash dividend), stock split, or
other change in corporate structure affecting the Common Stock, such
substitution or adjustment shall be made in the maximum aggregate number of
shares that may be issued under the Plan, the number of shares for which Stock
Options are to be granted
A-2
<PAGE>
to Eligible Directors pursuant to Section 6.2 and the number of shares subject
to, and the option price of, outstanding Options as may be determined to be
appropriate by the Board, in its sole discretion, provided that the number of
shares subject to any Option shall always be a whole number.
ARTICLE V
Eligibility
5.1 Eligible Directors. Only Eligible Directors shall be granted Options
------------------
under the Plan.
ARTICLE VI
Stock Options
6.1 Options. All Stock Options granted under the Plan shall be non-
-------
qualified stock options (i.e., options that do not qualify as incentive stock
----
options under Section 422 of the Code).
6.2 Grants. On the Effective Date, each Eligible Director who is not then
------
a consultant to the Company shall automatically receive a one-time grant of
Stock Options to purchase 10,000 shares of Common Stock. Thereafter, for as
long as the Plan remains in effect, each Eligible Director shall automatically
be granted, on the date of the annual meeting of shareholders of the Company,
Stock Options to purchase 2,500 shares of Common Stock; provided, however, that
an individual who ceases to be a member of the Board on such date shall not be
granted any Stock Options.
6.3 Terms of Options. Options granted under the Plan shall be subject to
----------------
the following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Board shall deem
desirable:
(a) Stock Option Certificate. Each Stock Option shall be evidenced
------------------------
by, and subject to the terms of, a Stock Option Certificate executed by the
Company. The Stock Option Certificate shall specify the number of shares of
Common Stock subject to the Stock Option, the option price, the option term, and
the other terms and conditions applicable to the Stock Option.
(b) Option Price. The option price per share of Common Stock
------------
purchasable upon exercise of a Stock Option shall be equal to the Fair Market
Value of a share of Common Stock on the date the Option is granted.
(c) Option Term. The term of each Stock Option shall be ten years
-----------
from the date of grant.
(d) Exercisability. Stock Options shall become exercisable in full
--------------
six months after the date of grant.
A-3
<PAGE>
(e) Method of Exercise. Stock Options may be exercised in whole or in
------------------
part at any time during the option term by giving written notice of exercise to
the Company specifying the number of shares of Common Stock to be purchased and
the option price therefor. The notice of exercise shall be accompanied by
payment in full of the option price and, if requested, by the representation
described in Section 9.2. The option price may be paid in cash or by check
payable to the Company or in such other form as the Board deems acceptable.
Unless otherwise determined by the Board in its sole discretion at or after
grant, payment in full or in part may be made in the form of Common Stock duly
owned by the Optionee (and for which the Optionee has good title free and clear
of any liens and encumbrances) or by reduction in the number of shares issuable
upon such exercise, based, in either case, on the Fair Market Value of the
Common Stock on the last trading date preceding payment. Upon payment in full
of the option price, as provided herein, a stock certificate representing the
number of shares of Common Stock to which the Optionee is entitled shall be
issued and delivered to the Optionee. An Optionee shall not be deemed to be the
holder of Common Stock, or to have the rights of a holder of Common Stock, with
respect to shares subject to the Option, unless and until a stock certificate
representing such shares of Common Stock is issued to such Optionee.
(f) Death. If an Optionee ceases to be a member of the Board by
-----
reason of death, any Stock Option that was exercisable on the date of such
Optionee's death may thereafter be exercised by the legal representative of the
Optionee's estate for a period of one year after the date of death or until the
expiration of the stated term of the Stock Option, whichever period is shorter,
and any Stock Option not exercisable on the date of death shall be forfeited.
(g) Disability. If an Optionee ceases to be a member of the Board by
----------
reason of Disability, any Stock Option that was exercisable on the date on which
the Optionee ceased to be a member of the Board may thereafter be exercised by
the Optionee for a period of one year after such date or until the expiration of
the stated term of the Stock Option, whichever period is shorter, and any Stock
Option not exercisable on the date on which the Optionee ceased to be a member
of the Board shall be forfeited; provided, however, that if the Optionee dies
during such one-year period, any unexercised Stock Options may be exercised by
the legal representative of the Optionee's estate for a period of one year after
the date of the Optionee's death or until the expiration of the stated term of
the Stock Option, whichever period is shorter.
(h) Other Termination. If an Optionee ceases to be a member of the
-----------------
Board by reason of retirement or for any reason other than death or Disability,
any Stock Option that was exercisable on the date on which the Optionee ceased
to be a member of the Board may be exercised by the Optionee for a period of
three months after such date or until the expiration of the stated term of such
Stock Option, whichever period is shorter, and any Stock Option not exercisable
on the date on which the Optionee ceases to be a member of the Board shall be
forfeited.
(i) Non-Transferability of Option. No Stock Option shall be
-----------------------------
transferable by an Optionee otherwise than by will or by the laws of descent and
distribution, to the extent consistent with the terms of the Plan and the
Option, and all Stock Options shall be exercisable, during an Optionee's
lifetime, only by the Optionee.
A-4
<PAGE>
ARTICLE VII
Termination or Amendment
7.1 Termination or Amendment of the Plan. The Board may at any time
------------------------------------
amend, discontinue or terminate the Plan or any part thereof (including any
amendment deemed necessary to ensure that the Company may comply with any
regulatory requirement referred to in Article IX); provided, however, that,
unless otherwise required by law, the rights of an Optionee with respect to
Options granted prior to such amendment, discontinuance or termination, may not
be impaired without the consent of such Optionee and, provided further, without
the approval of the Company's shareholders, no amendment may be made that would
(i) materially increase the aggregate number of shares of Common Stock that may
be issued under the Plan (except by operation of Section 4.2); (ii) materially
modify the requirements as to eligibility for participation in the Plan; or
(iii) materially increase the benefits accruing to participants under the Plan.
Notwithstanding the foregoing, the provisions of Articles V and VI may not be
amended more than once every six months, other than to comport with changes in
the Code, the Employee Retirement Income Security Act, or the rules thereunder.
7.2 Amendment of Options. The Board may amend the terms of any Stock
--------------------
Options theretofore granted, prospectively or retroactively, but, subject to
Article IV, no such amendment or other action by the Board shall impair the
rights of any Optionee without the Optionee's consent.
ARTICLE VIII
Unfunded Plan
8.1 Unfunded Status of Plan. The Plan is intended to constitute an
-----------------------
"unfunded" plan for incentive compensation. With respect to any payment not yet
made to an Optionee by the Company, nothing contained herein shall give any such
individual any rights that are greater than those of a general creditor of the
Company.
ARTICLE IX
General Provisions
9.1 Nonassignment. Except as otherwise provided in the Plan, Options
-------------
granted hereunder and the rights and privileges conferred thereby shall not be
sold, transferred, assigned, pledged or hypothecated in any way (whether by
operation of law or otherwise), and shall not be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of such Option, right or privilege contrary to
the provisions hereof, or upon the levy of any attachment or similar process
thereon, such Option and the rights and privileges conferred thereby shall
immediately terminate and the Option shall immediately be forfeited to the
Company.
A-5
<PAGE>
9.2 Legend. The Board may require each person purchasing shares upon
------
exercise of an Option to represent to the Company in writing that the Optionee
is acquiring the shares without a view to distribution thereof. The stock
certificates representing such shares may include any legend which the Board
deems appropriate to reflect any restrictions on transfer.
All certificates representing shares of Common Stock delivered under the
Plan shall be subject to such stock transfer orders and other restrictions as
the Board may deem advisable under the rules, regulations and other requirements
of the Securities and Exchange Commission, any stock exchange upon which the
Common Stock is then listed or traded or Nasdaq, any applicable Federal or state
securities law, and any applicable corporate law, and the Board may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.
9.3 Other Plans. Nothing contained in the Plan shall prevent the Board
-----------
from adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.
9.4 No Right to Continue Relationship. Neither the Plan nor the grant of
---------------------------------
any Option under the Plan shall confer upon any person any right to continue as
a director of the Company or obligate the Company to nominate any director for
reelection by the Company's shareholders.
9.5 Listing and Other Conditions.
----------------------------
(a) If the Common Stock is listed on a national securities exchange or
Nasdaq, the issuance of any shares of Common Stock upon exercise of an Option
shall be conditioned upon such shares being listed on such exchange or with
Nasdaq. The Company shall have no obligation to issue such shares unless and
until such shares are so listed, and the right to exercise any Option shall be
suspended until such listing has been effected.
(b) If at any time counsel to the Company shall be of the opinion that
any sale or delivery of shares of Common Stock upon exercise of an Option is or
may in the circumstances be unlawful or result in the imposition of excise taxes
under the statutes, rules or regulations of any applicable jurisdiction, the
Company shall have no obligation to make such sale or delivery, or to make any
application or to effect or to maintain any qualification or registration under
the Securities Act of 1933, as amended, or otherwise with respect to shares of
Common Stock, and the right to exercise any Option shall be suspended until, in
the opinion of such counsel, such sale or delivery shall be lawful or shall not
result in the imposition of excise taxes.
(c) Upon termination of any period of suspension under this Section
9.5, any Option affected by such suspension which shall not then have expired or
terminated shall be reinstated as to all shares available before such suspension
and as to shares which would otherwise have become available during the period
of such suspension, but no such suspension shall extend the term of any Option.
9.6 Governing Law. The Plan and actions taken in connection herewith
-------------
shall be governed and construed in accordance with the laws of the Commonwealth
of Pennsylvania.
A-6
<PAGE>
9.7 Construction. Wherever any words are used in the Plan in the
------------
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.
9.8 Liability of the Board. No member of the Board nor any employee of
----------------------
the Company or any of its subsidiaries shall be liable for any act or action
hereunder, whether of omission or commission, by any other member of the Board
or employee or by any agent to whom duties in connection with the administration
of the Plan have been delegated or, except in circumstances involving bad faith,
gross negligence or fraud, for anything done or omitted to be done by himself.
9.9 Costs. The Company shall bear all expenses incurred in administering
-----
the Plan, including expenses of issuing Common Stock upon the exercise of
Options.
9.10 Severability. If any part of the Plan shall be determined to be
------------
invalid or void in any respect, such determination shall not affect, impair,
invalidate or nullify the remaining provisions of the Plan which shall continue
in full force and effect.
9.11 Successors. The Plan shall be binding upon and inure to the benefit
----------
of any successor or successors of the Company.
9.12 Headings. Article and section headings contained in the Plan are
--------
included for convenience only and are not to be used in construing or
interpreting the Plan.
ARTICLE X
Term of Plan
10.1 Effective Date. The Plan shall be effective as of the Effective Date,
--------------
but the grant of any Option hereunder is subject to the express condition that
the Plan be approved by the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock present, or represented, and entitled to vote
at a duly held meeting of the shareholders of the Company.
10.2 Termination. Unless sooner terminated, the Plan shall terminate ten
-----------
years after the Effective Date and no Options shall be granted thereafter.
Termination of the Plan shall not affect Options granted before such date, which
shall continue to be exercisable, in accordance with their terms, after the Plan
terminates.
A-7
<PAGE>
P R O X Y
ALKERMES, INC.
CAMBRIDGE, MASSACHUSETTS
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JULY 25, 1996
The undersigned shareholder of Alkermes, Inc. hereby appoints Michael J.
Landine and Diane Fucci, and each of them, attorneys and proxies, with power of
substitution in each of them, to vote and act for and on behalf of the
undersigned at the annual meeting of shareholders of the Company to be held at
the offices of the Company, 64 Sidney Street, Cambridge, Massachusetts 02139, at
10:00 a.m., July 25, 1996, and at all adjournments thereof, according to the
number of shares which the undersigned would be entitled to vote if then
personally present, as indicated hereon and in their discretion upon such other
business as may come before the meeting, all as set forth in the notice of the
meeting and in the proxy statement furnished herewith, copies of which have been
received by the undersigned; hereby ratifying and confirming all that said
attorneys and proxies may do or cause to be done by virtue hereof.
It is agreed that unless otherwise marked on the other side said
attorneys and proxies are appointed with authority to vote FOR the directors and
proposals listed on the other side hereof.
(PLEASE FILL IN, SIGN AND DATE ON THE OTHER SIDE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE)
<PAGE>
[X] Please mark votes as in this example.
The Board of Directors recommends voting "FOR" Proposals 1 and 2
1. ELECTION OF DIRECTORS
Nominees: Floyd E. Bloom, Robert A. Breyer, John K. Clarke, Robert S.
Langer, Richard F. Pops, Alexander Rich, Paul Schimmel and Michael A. Wall.
FOR ALL NOMINEES [_] [_] WITHHOLD AUTHORITY
(Except as indicated FOR ALL NOMINEES
in space below)
-------------------------------------------------------------
(To Withhold Authority to vote for any individual nominee,
print the nominee's name above.)
FOR AGAINST ABSTAIN
2. Proposal to approve the adoption [_] [_] [_]
of the Stock Option Plan for
Non-Employee Directors.
MARK HERE FOR ADDRESS [_] MARK HERE IF YOU PLAN [_]
CHANGE AND NOTE AT LEFT TO ATTEND THE MEETING
JULY 25, 1996
Signature should be the same as the name printed at the left. Executors,
administrators, trustees, guardians, attorneys, and officers of
corporations should add their title when signing.
Signature:_________________ Date:_____ Signature:_________________ Date:_____
