<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
JULY 29, 1998
--------------------
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 Wednesday, July 29, 1998, 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 an amendment to the Alkermes Amended and
Restated 1990 Omnibus Stock Option Plan, as amended, to increase to 3,250,000
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 10, 1998 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 10, 1998 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 29, 1998
<PAGE> 3
ALKERMES, INC.
PROXY STATEMENT
INTRODUCTION
The accompanying proxy is solicited by the Board of Directors of
Alkermes, Inc., a Pennsylvania corporation ("Alkermes" or the "Company"), in
connection with its 1998 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 29, 1998 (the "Meeting"). Copies of this Proxy Statement and
the accompanying proxy are being mailed on or after June 29, 1998 to the holders
of record of Common Stock on June 10, 1998 (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 an 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 Amended and Restated 1990
Omnibus Stock Option Plan, as amended. 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 21,094,353 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 1999 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
<PAGE> 4
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. 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 10,
1998, including their recent employment, positions with the Company, other
directorships and age.
Dr. Bloom, age 61, 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 54, 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 44, 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 has been the managing general partner of Cardinal Health Partners, a
venture capital fund, since October 1997. Mr. Clarke is a director of DNX
Corporation, Inc. and Cubist Pharmaceuticals, Inc., both biopharmaceutical
companies, and a number of private health care companies.
Professor Langer, age 49, has served as a director of Alkermes 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. Professor Langer
is a director of Focal Inc., a medical device company.
Mr. Pops, age 36, 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
2
<PAGE> 5
currently serves on the Board of Directors of Immulogic Pharmaceutical
Corporation, Neurocrine Biosciences, Inc., the Biotechnology Industry
Organization (BIO) and The Brain Tumor Society (a non-profit organization). Mr.
Pops is President of the Massachusetts Biotechnology Council (MBC) and a member
of the BIO Emerging Companies Section Governing Body.
Dr. Rich, age 73, 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 has been a
member of the National Academy of Sciences since 1970 and a Senior Member of the
Institute of Medicine since 1990. Dr. Rich is Co-Chairman of the Board of
Directors of Repligen Corporation, a biopharmaceutical company.
Dr. Schimmel, age 57, is a founder of Alkermes and has been a director
of Alkermes since 1987. Dr. Schimmel is presently a member of the Skaggs
Institute for Chemical Biology at The Scripps Research Institute. Dr. Schimmel
was the John D. and Catherine T. MacArthur Professor of Biophysics and
Biochemistry at the Massachusetts Institute of Technology, where he was employed
from 1967 through 1997. A member of the National Academy of Sciences and the
American Academy of Arts and Sciences, Dr. Schimmel graduated from Ohio Wesleyan
University, 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 69, is a founder of Alkermes and has been Chairman of the
Board of Alkermes since 1987. From April 1992 until June 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.
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 held during the year of the Board and of all committees of which he was
a member. The standing committees of the Board are the Audit Committee, the
Compensation Committee and the Compensation Sub-Committee. The Board does not
have a standing nominating committee. The Audit Committee, consisting of John K.
Clarke and Alexander Rich, met once 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 and otherwise acted by unanimous written consent.
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 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, did not meet during the last fiscal year but acted by
unanimous written consent.
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, as
amended (the "Omnibus Plan"), authorizes the issuance of options to purchase up
to 2,500,000 shares of Common Stock. In June 1998, 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 3,250,000. 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 2,500,000 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 3,250,000. Such options may either be "incentive stock options" as
defined in Section 422 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 approximately 225 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. Therefore, the benefits and amounts that will be received by participants
under the Omnibus Plan are not currently determinable.
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 Richard F. Pops, Chief Executive Officer, options to purchase 74,500
shares granted to Michael J. Landine, Senior Vice President, Chief Financial
Officer and Treasurer and options to purchase 56,250 shares granted to Raymond
T. Bartus, Senior Vice President, Preclinical Research and Development.
5
<PAGE> 8
OPTIONS OUTSTANDING, EXERCISABLE AND AVAILABLE FOR FUTURE GRANT
As of June 10, 1998, options to purchase 1,734,871 shares were
outstanding under the Omnibus Plan, of which options to purchase 859,399 shares
were exercisable. The exercise prices for the outstanding options ranged from
$0.56 to $27.69 per share. On June 10, 1998, the last sale price of the
Company's Common Stock on the Nasdaq National Market was $20.25 per share. At
June 10, 1998, options to purchase 381,072 shares (plus any options that expire
unexercised 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 and does not address the rates of taxation applicable
to specific categories of taxpayers or classes of income. 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 an incentive 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 $100,000 during the fiscal
year ended March 31, 1998 (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------- ------------
Securities
Name and Underlying
Principal Options(1) All Other
Position Year Salary ($) Bonus ($) (#) Compensation ($)
---------- ---- ---------- --------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Richard F. Pops 1998 326,000 150,000 80,000 0
Chief Executive 1997 291,116 50,000 40,000 0
Officer 1996 266,346 15,000 87,500 0
Robert A. Breyer 1998 239,000 75,000 40,000 1,500(2)
President and Chief 1997 223,058 25,000 25,000 1,500(2)
Operating Officer 1996 204,231 10,000 50,000 1,500(2)
Raymond T. Bartus 1998 209,100 15,000 10,000 0
Senior Vice 1997 199,039 5,000 10,000 0
President, 1996 190,692 0 17,500 0
Preclinical Research
and Development
Michael J. Landine 1998 212,800 75,000 40,000 0
Senior Vice 1997 197,752 30,000 25,000 0
President, 1996 179,231 0 51,500 0
Chief Financial
Officer and
Treasurer
James L. Wright 1998 170,800 25,000 20,000 0
Vice President, 1997 159,742 10,000 20,000 0
Pharmaceutical 1996 151,587 0 20,000 0
Department
</TABLE>
- --------------
(1) Alkermes granted no LSARs.
(2) Consists of payment to Mr. Breyer for opting out of the Company's
health insurance plan.
7
<PAGE> 10
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning stock options
granted during the fiscal year ended March 31, 1998 to each of the Named
Executive Officers.
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------------------------
Potential Realizable
Number of Percent of Total Value at Assumed
Securities Options Annual Rates of
Underlying Granted to Exercise Stock Price
Options 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% ($)
Richard F. Pops 80,000 16.92 15.88 07/25/07 798,948 2,024,690
Robert A. Breyer 40,000 8.46 15.88 07/25/07 399,474 1,012,345
Raymond T. Bartus 10,000 2.12 17.38 12/12/07 109,302 276,992
Michael J. Landine 40,000 8.46 15.88 07/25/07 399,474 1,012,345
James L. Wright 20,000 4.23 15.88 07/25/07 199,737 506,173
</TABLE>
8
<PAGE> 11
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
The following table sets forth the number of shares acquired upon
exercise of options exercised by the Named Executive Officers during the fiscal
year ended March 31, 1998, the value realized upon exercise of such options, the
number of shares issuable on exercise of options held by such persons at the end
of the last fiscal year and the value of such unexercised options as of such
date.
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs at
at FY-End (#) FY-End ($)(1)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard F. Pops 0 0 354,375 / 155,625 7,899,072 / 1,954,353
Robert A. Breyer 13,000 190,070 171,875 / 135,625 3,508,972 / 2,148,666
Raymond T. Bartus 0 0 84,375 / 28,125 1,760,122 / 372,616
Michael J. Landine 0 0 112,126 / 86,374 2,376,171 / 1,126,186
James L. Wright 0 0 33,750 / 51,250 668,106 / 680,969
</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, 1998, $24.875,
and the exercise price of the options.
9
<PAGE> 12
TEN-YEAR OPTION/SAR REPRICING
The following table sets forth certain information with respect to the
stock options held by the Company's Named Executive Officers that have been
repriced since the formation of the Company in 1987.
<TABLE>
<CAPTION>
Length of
Number of Original
Securities Term
Underlying Market Price of Exercise Price Remaining
Options/SARs Stock at Time at Time of New at Date of
Repriced or of Repricing or Repricing or Exercise Repricing or
Name Date Amended Amendment($) Amendment($) Price($) Amendment
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <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 7/21/94 15,000(1) 3.69 9.00 3.69 8 years 153 days
President,
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 7/21/94 20,000(1) 3.69 9.00 3.69 8 years 153 days
President, 7/21/94 21,000(1) 3.69 7.94 3.69 9 years 182 days
Chief Financial 11/25/91 25,000 11.375 15.875 11.375 9 years 324 days
Officer and
Treasurer
</TABLE>
- ---------------
(1) All options indicated were exchanged for options to purchase 25% fewer
shares.
10
<PAGE> 13
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 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 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
Each non-employee director automatically receives 2,500 stock options under
the Stock Option Plan for Non-Employee Directors each year on the date of the
Company's annual meeting of shareholders. Such options are exercisable at the
fair market value of the Company's Common Stock on the date such options are
granted and vest in full six (6) months following their grant. Except for such
stock options, 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, 1998, 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."
11
<PAGE> 14
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 16.
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. The Committee and the Compensation Sub-Committee have not, however,
targeted a range or specific number of options for each executive position, but
makes their decisions based on the above-mentioned survey and the general
experience of the Committee and the Compensation Sub-Committee members.
12
<PAGE> 15
COMPENSATION MIX
The Company's executive compensation packages generally include three
components: base salary; a discretionary annual cash bonus; and stock options.
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. 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
Grants of stock options under the Company's stock option award plan 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 a four-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 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, 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 to each executive
officer is generally determined by the Committee and the Compensation
Sub-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.
13
<PAGE> 16
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 significant
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 1997:
In the first quarter of 1997, the Company successfully completed the sale
of 2,000,000 shares of its Common Stock to ALZA Corporation at $25 per share,
with net proceeds to the Company of approximately $49.7 million. In addition,
during the year the Company successfully obtained $6.5 million in equipment
loans from a bank.
In March 1997, the Company announced results of its U.S. Phase II clinical
trial of intravenous Cereport(TM) (formerly known as RMP-7(TM)) and carboplatin.
Based on this trial and the Company's two European Phase II clinical trials of
intravenous Cereport and carboplatin, the Company made a decision to proceed
into a global Phase III clinical trial of intravenous Cereport and carboplatin
in patients with newly-diagnosed brain tumors. The Company also completed a
Phase II clinical trial of intra-arterial Cereport during the year. In October,
the Company entered into an agreement with ALZA to develop and commercialize
Cereport. ALZA made a $10 million upfront payment to the Company to fund
clinical development; in return, ALZA will have the option to acquire exclusive
worldwide commercialization rights to Cereport.
In addition, during 1997, the Company completed a multi-center Phase II
clinical trial of ProLease(R) hGH in growth hormone deficient children. As a
result, in December 1997 the Company and Genentech, Inc. commenced a pivotal
Phase III clinical trial in the same indication. In connection with the decision
to proceed to Phase III, the Company began designing a 30,000 square foot GMP
(good manufacturing practices) ProLease production facility in Cambridge,
Massachusetts to support the anticipated commercial launch of ProLease hGH.
In August 1997, the Company entered into a supply agreement with Janssen
Pharmaceutica International, for commercial quantities of Alkermes' Medisorb(TM)
injectable sustained release formulation of a Janssen proprietary product. As a
result of the signing of the agreement, Alkermes began a 20,000 square foot
expansion of its GMP manufacturing facility in Wilmington, Ohio. During the
year, the Company successfully manufactured clinical trial material for a
multi-center Phase II clinical trial which was started in 1997 by Janssen.
14
<PAGE> 17
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, 1998 from $320,000 to $350,000 and granted Mr. Pops a cash bonus of
$150,000. As additional recognition of Mr. Pops' efforts in 1997, and in
furtherance of the Committee's belief that a significant portion of Mr. Pops'
total compensation should be dependent on the long-term appreciation of the
Company's stock price, in July 1997 the Committee granted Mr. Pops options to
purchase 80,000 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 1997
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
15
<PAGE> 18
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 3/31/98
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Alkermes, Inc. 100.00 87.50 34.38 114.06 175.00 310.94
Nasdaq Stock Market 100.00 107.94 120.07 163.03 181.21 275.21
(U.S. Index)
Nasdaq Pharmaceutical 100.00 100.99 100.61 177.38 162.38 194.23
Index
</TABLE>
16
<PAGE> 19
MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the
ownership of the Company's Common Stock as of June 10, 1998 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
Beneficially Percentage
Owned Beneficially Owned(1)
----- ---------------------
<S> <C> <C>
ALZA Corporation....................................................... 2,000,000 9.48%
950 Page Mill Road
Palo Alto, CA 94303
Amerindo Investment Advisors Inc.(2)................................... 2,465,000 11.69
One Embarcadero, Suite 2300
San Francisco, CA 94111
FMR Corporation(3)..................................................... 1,142,800 5.42
82 Devonshire Street
Boston, MA 02109
Floyd E. Bloom(4)...................................................... 168,500 *
Robert A. Breyer(5).................................................... 254,375 1.19
John K. Clarke(6)...................................................... 29,468 *
Robert S. Langer(7).................................................... 173,689 *
Richard F. Pops(8)..................................................... 398,841 1.86
Alexander Rich(9)...................................................... 186,700 *
Paul Schimmel(9)....................................................... 303,700 1.44
Michael A. Wall(10).................................................... 457,350 2.17
Raymond T. Bartus(11).................................................. 92,875 *
Michael J. Landine(12)................................................. 185,775 *
James L. Wright (13)................................................... 42,500 *
All directors and executive officers as a group (14 persons)(14)....... 2,402,798 10.86
</TABLE>
- ----------
* Represents less than 1% of the outstanding shares of the Company's Common
Stock.
(1) As of June 10, 1998, there were 21,094,353 shares of the Company's
Common Stock outstanding.
(2) Information is as of December 31, 1997. Amerindo Investment Advisors
Inc. holds these shares in its capacity as investment advisor for
various fiduciary accounts.
(3) Information is as of December 31, 1997. FMR Corporation holds these
shares in its capacity as investment advisor for various fiduciary
accounts.
(4) Includes 163,500 shares of Common Stock held by The Floyd E. Bloom
Charitable Trust, The Corey Bloom Family Trust and The Jody Corey-Bloom
Charitable Trust, of which Dr. Bloom is a Trustee. Also
17
<PAGE> 20
includes 5,000 shares of Common Stock subject to options which will
become exercisable within 60 days of June 10, 1998.
(5) Consists of 239,375 shares of Common Stock subject to options which are
exercisable or will become exercisable within 60 days of June 10, 1998.
(6) Includes 15,000 shares of Common Stock subject to options which will
become exercisable within 60 days of June 10, 1998. Also includes 850
shares of Common Stock issuable upon exercise of warrants which are
exercisable.
(7) Includes 167,857 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. Also includes 832 shares of Common Stock held by a trust, of
which Professor Langer's wife is trustee, for the benefit of his
children. Also includes 5,000 shares of Common Stock subject to options
which will become exercisable within 60 days of June 10, 1998.
(8) Includes 386,250 shares of Common Stock subject to options which are
exercisable or which will become exercisable within 60 days of June 10,
1998.
(9) Includes 5,000 shares of Common Stock subject to options which will
become exercisable within 60 days of June 10, 1998. Also includes 1,700
shares of Common Stock issuable upon exercise of warrants which are
exercisable.
(10) Includes 5,000 shares of Common Stock subject to options which will
become exercisable within 60 days of June 10, 1998.
(11) Includes 86,875 shares of Common Stock subject to options which are
exercisable or which will become exercisable within 60 days of June 10,
1998.
(12) Includes 130,875 shares of Common Stock subject to options which are
exercisable or which will become exercisable within 60 days of June 10,
1998.
(13) Represents shares of Common Stock subject to options which are
exercisable or which will become exercisable within 60 days of June 10,
1998.
(14) Includes 1,034,750 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 10, 1998. Also includes
332,189 shares of Common Stock held in trust.
18
<PAGE> 21
CERTAIN TRANSACTIONS
STOCK OPTIONS AND AWARDS
During the last fiscal year, each executive officer and director was
granted options to purchase shares of Common Stock pursuant to the Omnibus Plan
and the Stock Option Plan for Non-Employee Directors, respectively.
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, 1998, the Company recorded no revenue 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 Cereport, 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 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, 1998.
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, 1999.
DEADLINE FOR SHAREHOLDERS PROPOSALS
The Company must receive any proposal which a shareholder wishes to
submit at the 1999 annual meeting of shareholders before March 1, 1999 if the
proposal is to be considered by the Board of Directors for inclusion in the
proxy material for that meeting.
19
<PAGE> 22
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. 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, 1998, 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 29, 1998
20
<PAGE> 23
Appendix
ALKERMES, INC.
AMENDED AND RESTATED 1990 OMNIBUS STOCK OPTION PLAN
(ADOPTED ON SEPTEMBER 19, 1990, AS AMENDED
THROUGH JUNE 4, 1998)
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 exchange on which shares of Common
Stock are then listed or as quoted on the NASDAQ National
<PAGE> 24
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
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
2
<PAGE> 25
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 3,250,000. 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> 26
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.
(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.
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<PAGE> 27
(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 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.
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<PAGE> 28
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> 29
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> 30
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
hereunder, or to such other address as either party may hereafter designate in
writing by notice similarly given by one party to the other.
8
<PAGE> 31
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
<PAGE> 32
DETACH HERE
ALK00 2
PROXY 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 29, 1998
The undersigned shareholder of Alkermes, Inc. hereby appoints James M.
Frates 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 29, 1998, 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)
- ----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
<PAGE> 33
DETACH HERE
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" PROPOSALS 1 AND 2.
<TABLE>
<S> <C>
1. ELECTION OF DIRECTORS 2. Proposal to approve an amendment
to the Alkermes Amended and
NOMINEES: Floyd E. Bloom, Robert A. Breyer, John Restated 1990 Omnibus Stock FOR AGAINST ABSTAIN
K. Clarke, Robert S. Langer, Richard F. Pops, Option Plan, as amended, to [ ] [ ] [ ]
Alexander Rich, Paul Schimmel and Michael A. Wall. increase to 3,250,000 the number of
shares issuable upon the exercise of
FOR ALL WITHHOLD options granted thereunder, an
NOMINEES [ ] [ ] AUTHORITY increase of 750,000 shares.
(except as FOR ALL
indicated in NOMINEES
space below)
[ ]
------------------------------------------------- MARK HERE MARK HERE IF YOU
To Withhold Authority to vote for any individual FOR ADDRESS [ ] PLAN TO ATTEND [ ]
nominee, print the nominee's name above.) CHANGE AND THE MEETING
NOTE AT LEFT JULY 29, 1998
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: ___________
</TABLE>
