<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
ALKERMES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
ALKERMES, INC.
CAMBRIDGE, MASSACHUSETTS 02139
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 25, 1997
--------------------
TO THE SHAREHOLDERS:
The annual meeting of shareholders of Alkermes, Inc. (the "Company") will
be held at the offices of the Company, 64 Sidney Street, Cambridge,
Massachusetts 02139, on Friday, July 25, 1997, 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 his successor is duly elected
and qualified.
2. To approve the amendment to the Alkermes Amended and Restated 1990
Omnibus Stock Option Plan to increase to 2,500,000 the number of shares issuable
upon the exercise of options granted thereunder, an increase of 750,000 shares.
3. To transact such other business as may properly come before the meeting.
The Board of Directors has fixed June 6, 1997 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 6, 1997 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 27, 1997
<PAGE> 3
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 1997 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, 1997 (the "Meeting").
Copies of this Proxy Statement and the accompanying proxy are being mailed on or
after June 27, 1997 to the holders of record of Common Stock on June 6, 1997
(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 election to the Company's Board of
Directors of the nominees named herein and FOR approval of the amendment to
increase the number of shares available under the 1990 Amended and Restated
Omnibus Stock Option Plan. With respect to all other matters, 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 20,765,518 shares of Common Stock outstanding on the Record
Date. The presence at the Meeting, in person or by proxy, of shareholders
entitled to cast at least a majority of the votes that all shareholders are
entitled to cast on a particular matter will constitute a quorum for the
purposes of consideration and action on such matter.
ELECTION OF DIRECTORS
Eight directors are to be elected at the Meeting to serve one-year terms
until the 1998 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. 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
<PAGE> 4
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. Votes that are withheld will be counted in determining the
presence of a quorum, but will have no effect on the vote.
Set forth below is information regarding the nominees, as of June 6, 1997,
including their recent employment, positions with the Company, other
directorships and age.
Dr. Bloom, age 60, 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. He is
a member of the National Academy of Science, the Institute of Medicine and the
Royal Swedish Academy of Science.
Mr. Breyer, age 53, 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 43, 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. He is also the managing general partner of Cardinal
Health Partners. Mr. Clarke has been associated with DSV since 1982. Mr. Clarke
is also a director of DNX Corporation, Inc., a biopharmaceutical company,
Chrysalis International Corporation and Cubist Pharmaceuticals, Inc.
Professor Langer, age 48, 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.
Mr. Pops, age 35, 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
Immulogic Pharmaceutical Corporation, the Biotechnology Industry Organization
(BIO), and The Brain Tumor Society (a non-profit organization).
2
<PAGE> 5
Dr. Rich, age 72, 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 56, 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 member of the National
Academy of Sciences and the American Academy of Arts and Sciences, Dr. Schimmel
graduated from Ohio Wesleyan University and 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 68, 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 seven 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 once 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, fixing the
compensation of officers of the Company and administering, and making grants and
awards under, the Company's stock option and restricted stock award plans. The
Compensation Sub-Committee, formed in June 1997, is responsible for making
grants and awards under the Company's stock option and restricted stock award
plans to "officers" as defined under Section 16(a) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). The Compensation Sub-Committee,
consisting of John K. Clarke and Paul Schimmel, ratified all actions taken by
the Compensation Committee with regard to such officers since November 1996 and
did not meet during the last fiscal year.
3
<PAGE> 6
APPROVAL OF AMENDMENT TO AMENDED AND RESTATED
1990 OMNIBUS STOCK OPTION PLAN
The Company's Amended and Restated 1990 Omnibus Stock Option Plan (the
"Omnibus Plan") currently authorizes the issuance of options to purchase up to
1,750,000 shares of Common Stock. In June 1997, the Board amended the Omnibus
Plan, subject to shareholder approval, to increase the aggregate number of
shares authorized for issuance upon exercise of options granted under the
Omnibus Plan to 2,500,000. This amendment was designed to enhance the
flexibility of the Compensation Committee and the Compensation Sub-Committee of
the Board in granting stock options and limited stock appreciation rights to the
Company's employees, officers and consultants and to ensure that the Company can
continue to grant stock options to such persons at levels determined to be
appropriate by the Compensation Committee and the Compensation Sub-Committee.
The affirmative vote of a majority of the votes cast by all shareholders
entitled to vote will be required to approve the proposed amendment to the
Omnibus Plan. Abstentions will be counted as present for purposes of determining
the presence of a quorum for purposes of this proposal, but will not be counted
as votes cast. Broker non-votes (shares held by a broker or nominee as to which
the broker or nominee does not have the authority to vote on a particular
matter) will not be counted as present for purposes of determining the presence
of a quorum for purposes of this proposal and will not be voted. Accordingly,
neither abstentions nor broker non-votes will have any effect on the outcome of
the vote on this proposal.
The Board of Directors recommends that you vote FOR the approval of the
amendment to the Omnibus Plan.
DESCRIPTION OF THE OMNIBUS PLAN
The Omnibus Plan provides for the grant to employees, officers and
directors of, and consultants to, the Company and its subsidiaries of options to
purchase up to 1,750,000 shares of Common Stock. The proposed amendment, which
has been adopted by the Board of Directors, increases the number of shares which
may be issued upon exercise of options which may be granted under the Omnibus
Plan to 2,500,000. Such options may either be "incentive stock options" as
defined in Section 422A of the Internal Revenue Code of 1986, as amended (the
"Code"), or may be non-qualified options. The Omnibus Plan will terminate on
September 19, 2000 unless sooner terminated by the Board of Directors. The
Company estimates that there are currently 200 persons who are eligible to
receive options under the Omnibus Plan.
The Omnibus Plan is administered by the Board of Directors with respect to
options granted to employees, officers and consultants who are not directors,
executive officers or significant employees of the Company, unless the Board
delegates administration of the Omnibus Plan to the Compensation Committee,
which the Board has done. The Compensation Sub-Committee administers the Omnibus
Plan with respect to options granted to directors, executive officers and
significant employees of the Company ("Reporting Persons"). The total number of
options to be granted in any year under the Omnibus Plan to participants, the
number and selection of the participants to receive options, the type and number
of options granted to each and the other terms and provisions of such options
are wholly within the discretion of the Compensation Committee and the
Compensation Sub-Committee, subject to the limitations set forth in the Omnibus
Plan.
4
<PAGE> 7
Under the terms of the Omnibus Plan, the option exercise price may not be
less than 100% (or, with respect to incentive stock options, 110% if the
optionee owns 10% of the total combined voting power of all classes of stock of
the Company) of the fair market value of the underlying stock at the time the
option is granted. Options granted under the Omnibus Plan are generally
nontransferable and expire upon the earlier of an expiration date fixed by the
Compensation Committee and set forth in each individual option award
certificate, ten years (or with respect to incentive stock options, five years,
if the optionee owns 10% of the total combined voting power of all classes of
stock of the Company) from the date of grant, and either three months after the
date the optionee ceases to be an employee, officer or director of, or
consultant to, the Company or its subsidiaries or, if the optionee dies or
becomes disabled, one year after the date of death or the date the optionee
ceases to be an employee, officer, director or consultant because of disability.
Options which have expired or which have been cancelled unexercised will be
returned to the Omnibus Plan and may again be granted pursuant to the Omnibus
Plan.
Under the Omnibus Plan, the price payable upon exercise of options may be
paid in cash, property, services rendered or, under certain circumstances, in
shares of stock of the Company having a fair market value equal to the option
price on the date of exercise or any combination thereof.
The Compensation Committee and the Compensation Sub-Committee are
authorized, under the Omnibus Plan, to grant limited stock appreciation rights
("LSARs") with respect to all or any portion of the shares covered by options
granted to Reporting Persons simultaneously with the grant of the related
options if the related options are incentive stock options, or simultaneously
with the grant of, or at any time during the term of, the related options if the
related options are non-qualified options. The grant of an LSAR will not be
effective until six months after the date of its grant. Those options with
respect to which LSARs have been granted and become effective shall become
immediately exercisable upon the occurrence of any of the following events
(each, a "Triggering Event"): (i) consummation by the Company of a
reorganization, merger, or consolidation after approval of any such transaction
by shareholders, other than Reporting Persons, holding at least the minimum
number of shares necessary to approve such transaction under the Company's
Amended and Restated Articles of Incorporation, as amended (the "Articles") and
applicable law, (ii) consummation by the Company of a sale of substantially all
its assets after approval of any such transaction by shareholders, other than
Reporting Persons, holding at least the minimum number of shares necessary to
approve such transaction under the Articles and applicable law, or (iii)
acquisition by a single purchaser or group of related purchasers of in excess of
51% of the issued and outstanding shares of Common Stock from shareholders of
the Company other than Reporting Persons, in any case other than in a
transaction in which the surviving corporation or the purchaser is the Company
or a subsidiary of the Company (unless in such transaction the capital stock of
the Company or a subsidiary of the Company is converted into capital stock of an
entity other than the Company or any such subsidiary) or an entity controlled by
a Reporting Person.
Each LSAR provides that upon the occurrence of a Triggering Event, the
optionee will receive an amount in cash equal to the amount by which the fair
market value per share of the Common Stock issuable upon exercise of the option
on the date such 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. LSARs have been granted
with respect to options to purchase 295,000 shares granted under the Omnibus
Plan to Mr. Pops, options to purchase 74,500 shares granted to Mr. Landine and
options to purchase 56,250 shares granted to Dr. Bartus.
5
<PAGE> 8
OPTIONS OUTSTANDING, EXERCISABLE AND AVAILABLE FOR FUTURE GRANT
As of June 6, 1997, options to purchase 1,466,228 shares were outstanding
under the Omnibus Plan, of which options to purchase 669,785 shares were
exercisable. The exercise prices for the outstanding options ranged from $0.56
to $28.75 per share. On June 6, 1997, the last sale price of the Company's
Common Stock on the Nasdaq National Market was $17.125 per share. At June 6,
1997, options to purchase 62,699 shares (plus any options that expire or are
cancelled in the future) were available for future grant, exclusive of the
additional shares covered by the proposed amendment.
FEDERAL INCOME 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, a participant who is granted a
non-qualified option will not realize taxable income at the time the option is
granted. In general, a participant 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 participant'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
participant 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.
A participant is not taxed at the time an incentive option is granted. The
tax consequences upon exercise and later disposition depend upon whether the
participant was an employee of the Company or a subsidiary at all times from the
date of grant until three months preceding exercise (one year in the case of
permanent and total disability) and on whether the participant holds the shares
for more than one year after exercising the option and two years after the date
of grant of the option.
If the participant satisfies both the employment rule and the holding rule,
for regular tax purposes the participant will not realize income upon exercise
of the option and the Company will not be allowed an income tax deduction at any
time. The difference between the option price and the amount realized upon
disposition of the shares by the participant will generally constitute a
long-term capital gain or a long-term capital loss, as the case may be.
If the participant meets the employment rule but fails to observe the
holding rule (a "disqualifying disposition"), the participant generally
recognizes as ordinary income, in the year of the disqualifying disposition
(whether by sale or gift), the excess of the fair market value of the shares at
the date of exercise over the option price. In the case of a sale, any excess of
the sales price over the fair market value at the date of exercise will be
recognized by the participant as capital gain (long-term or short-term depending
on the length of time the stock was held after the option was exercised). If,
however, the sales price is less than the fair market value at the date of
exercise, then the ordinary income recognized by the participant is limited to
the excess of the sales price over the option price. In the case of any
disqualifying disposition, the Company's tax deduction is limited to the amount
of ordinary income recognized by the participant.
Different consequences will apply for a participant subject to the
alternative minimum tax.
6
<PAGE> 9
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 $100,000 during the fiscal year
ended March 31, 1997 (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Securities
Name and Restricted Underlying
Principal Stock Options/ All Other
Position Year Salary ($) Bonus ($) Awards ($)(1) LSARs (#) Compensation ($)
---------- ---- ---------- --------- ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Richard F. Pops 1997 291,116 50,000 0 40,000 0
Chief Executive 1996 266,346 15,000 0 87,500 0
Officer 1995 249,423 0 35,000 127,500(2) 0
Robert A. Breyer 1997 223,058 25,000 0 25,000 1,500(3)
President and Chief 1996 204,231 10,000 0 50,000 1,500(3)
Operating Officer 1995 143,077(4) 30,000(5) 0 207,500 16,735(6)
Raymond T. Bartus 1997 199,039 5,000 0 10,000 0
Senior Vice 1996 190,692 0 0 17,500 0
President, 1995 189,000 0 10,500 75,000(7) 0
Preclinical Research
and Development
Michael J. Landine 1997 197,752 30,000 0 25,000 0
Senior Vice 1996 179,231 0 0 51,500 0
President and 1995 175,000 0 21,000 57,000(8) 0
Chief Financial
Officer
Scott D. Putney 1997 177,538 5,000 0 10,000 0
Vice President, 1996 169,192 0 0 17,500 0
Protein and 1995 167,500 0 10,500 75,000 0
Molecular Biology
</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 and the
employee has not deferred the date on which forfeiture will lapse. Stock
certificates are issued to the grantees
7
<PAGE> 10
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, 1997) of the restricted stock awards as of June 6, 1997 of each Named
Executive Officer who has awards are as follows: Mr. Pops, 16,000 shares,
$224,000; Dr. Bartus, 4,200 shares, $58,800; Mr. Landine, 9,600 shares,
$134,400; Dr. Putney, 3,600 shares, $50,400.
(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." For a discussion of the LSARs held by
Mr. Pops, see "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements."
(3) Consists of payment to Mr. Breyer for opting out of the Company's health
insurance plan.
(4) Represents cash compensation paid to Mr. Breyer for 39 weeks of employment
in the fiscal year ended March 31, 1995.
(5) Consists of a signing bonus paid to Mr. Breyer upon commencement of his
employment in July 1994.
(6) 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 $1,154 payment to Mr. Breyer for
opting out of the Company's health insurance plan.
(7) Includes options to purchase 67,500 shares of the Company's Common Stock
granted in exchange for all outstanding options previously granted to Dr.
Bartus. See "Ten Year Option/SAR Repricings." Of such options, options to
purchase 56,250 shares were granted in tandem with LSARs. For a discussion
of the LSARs held by Dr. Bartus, see "Employment Contracts and Termination
of Employment and Change in Control Arrangements."
(8) Includes options to purchase 49,500 shares of the Company's Common Stock
granted, in tandem with LSARs, in exchange for certain outstanding options
previously granted to Mr. Landine. See "Ten Year Option/SAR Repricings."
For a discussion of the LSARs held by Mr. Landine, see "Employment
Contracts and Termination of Employment and Change-in-Control
Arrangements."
8
<PAGE> 11
OPTIONS/LSAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning stock options and
LSARs granted during the fiscal year ended March 31, 1997 to each of the Named
Executive Officers.
<TABLE>
<CAPTION>
Potential Realizable
Shares % of Total Value at Assumed
Underlying Options/LSARs Annual Rates of
Options/ Granted to Exercise Stock Price
LSARs Employees in or Base Expiration Appreciation for
Name Granted (#) Fiscal Year Price ($/Sh) Date Option Term
- ---- ----------- ---------------- ------------ ---------- ------------------------
5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Richard F. Pops 40,000 9.26 14.31 11/21/06 359,979 912,258
Robert A. Breyer 25,000 5.79 14.31 11/21/06 224,987 570,161
Raymond T. Bartus 10,000 2.31 14.31 11/21/06 89,995 228,065
Michael J. Landine 25,000 5.79 14.31 11/21/06 224,987 570,161
Scott D. Putney 10,000 2.31 14.31 11/21/06 89,995 228,065
</TABLE>
9
<PAGE> 12
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
The following table sets forth the number of shares acquired upon exercise
of options exercised by the Named Executive Officers during the fiscal year
ended March 31, 1997, the value realized upon exercise of such options, the
number of shares issuable on exercise of 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
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SAR at Options/SAR at
FY-End (#) FY-End ($)(1)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richard F. Pops 0 0 280,625 / 149,375 3,414,000 / 1,055,975
Robert A. Breyer 2,000 43,760 114,250 / 166,250 1,139,763 / 1,393,263
Raymond T. Bartus 0 0 53,125 / 49,375 548,775 / 397,425
Michael J. Landine 0 0 74,625 / 83,875 843,555 / 583,065
Scott D. Putney 0 0 53,125 / 49,375 548,775 / 397,425
</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, 1997 and
the exercise price of the option.
10
<PAGE> 13
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 Term
Underlying Market Price of Exercise Price Remaining
Options/SARS Stock at Time at Time of New at Date of
Repriced or of Repricing 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
Preclinical Research
and Development
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
Protein and
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> 14
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 automatically granted under the Stock Option Plan
For Non-Employee Directors, 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, 1997,
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 Professor Langer aggregating $86,572. 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. The Compensation
Sub-Committee consists of John K. Clarke and Paul Schimmel. Mr. Wall and Dr.
Schimmel are consultants to Alkermes and Professor Langer is a consultant to
ACTI. See "Compensation of Directors."
12
<PAGE> 15
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") is responsible for reviewing
and establishing the compensation, and the Compensation Sub-Committee is
responsible for reviewing and establishing compensation in the form of stock
options or restricted stock awards, of the Company's executive officers.
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, corporate partnering, 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 and the Compensation Sub-Committee seek to
provide a significant portion of executive compensation in the form of stock
options or restricted stock awards. The Committee and the Compensation
Sub-Committee have 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 the Committee and the
Compensation Sub-Committee members.
13
<PAGE> 16
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 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 and reward 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. Criteria
for bonuses for executive officers range from success in attracting equity
capital to success in conducting clinical trials to success in entering into new
and expanded collaborations.
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 and the Compensation Sub-Committee consider 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 and the Compensation Sub-Committee on the basis of the general
experience and subjective judgment of its members.
14
<PAGE> 17
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.
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 and the Compensation Sub-Committee attempt 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 development of 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 1996.
In March 1996, the Company acquired certain assets and technology owned or
used by Medisorb Technologies International L.P. In May 1996, the Company
successfully completed a public offering of 2,300,000 shares of its Common Stock
resulting in net proceeds to the Company of approximately $22.9 million. In
addition, a $5 million mortgage financing loan was completed in September 1996.
The Company expanded its collaboration for Medisorb(R) with Janssen
Pharmaceutica and its collaboration for ProLease(R) with Genentech, Inc. At the
time the Committee established Mr. Pops' compensation, the Company had
substantially negotiated and subsequently entered into a new collaboration for
ProLease with Johnson & Johnson.
In addition, the Company progressed in clinical trials of product
candidates based on its proprietary RMP-7(TM), ProLease and Medisorb drug
delivery systems. The Company completed a Phase I/II clinical trial of
intra-arterial RMP-7 and completed enrollment of one multi-center Phase II
clinical trial of intra-arterial RMP-7. In July 1996, Alkermes initiated a
non-controlled, open label Phase I/II clinical trial of intravenous RMP-7. In
August 1996, the Company completed a Phase I clinical trial of ProLease hGH in
growth hormone deficient adults and in November 1996 commenced a multi-center
Phase I/II clinical trial of ProLease hGH in growth hormone deficient children.
The Company successfully manufactured a Medisorb formulation of a Janssen
proprietary product and initial Phase I clinical trials of this Medisorb
formulation were completed in 1996.
15
<PAGE> 18
Given the significant role played by Mr. Pops in each of the above-noted
accomplishments, the Committee increased Mr. Pops' annual base salary effective
January 1, 1997 from $290,000 to $320,000 and granted Mr. Pops cash bonuses
during the fiscal year totaling $50,000. As additional recognition of Mr. Pops'
efforts in 1996, 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 November 1996 the Committee
granted Mr. Pops options to purchase 40,000 shares of Common Stock, which was
subsequently ratified by the Compensation Sub-Committee. The Committee believes
that each of these actions was particularly appropriate given Mr. Pops'
performance during calendar 1996 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
Compensation Sub-Committee
John K. Clarke Paul Schimmel
16
<PAGE> 19
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, 1993 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>
3/31/93 3/31/94 3/31/95 3/31/96 3/31/97
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Alkermes, Inc. 100.00 87.50 34.38 114.06 175.00
Nasdaq Stock Market 100.00 107.94 120.08 163.04 181.21
(U.S. Index)
Nasdaq Pharmaceutical 100.00 100.99 100.61 177.41 162.36
Index
</TABLE>
17
<PAGE> 20
MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of June 6, 1997 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....... 3,167,500(2) 15.25%
One Embarcadero, Ste. 2300
San Francisco, CA 94111
FMR Corporation........................ 2,100,100(3) 10.11%
82 Devonshire Street
Boston, MA 02109
ALZA Corporation....................... 2,000,000 9.63%
950 Page Mill Road
Palo Alto, CA 94303
Floyd E. Bloom......................... 166,000(4) *
Robert A. Breyer....................... 173,750(5) *
John K. Clarke......................... 26,968(6) *
Robert S. Langer....................... 171,189(7) *
Richard F. Pops........................ 345,091(8) 1.64%
Alexander Rich......................... 184,200(9) *
Paul Schimmel.......................... 302,200(9) 1.46%
Michael A. Wall........................ 489,850(10) 2.36%
Raymond T. Bartus...................... 84,125(11) *
Michael J. Landine..................... 154,775(12) *
Scott D. Putney........................ 84,725(13) *
</TABLE>
18
<PAGE> 21
<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 (16 persons)............ 2,275,673(14) 10.52%
</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) Information is as of December 31, 1996. Amerindo Investment Advisors Inc.
holds these shares in its capacity as investment advisor for various
fiduciary accounts.
(3) Information is as of May 8, 1997. FMR Corporation holds 1,983,000 of these
shares in its capacity as investment advisor for various fiduciary
accounts.
(4) Includes 163,500 shares of Common Stock held by the Corey-Bloom Family
Trust. Also includes 2,500 shares of Common Stock subject to options which
are exercisable or which will become exercisable within 60 days of June 6,
1997.
(5) Includes 166,750 shares of Common Stock subject to options which are
exercisable or will become exercisable within 60 days of June 6, 1997.
(6) Includes 850 shares of Common Stock issuable upon exercise of warrants
which are exercisable. Also includes 12,500 shares of Common Stock subject
to options which are exercisable.
(7) Includes 167,857 shares of Common Stock held by The Wetmann Trust.
Professor Langer is a beneficiary of The Wetmann Trust, but has no voting
or investment power with respect to the shares held by The Wetmann Trust.
Also includes 832 shares held by a trust, of which Professor Langer's wife
is trustee, for the benefit of his children. Also includes 2,500 shares of
Common Stock subject to options held by Professor Langer which are
exercisable.
(8) Includes 332,500 shares of Common Stock subject to options which are
exercisable or which will become exercisable within 60 days of June 6,
1997.
(9) Includes 1,700 shares of Common Stock issuable upon exercise of warrants
which are exercisable. Also includes 2,500 shares of Common Stock subject
to options which are exercisable.
(10) Includes 2,500 shares of Common Stock subject to options which are
exercisable.
(11) Includes 78,125 shares of Common Stock subject to options which are
exercisable or which will become exercisable within 60 days of June 6,
1997.
19
<PAGE> 22
(12) Includes 99,875 shares of Common Stock subject to options which are
exercisable or which will become exercisable within 60 days of June 6,
1997.
(13) Includes 78,125 shares of Common Stock subject to options which are
exercisable or which will become exercisable within 60 days of June 6,
1997. 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 6,
1997.
(14) Includes 874,625 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 6, 1997. 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 6, 1997. Also includes 167,857 shares of Common
Stock held by The Wetmann Trust and 163,500 Shares of Common Stock held by
the Corey-Bloom Family 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 Omnibus Plan,
the Amended and Restated 1989 Non-Qualified Stock Option Plan or the Stock
Option Plan for Non-Employee Directors.
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. Until funding was completed in the quarter
ended June 30, 1996, the Company was reimbursed by the Partnership for its
actual costs incurred in conducting such research and development, and also
received a management fee of 10% of such costs. For the fiscal year ended March
31, 1997, the Company recorded revenue of $1,415,313 from the Partnership
pursuant to the Product Development Agreement. Since the completion of funding
from the Partnership, Alkermes has used its own resources, and intends to
continue to use its own resources, to develop RMP-7, but may be forced to seek
alternative sources of funding, including additional collaborators.
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 amendment
to the Omnibus 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
20
<PAGE> 23
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.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, independent auditors, audited the consolidated
financial statements of the Company for the fiscal year ended March 31, 1997.
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, 1998.
DEADLINE FOR SHAREHOLDERS PROPOSALS
The Company must receive any proposal which a shareholder wishes to submit
at the 1998 annual meeting of shareholders before February 27, 1998 if the
proposal is to be considered by the Board of Directors for inclusion in the
proxy material for that meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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. Professor Langer is a beneficiary of The
Wetmann Trust but, has no voting or investment power with respect to the shares
held by The Wetmann Trust, which sold 20,000 shares of Common Stock in May,
1996. The Wetmann Trust timely filed a Form 4 reporting the sale of only 10,000
shares of Common Stock. The error was discovered in July, and an amended Form 4
was filed to reflect the sale of all 20,000 shares. 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, 1997, 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 27, 1997
21
<PAGE> 24
DETACH HERE
PROXY
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, 1997
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, 1997, 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 the proposal listed on the other side hereof.
(PLEASE FILL IN, SIGN AND DATE ON THE OTHER SIDE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE)
<PAGE> 25
APPENDIX
ALKERMES, INC.
AMENDED AND RESTATED 1990 OMNIBUS STOCK OPTION PLAN
(ADOPTED ON SEPTEMBER 19, 1990, AS AMENDED
THROUGH JUNE 11, 1997)
1. OBJECTIVES
The objectives of this Plan are to assist Alkermes, Inc. (the
"Company") in attracting and retaining employees, officers and directors of and
consultants to the Company and in promoting the identification of such persons'
interests with those of the Company's shareholders.
2. DEFINITIONS
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
any successor statute or codification of the income tax laws of the United
States.
"Committee" shall mean the Stock Option Committee of the Board of
Directors, which shall consist of at least two directors, each of whom is a
disinterested person within the meaning of Rule 16b-3(c)(2)(i) under the
Exchange Act.
"Common Stock" shall mean the Company's Common Stock, par value $.01
per share.
"Date of Grant" in relation to any option granted under this Plan
shall mean the date on which, or the future date as of which, the Board or the
Committee grants that option.
"Eligible Person" shall mean any employee, consultant, officer or
director of the Company or any Parent or Subsidiary. For the purposes of
Incentive Stock Options, Eligible Persons must meet all the requirements under
Section 422 of the Code.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Exercise" in respect of an option shall mean the delivery by the
Optionee to the Company of (a) written notice of exercise of the option as to a
specified number of Shares; (b) payment of the option exercise price for such
Shares; and (c) any other statement or evidence required pursuant to Section 9
hereof.
"Fair Market Value" of a Share with respect to any day shall mean (i)
the average of the high and low price on such day for a share of Common Stock as
reported on the principal securities
<PAGE> 26
exchange on which shares of Common Stock are then listed or as quoted on the
NASDAQ National Market System, (ii) if not so listed or quoted, the average of
the closing bid and asked prices on such day as reported on NASDAQ, and (iii) if
not so listed, quoted or reported, the value as determined in good faith by the
Board or the Committee, as the case may be.
"Incentive Stock Option" shall mean any option that, at the time of
grant, meets the requirements of Section 422 of the Code and is identified as an
incentive stock option.
"ISO Plans" shall mean the Plan and all other incentive stock option
plans under Section 422 of the Code adopted or assumed by corporations that are
Qualified Employers.
"NASDAQ" shall mean the National Association of Securities Dealers
Automated Quotation System.
"Non-Qualified Stock Option" shall mean any option granted under the
Plan other than an Incentive Stock Option.
"Non-Section 16 Eligible Person" shall mean an Eligible Person who is
not an Officer or a director of the Company.
"Officer" shall mean a person who has been designated by the Board as
an officer of the Company within the meaning of Rule 16a-1(f) of the Exchange
Act.
"Optionee" shall mean a person holding an option granted under this
Plan which has not been exercised or surrendered and has not expired.
"Parent" shall mean a corporation which, at the time in question, owns
at least 50% of the total combined voting power of all classes of outstanding
stock of the Company (or of a corporation that has issued or assumed a stock
option of the Company in a transaction to which Section 424(a) of the Code
applies) and a corporation which, at such time, owns at least 50% of the total
combined voting power of all classes of stock in another Parent.
"Plan" means this Amended and Restated 1990 Omnibus Stock Option Plan,
as amended from time to time.
"Qualified Employer" shall mean the Company, any Parent or any
Subsidiary.
"Section 16 Eligible Person" shall mean an Eligible Person who is an
Officer or a director of the Company.
"Shares" shall mean shares of Common Stock of the Company for which
options may be granted hereunder.
"Subsidiary" shall mean a corporation in which, at the time in
question, the Company (or a corporation that issued or assumed a stock option of
the Company in a transaction to which Section 424(a) of the Code applies) owns
at least 50% of the total combined voting power of all classes of stock
2
<PAGE> 27
outstanding and a corporation in which, at such time, another Subsidiary owns at
least 50% of the total combined voting power of all classes of stock
outstanding.
"Ten Percent Shareholder" shall mean an Eligible Person who owns at
the Date of Grant more than 10% of the total combined voting power of all
classes of stock of a Qualified Employer.
3. MAXIMUM NUMBER OF SHARES TO BE OPTIONED AND ADJUSTMENTS IN OPTIONED SHARES
The maximum number of Shares for which options may be granted
hereunder is 1,750,000. This number shall be adjusted if the number of
outstanding shares of Common Stock of the Company is increased or reduced by
split-up, reclassification, stock dividend, or the like. The number of Shares
previously optioned and not theretofore delivered and the option exercise price
per Share shall likewise be adjusted whenever the number of outstanding shares
of Common Stock is increased or reduced by any such procedure. Shares for which
options have expired or have been surrendered may again be optioned pursuant to
the Plan.
4. ADMINISTRATION AND INTERPRETATION
Except to the extent provided below, this Plan shall be administered
by the Board. The Board may delegate responsibility for administration to the
Committee. The Board, or such Committee, may make such rules and establish such
procedures as it deems appropriate for the administration of the Plan. In the
event of any disagreement as to the interpretation of the Plan or any rule or
procedure thereunder, the decision of the Board, or such Committee, shall be
final and binding upon all persons in interest. Members of the Board who are
eligible to participate in or have been granted options under the Plan may vote
on matters affecting administration of the Plan; provided, however, that the
Committee shall have the authority and sole responsibility for granting options
to Section 16 Eligible Persons and authorizing the issuance of Shares upon the
exercise thereof, and for the administration of the Plan with respect thereto.
5. GRANTING OF OPTIONS
The Board is authorized to grant options to Non-Section 16 Eligible
Persons pursuant to this Plan. The number of Shares, if any, optioned in each
year, the Non-Section 16 Eligible Persons to whom and the time or times at which
options are granted, the number of Shares optioned to each Non-Section 16
Eligible Person and the other terms and provisions of such options shall be
wholly within the discretion of the Board, subject to the limitation that no
option shall be granted (notwithstanding any other provisions of this Plan to
the contrary) later than September 19, 2000.
The Committee is authorized to grant options to Section 16 Eligible
Persons pursuant to this Plan. The number of Shares, if any, optioned in each
year, the Section 16 Eligible Persons to whom and the time or times at which
options are granted, the number of Shares optioned to each Section 16 Eligible
Person and the other terms and provisions of such options shall be wholly within
the discretion of the Committee, subject to the limitation that no option shall
be granted (notwithstanding any other provisions of this Plan to the contrary)
later than September 19, 2000.
3
<PAGE> 28
6. TYPE OF OPTIONS
This Plan permits the grant of Non-Qualified Stock Options, as well as
Incentive Stock Options. Options granted under the Plan will be designated as
Non-Qualified Stock Options or Incentive Stock Options at the time of their
grant.
7. OPTION TERMS
Subject to the limitation prescribed in Section 5 above, the options
granted under this Plan shall be on the terms stated in clauses (a) through (h)
below. The Board or the Committee, as the case may be, may specify additional
terms not inconsistent with this Plan by rules of general application or by
specific direction in connection with a particular option or group of options.
(a) The option exercise price shall be fixed by the Board or the
Committee, as the case may be, but shall not be less than 100% (110% in the case
of an Incentive Stock Option granted to a Ten Percent Shareholder) of the Fair
Market Value of the underlying Shares on the Date of Grant.
(b) The option exercise price shall be payable in cash, property,
services rendered or, under certain circumstances, in shares of Common Stock of
the Company having a Fair Market Value equal to the option exercise price on the
date of exercise, or any combination thereof, or any other means which the Board
or the Committee, as the case may be, determines are consistent with the Plan's
purpose and applicable laws.
(c) The option shall not be transferable otherwise than by will or the
laws of descent and distribution and shall be exercisable during the Optionee's
lifetime only by the Optionee or after his death by the person or persons
entitled thereto by will or the laws of descent and distribution.
(d) The term of the option shall be fixed by the Board or the
Committee, as the case may be, but no option shall be granted for a term to
exceed ten years or, in the case of an Incentive Stock Option being granted to a
Ten Percent Shareholder, for a term to exceed five years.
(e) The option shall terminate and may not be exercised if the
Optionee ceases for any reason (including death, retirement or disability) to be
an employee of the Qualified Employer, except to the extent provided in Section
9 hereof.
(f) In the event that the Company is succeeded by another company in a
reorganization, merger, consolidation, acquisition of property or stock,
separation or liquidation, the successor company shall assume the outstanding
options granted under this Plan or shall substitute new options for them, which
shall provide that the Optionee, at the same cost, shall be entitled upon the
exercise of such option to receive such securities of the surviving or resulting
corporation as the Board of Directors of such corporation shall determine to be
equivalent, as nearly as practicable, to the nearest whole number and class of
shares of stock or other securities to which the Optionee would have been
entitled under the terms of the agreement governing the reorganization, merger,
consolidation, acquisition of property or stock, separation or liquidation as
if, immediately prior to such event, the Optionee had been the holder of record
of the number of Shares which were then subject to such option.
4
<PAGE> 29
(g) The aggregate Fair Market Value (determined as of the Date of
Grant) of the Shares for which Incentive Stock Options are granted under the ISO
Plans to any one Eligible Person that are exercisable for the first time during
any calendar year shall not exceed $100,000.
(h) The terms and conditions of the grant of each option granted
hereunder shall be embodied in a written award certificate in a form prescribed
by the Board or by the Committee, as the case may be, which (i) has been
completed with the date, name of Optionee, number of Shares to which it relates,
type of option, term of option, option price per Share, name of Optionee's
employing company and (with respect to Incentive Stock Options) the conditions
required to qualify as an incentive stock option under Section 422 of the Code,
(ii) has been signed by a member of the Board or the Committee or an officer of
the Company designated by the Board or by the Committee, as the case may be, and
(iii) has been delivered to the Optionee.
8. LIMITED STOCK APPRECIATION RIGHTS
(a) The Committee is authorized, in its discretion, to grant limited
stock appreciation rights ("LSARs") with respect to all or any portion of the
Shares covered by stock options granted hereunder to Officers and directors of
the Company, simultaneously with the grant of, or at any time during the term
of, non-qualified options or simultaneously with the grant of incentive stock
options. The grant of the LSAR will not be effective until six months after the
date of its grant. Those options with respect to which an LSAR has been granted
and become effective shall become immediately exercisable upon the occurrence of
any of the following events (each, a "Triggering Event"): (i) the consummation
by the Company of a reorganization, merger, or consolidation after approval of
any such transaction by shareholders, other than Section 16 Eligible Persons,
holding at least the minimum number of shares necessary to approve such
transaction under the Company's Articles of Incorporation and applicable law,
(ii) the consummation by the Company of a sale of substantially all its assets
after approval of any such transaction by shareholders, other than Section 16
Eligible Persons, holding at least the minimum number of shares necessary to
approve such transaction under the Company's Articles of Incorporation and
applicable law, or (iii) the acquisition by a single purchaser or group of
related purchasers of in excess of 51% of the issued and outstanding shares of
Common Stock from shareholders of the Company other than Section 16 Eligible
Persons, in any case other than in a transaction in which the surviving
corporation or the purchaser is the Company or a Subsidiary of the Company
(other than a transaction in which the surviving corporation or the purchaser is
the Company or a Subsidiary of the Company but the capital stock of the Company
or a Subsidiary of the Company is converted into capital stock of any entity
other than the Company or any such Subsidiary) or an entity controlled by
Section 16 Eligible Persons.
(b) The LSARs shall provide that upon the occurrence of any Triggering
Event, the Optionee shall receive from the Company, for each LSAR, an amount in
cash equal to the amount by which the option exercise price per Share of the
option to which the LSAR relates is exceeded by the Fair Market Value of the
Shares issuable upon exercise of such option on the date such Triggering Event
occurs. When a Triggering Event occurs, the option to which the LSAR relates
will cease to be exercisable, but will be deemed to have been exercised for
purposes of determining the number of Shares for which options may be granted
hereunder.
(c) An LSAR shall be expressly subject to the following additional
requirements: (i) the LSAR shall expire no later than the expiration of the
underlying option; (ii) the LSAR shall be
5
<PAGE> 30
transferable only when the underlying option is transferable, and under the same
conditions; and (iii) 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.
9. EXERCISE RIGHTS UPON CEASING TO BE AN EMPLOYEE, OFFICER, CONSULTANT OR
DIRECTOR
(a) If an Optionee becomes permanently and totally disabled, he may
exercise his option for up to one year after the date he ceases to be an
employee, officer or director of or a consultant to a Qualified Employer on
account of such disability, but in no event later than the date on which the
option would have expired if the Optionee had not become disabled. During such
period, the option may be exercised only to the extent that the Optionee was
entitled to do so at the date of disability and, to the extent the option is not
so exercised, it shall expire at the end of such period. For purposes of this
Section 9(a), an Optionee shall be deemed to be disabled if, in the
determination of the Board or the Committee, as the case may be, he is unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months.
(b) If an Optionee dies during a period in which he is entitled to
exercise an option (including the period referred to in subsection (a) above),
the option shall terminate one year after the date of death, but in no event
later than the date on which the option would have expired if the Optionee had
lived. During such period, the option may be exercised by the Optionee's
executor or administrator or by any person or persons who shall have acquired
the option directly from the Optionee by bequest or inheritance or by reason of
the death of the Optionee, but only to the extent that the Optionee was entitled
to do so at the date of death and, to the extent the option is not so exercised,
it shall expire at the end of such period.
(c) If an Optionee ceases to be an employee, officer or director of or
consultant to any and all Qualified Employers in circumstances other than those
described in subsections (a) or (b) above, he may exercise options granted
hereunder for a period not to exceed three months after the date of such
cessation, but in no event later than the date on which the option would have
expired if the Optionee had remained an employee, officer or director of or
consultant to a Qualified Employer. During such period, the option may be
exercised only to the extent that the Optionee was entitled to do so on the date
of cessation and, to the extent the option is not so exercised, it shall expire
at the end of such three-month period. This provision shall not apply if the
Optionee's employment or consultant relationship was terminated for "cause," or
if the officer or director was removed for "cause," which shall include theft,
falsification of records, fraud, embezzlement, gross negligence or willful
misconduct, causing a Qualified Employer to violate any federal, state, or local
law, or administrative regulation or ruling having the force and effect of law,
insubordination, conflict of interest, diversion of corporate opportunity, or
conduct that results in publicity that reflects unfavorably on a Qualified
Employer.
(d) For purposes of this section an Optionee who is an employee shall
not be treated as having ceased employment if (1) the Optionee is on military,
sick leave or other bona fide leave of absence (such as temporary employment by
the United States Government); and (2) the period of such leave does not exceed
90 days, or, if longer, so long as the Optionee's right to reemployment with a
Qualified Employer is guaranteed by statute or by contract. Where the period of
leave exceeds 90 days and the Optionee's right to reemployment is not guaranteed
by statute or by contract, such Optionee shall be deemed to have ceased being an
employee on the 91st day of such leave.
6
<PAGE> 31
10. ADDITIONAL REQUIREMENTS
Upon the exercise of an option granted hereunder the Board or the
Committee, as the case may be, may require the Optionee to deliver the
following:
(a) A written statement satisfactory to the Company or its counsel
that the Optionee is purchasing the Shares for investment and not with a view
toward their distribution or sale and will not sell or transfer any Shares
received upon the exercise of the option except in accordance with the
Securities Act of 1933 and applicable state securities laws; and
(b) Evidence reasonably satisfactory to the Company that at the time
of exercise the Optionee meets such other requirements as the Board or the
Committee, as the case may be, may determine.
11. SHARES SUBJECT TO OPTION
The Shares issuable upon exercise of options granted hereunder may be
unissued shares or treasury shares, including shares bought on the open market.
The Company at all times during the term of this Plan shall reserve for issuance
the number of Shares issuable upon exercise of options granted hereunder.
12. COMPLIANCE WITH GOVERNMENTAL AND OTHER REGULATIONS
The Company will not be obligated to issue and sell the Shares issued
pursuant to options granted hereunder if, in the opinion of its counsel, such
issuance and sale would violate any applicable federal or state securities laws.
The Company will seek to obtain from each regulatory commission or agency having
jurisdiction such authority as may be required to issue and sell Shares issuable
upon exercise of any option granted hereunder. Inability of the Company to
obtain from any such regulatory commission or agency authority which counsel for
the Company deems necessary for the lawful issuance and sale of Shares upon
exercise of an option granted hereunder shall relieve the Company from any
liability for failure to issue and sell such Shares until the time when such
authority is obtained or is obtainable.
13. NONASSIGNMENT OF OPTIONS
Except as otherwise provided in Paragraph 7(c) hereof, any option
granted hereunder and the rights and privileges conferred hereby shall not be
transferred, assigned, pledged or hypothecated in any way (whether by operation
of law 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 or any attachment or similar process upon the rights and
privileges conferred hereby, such option and the rights and privileges conferred
hereby shall immediately terminate.
7
<PAGE> 32
14. RIGHTS OF OPTIONEE IN SHARES
Neither any Optionee nor the legal representatives, heirs, legatees,
or distributees of any Optionee, shall be deemed to be the holder of, or to have
any rights of a holder with respect to, any Shares issuable upon exercise of an
option granted hereunder unless and until such Shares are issued to him or them.
15. DELIVERY OF SHARES ISSUED PURSUANT TO OPTION
Subject to the other terms and conditions of this Plan, upon the
exercise of an option granted hereunder, the Company shall sell to the Optionee
the Shares with respect to which the option has been exercised.
16. WITHHOLDING OF APPLICABLE TAXES
A Qualified Employer shall have the right to reduce the number of
Shares otherwise required to be issued upon exercise of an option granted
hereunder by an amount which would have a Fair Market Value on the date of such
exercise equal to all Federal, state, city, or other taxes as shall be required
to be withheld by the Qualified Employer pursuant to any statute or other
governmental regulation or ruling. In connection with all such withholding
obligations (whether arising in connection with an exercise of an option granted
hereunder or in connection with a disqualifying disposition (as defined in
Section 421(b) of the Code) of stock obtained upon exercise of an Incentive
Stock Option granted hereunder), a Qualified Employer may make any other
arrangements consistent with this Plan as it may deem appropriate, including but
not limited to withholding such taxes from cash compensation payable to the
Optionee and requiring the Optionee to remit cash in an amount equal to the
taxes required to be withheld.
17. PLAN AND OPTIONS NOT TO AFFECT EMPLOYMENT OR OTHER AFFILIATION
Neither this Plan nor any options granted hereunder shall confer upon
any Eligible Person any right to continue employment or affiliation with any
Qualified Employer.
18. AMENDMENT OF PLAN
The Board may make such amendments to this Plan as it deems necessary
or advisable, provided that, without further action by the shareholders of the
Company, no such amendment shall (a) materially increase the maximum number of
Shares for which options may be granted, except as provided in Section 3, (b)
materially increase the benefits under the Plan, or (c) materially modify the
requirements as to eligibility for participation in the Plan, and in no event
shall any such amendment impair the rights of any participant under any option
theretofore granted.
19. NOTICES
Any notice required or permitted hereunder shall be sufficiently given
only if sent by registered or certified mail, postage prepaid, addressed to the
Company, 26 Landsdowne Street, Cambridge, MA 02139 and to the Optionee at the
address on file with the Company at the time of grant
8
<PAGE> 33
hereunder, or to such other address as either party may hereafter designate in
writing by notice similarly given by one party to the other.
20. SUCCESSORS
The Plan shall be binding upon and inure to the benefit of any
successor, successors or assigns of the Company.
21. SEVERABILITY
If any part of this 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 this Plan which shall continue in full force and
effect.
22. TERMINATION OF THE PLAN
The Board may terminate this Plan at any time; otherwise this Plan
shall terminate September 19, 2000. Termination of the Plan shall not deprive
Optionees of their rights under previously granted options.
23. GRANTS OF OPTIONS AFTER AMENDMENTS TO PLAN
The grant of any option hereunder on or after the date the Board has
adopted any amendments to the Plan that require shareholder approval pursuant to
Section 18 hereof, is subject to the express condition that within 12 months
after such date, the holders of a majority of the outstanding shares of Common
Stock present, or represented, and entitled to vote thereon shall have approved
the Plan at a duly held meeting of the shareholders of the Company.
9
