Registration Rights Agreement

MILLENNIUM PHARMACEUTICALS, INC.


REGISTRATION RIGHTS AGREEMENT


This REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is entered into as of November 10, 1998 by and among Millennium Pharmaceuticals, Inc., a Delaware corporation (the "COMPANY"), and Bayer AG, a Federal Republic of Germany corporation ("PURCHASER").


RECITALS


WHEREAS, the Company and the Purchaser have entered into an Investment Agreement, dated as of September 22, 1998 (the "INVESTMENT AGREEMENT"), pursuant to which the Purchaser has agreed to purchase 4,957,660 shares (the "Shares") of common stock, par value $.001 per share, of the Company, upon the terms and conditions set forth therein;


WHEREAS, in order to induce the Purchaser to enter into the Investment Agreement, the Company has agreed to provide the registration rights set forth in this Agreement for the benefit of Purchaser and its direct and indirect transferees upon the terms and conditions set forth herein; and


WHEREAS, the execution and delivery of this Agreement is a condition to the Purchaser's obligations pursuant to the Investment Agreement.


NOW, THEREFORE, in consideration of the mutual premises, covenants and conditions set forth herein, the parties hereby agree as follows:


1. DEFINITIONS. Capitalized terms used herein without definition shall have the meanings assigned to such terms in the Investment Agreement. For the purposes of this Agreement:


"COMMISSION" means the U.S. Securities and Exchange Commission or any other governmental authority from time to time administering the Securities Act.


"COMMON STOCK" means the common stock, par value $.001 per share, of the Company.


"DTC" means the Depository Trust Company.


"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or any successor federal statute and the rules and the regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time.


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"HOLDER" means any Person owning or having the right to acquire Registrable Securities, including an Affiliate or any successor, assignee or transferee of Purchaser or a Holder that has received Registrable Securities in accordance with Section 13 hereof.


"NASD" means the National Association of Securities Dealers, Inc.


"PERSON" means any natural person, firm, partnership, association, corporation, company, joint venture, unincorporated association, trust, business trust, government or department or agency of a government, limited liability company or other entity.


"PROSPECTUS" means the prospectus included in any Registration Statement (including without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering or any portion of the Registrable Securities covered by such Registration Statement and all other amendments and supplements to the prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such prospectus.


"REGISTRABLE SECURITIES" means (a) the Shares of Common Stock received by the Purchaser pursuant to the Investment Agreement and (b) any capital stock or other securities of the Company issued or issuable with respect to the Shares, (i) upon any conversion or exchange thereof, (ii) by way of stock dividend or other distribution, stock split or reverse stock split, or (iii) in connection with a combination of shares, recapitalization, merger, consolidation, exchange offer or other reorganization. As to any particular Registrable Securities, once issued such securities shall cease to be Registrable Securities when (A) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such Registration Statement, (B) such securities shall have been distributed to the public in reliance upon Rule 144 (or any successor provision) under the Securities Act, provided that at the time such securities are proposed to be disposed of, they may be sold under Rule 144 without any limitation on the amount of such securities which may be sold or (C) they shall have ceased to be outstanding.


"REGISTRATION EXPENSES" means all fees and expenses incident to the performance of or compliance with the provisions of this Agreement, whether or not any Registration Statement is filed or becomes effective, including, without limitation, all (a) registration and filing fees (including, without limitation, (i) fees with respect to filings required to be made and other expenses associated with the NASD and any other applicable exchange in connection with an underwritten offering, and (ii) fees and expenses of compliance with state securities or blue sky laws (including, without limitation, fees and distributions of counsel for the underwriter or underwriters in connection with blue sky qualifications of the Registrable Securities and determination of eligibility of the Registrable Securities for investment under the laws of such jurisdictions as are provided in Section 5(e)), (b) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities in a form eligible for deposit with DTC and of printing prospectuses), (c) fees and disbursements of all independent certified public


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accountants referred to in Section 5 (including, without limitation, the reasonable expenses of any special audit and "cold comfort" letters required by or incident to such performance), (d) the fees and expenses of any "qualified independent underwriter" or other independent appraiser participating in an offering pursuant to the NASD Rules of Conduct and the corresponding rules of any other applicable exchange, (e) liability insurance under the Securities Act or any other securities laws, if the Company desires such insurance, (f) fees and expenses of all attorneys, advisers, appraisers and other persons retained by the Company or any Subsidiary of the Company, (g) internal expenses of the Company and its Subsidiaries (including, without limitation, all salaries and expenses of officers and employees of the Company and its Subsidiaries, other general overhead expenses of the Company and its Subsidiaries, and other expenses for the performance of legal or accounting duties), (h) the expense of any annual audit and the preparation of historical and pro forma financial statements or other data normally prepared by the Company in the ordinary course of business, (i) the expenses relating to printing, word processing and distributing all Registration Statements, underwriting agreements, securities sales agreements, and any other documents necessary in order to comply with this Agreement, (j) any fees and disbursements of any other underwriters and broker-dealers customarily paid by issuers or sellers of securities, and (k) the fees and disbursements of not more than one (1) counsel (together with appropriate local counsel) chosen by the Holders of a majority of the Registrable Securities to be included in such Registration Statement; PROVIDED, HOWEVER, that in all cases in which the Company is required to pay Registration Expenses hereunder, Registration Expenses shall exclude any underwriting discounts, selling commissions or any transfer taxes payable in respect of the sale of the Registrable Securities by the Holders thereof.


"REGISTRATION STATEMENT" means any registration statement of the Company that covers any of the Registrable Securities pursuant to the provisions of this Agreement, and all amendments and supplements to any such registration statement, including post-effective amendments, in each case including the Prospectus, all exhibits and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.


"RULE 144" means Rule 144 (or any successor provision) under the Securities Act.


"SECURITIES ACT" means the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time.


"SPECIAL REGISTRATION" means the registration of share of equity securities and/or options or other rights in respect thereof to be offered solely to directors, members of management, employees, consultants or sales agents, distributors or similar representatives of the Company or its direct or indirect Subsidiaries, solely on Form S-8 or any successor form, a registration on Form S-4 with respect to any merger, consolidation or acquisition, or a registration on another form not available for registering Registrable Securities for sale to the public.


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"UNDERWRITTEN REGISTRATION" or "UNDERWRITTEN OFFERING" means a registration in which securities of the Company (including Registrable Securities) are sold to an underwriter for reoffering to the public.


2. DEMAND REGISTRATION.


(a) REQUEST FOR REGISTRATION. Subject to the provisions of Sections 2(d) and 8, at any time or from time to time as of the date hereof, Holders of Registrable Securities shall have the right to make a written request that the Company effect a registration under the Securities Act of all or part of its Registrable Securities of the Holders making such request. A request for registration pursuant to this Section 2 (a "DEMAND REGISTRATION") shall specify the approximate number of Registrable Securities requested to be registered, the anticipated per share price range for such offering and the intended method or disposition thereof by such Holders.


(b) OBLIGATION TO EFFECT REGISTRATION. Within five (5) days after receipt by the Company of any request for Demand Registration, the Company shall promptly give written notice of such requested registration to all Holders. Such Holders shall have the right, by giving written notice to the Company within twenty (20) days after the Company provides its notice, to elect to have included in such registration such of their Registrable Securities as such Holders may request in such notice of election. Thereupon, the Company shall, as expeditiously as possible, use reasonable best efforts to effect the registration under the Securities Act of all Registrable Securities that the Company has been requested to so register; PROVIDED, that if the underwriter (if any) managing the offering determines that, because of marketing factors, all of the Registrable Securities requested to be registered by all Holders may not be included in the offering, then all Holders who have requested registration shall participate in the offering pro rata based upon the number of Registrable Securities that they have requested to be so registered.


(c) REGISTRATION STATEMENT FORM. Registrations under this Section 2 shall be on such appropriate form of Registration Statement of the Commission as shall be selected by the Company and available to it under the Securities Act. The Company agrees to include in any such Registration Statement all information which, in the opinion of counsel to the Company, is required to be included therein under the Securities Act.


(d) LIMITATIONS ON REGISTRATION. The Company shall not be required to effect more than two (2) Demand Registrations pursuant to this Section 2. In addition, the Company shall not be required to effect any registration (other than on Form S-3 or any successor form relating to secondary offerings) during the period starting with the date sixty (60) days prior to the Company's estimated date of filing of, and ending on the date ninety (90) days immediately following the effective date of, any registration statement (other than a Special Registration) pertaining to the securities of the Company, provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective. Notwithstanding any other provision of this Agreement, the Company shall not be required to effect the Demand Registration of any Registrable Securities prior to the second anniversary of the closing date of the Investment Agreement.


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(e) INCLUSION OF OTHER SECURITIES. The Company shall not register securities (other than Registrable Securities) for sale for the account of any Person in any request for Demand Registration, unless permitted to do so by the written consent of the Holders of at least a majority of the Registrable Securities proposed to be sold in such Demand Registration.


(f) EFFECTIVE REGISTRATION STATEMENT. A Demand Registration shall not be deemed to have been effected unless a Registration Statement covering all of the Registrable Securities requested to be included in such registration by the Holders thereof and as reduced, if necessary, in accordance with Section 2(g) hereto has been declared effective by the Commission and remains continually effective for the period specified in Section 5(b).


(g) SUSPENSION. If the Board of Directors of the Company, in its good faith judgment, determines that any registration under the Securities Act of Registrable Securities should not be made or continued because it would materially interfere with any material financing, acquisition, corporation reorganization, merger, or other transaction involving the Company or any of its subsidiaries (a "VALID BUSINESS REASON"), (i) the Company may postpone filing a Registration Statement relating to a Demand Registration until such Valid Business Reason no longer exists, but in no event for more than 60 days, and (ii) in case a Registration Statement has been filed relating to a Demand Registration, the Company may cause such Registration Statement to be withdrawn and its effectiveness terminated or may postpone amending or supplementing such Registration Statement until such Valid Business Reason no longer exists, but in no event for more than 60 days (the "POSTPONEMENT PERIOD"); PROVIDED, HOWEVER, that in no event shall the Company be permitted to postpone or withdraw a Registration Statement within 120 days after the expiration of any Postponement Period.


(h) ALLOCATION. If any Demand Registration involves an underwritten offering and the managing underwriter of such offering shall advise the Company that, in its view, the number of securities requested to be included in such registration exceeds the largest number (the "SECTION 2(h) NUMBER") that can be sold in an orderly manner in such offering within a price range acceptable to the Holders of Registrable Securities requesting the registration, the Company shall include in such registration:


(i) first, all Registrable Securities requested to be included in such Registration by the Holders of Registrable Securities requesting such registration; PROVIDED, HOWEVER, that, if the number of such Registrable Securities exceeds the Section 2(h) Number, the number of such Registrable Securities (not to exceed the Section 2(h) Number) shall be allocated to the Holders of Registrable Securities requesting such registration; PROVIDED FURTHER, HOWEVER, that if the number of Registrable Securities requested to be included by all Holders of Registrable Securities requesting such registration exceeds the Section 2(h) Number, then the number of such Registrable Securities included in such registration shall be allocated on a pro rata basis among all Holders of Registrable Securities requesting such registration, based on the number of Registrable Securities that each such Holder requesting registration then owned by all such Holders requesting such registration; and


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(ii) second, to the extent that consent has been granted in accordance with Section 2(e) and the number of Registrable Securities to be included by all Holders of Registrable Securities requesting such registration is less than the Section 2(h) Number, securities that the Company proposes to register.


3. PIGGYBACK REGISTRATION.


(a) INCLUSION IN PIGGYBACK REGISTRATION. If the Company at any time proposes to register any of its securities under the Securities Act (other than pursuant to Section 2 or a Special Registration), whether or not for sale for its own account, (a "COMPANY REGISTRATION"), it shall each such time, prior to such filing, give prompt written notice to all Holders of Registrable Securities of its intention to do so and, upon the written request of any Holder of Registrable Securities given to the Company within twenty (20) days after the Company has provided such notice (which request shall state the intended method of disposition of such Registrable Securities), the Company shall use reasonable best efforts to cause all Registrable Securities that the Company has been requested by the Holders thereof to register to be so registered under the Securities Act to the extent necessary to permit their disposition in accordance with the intended methods of distribution specified in the request of such Holder or Holders; PROVIDED, that if at any time after giving written notice of its intention to register any securities and prior to the effective date of the Registration Statement filed in connection with such registration, the Company shall determine for any reason not to register such securities, the Company may, at its election, give written notice of such determination to each Holder that was previously notified of such registration, and, thereupon, shall not register any Registrable Securities in connection with such registration (but shall nevertheless pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of any Holders to request that a registration be effect under Section 2 and PROVIDED FURTHER, that no registration effected under this Section 3 shall relieve the Company from its obligations to effect Registration upon request under Section 2.


(b) TERMS OF UNDERWRITING. In connection with any offering under this Section 3 involving an underwritten offering, the Company shall not be required to include any Registrable Securities in such offering unless the Holder thereof accepts the terms, if any, of the underwriting as agreed upon between the Company and the underwriters selected by it provided that such terms must be reasonably satisfactory in substance and form to the Holder and consistent with this Agreement, and then only in such quantity as will not, in the opinion of the managing underwriter, jeopardize the success of the offering by the Company.


(C) ALLOCATION. If any Company Registration involves an underwritten offering and the managing underwriter of such offering shall advise the Company that, in its view, the number of securities requested to be included in such registration exceeds the largest number (the "SECTION 3(c) NUMBER") that can be sold in an orderly manner in such offering within a price range acceptable to the Company, the Company shall include in such registration:


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(i) first, all securities that the Company proposes to register for its own account (the "COMPANY SECURITIES"); and


(ii) second, to the extent that the number of Company Securities is less than the Section 3(c) Number, the remaining securities to be included in such registration shall be allocated on a pro rate basis among (i) all Holders of Registrable Securities requesting that Registrable Securities be included in such Registration, and (ii) all other holders ("Other Holders") of the Company's securities who have been granted "piggy-back" registration rights with respect to such securities (the "Other Securities") and have requested that such Other Securities be included in such registration, based on the number of Registrable Securities and Other Securities that each such Holder and Other Holder requesting such registration bears to the aggregate number of Registrable Securities and Other Securities then owned by all such Holders and Other Holders requesting such registration.


4. ALLOCATION OF EXPENSES. The Company will pay all Registration Expenses of all registrations under this Agreement.


5. OBLIGATIONS OF THE COMPANY. If and whenever the Company is required to use best efforts to effect the registration under the Securities Act of any Registrable Securities pursuant to Section 2 and 3 of this Agreement, the Company shall:


(a) file with the Commission, as soon as practicable, a Registration Statement with respect to such Registrable Securities, make all required filings with the NASD and any other applicable exchange, and use best efforts to cause such Registration Statement to become effective at the earliest possible date and remain effective;


(b) prepare and file with the Commission such amendments and supplements to the Registration Statement and the Prospectus used in connection therewith and such other documents as may be necessary to keep the Registration Statement effective until the earlier of (i) 210 days after the effective date of such Registration Statement or (ii) the consummation of the disposition by the Holders of all the Registrable Securities covered by such Registration Statement and otherwise comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement;


(c) furnish to counsel (if any) selected by the Holders of a majority of the Registrable Securities covered by such Registration Statement and to counsel for the underwriters in any underwritten offering copies of all documents proposed to be filed with the Commission in connection with such registration a reasonable time prior to the proposed filing thereof and give reasonable consideration in good faith to any comments of such Holders, counsel and underwriters.


(d) furnish to each seller of such securities, without charge, such number of conformed copies of such Registration Statement and of each such amendment and supplement thereto (in each case, including all exhibits ...