Investment Agreement

INVESTMENT AGREEMENT


dated as of September 22, 1998


by and between


BAYER AG
a corporation of the Federal Republic of Germany


and


MILLENNIUM PHARMACEUTICALS, INC.,
a Delaware corporation


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TABLE OF CONTENTS


Page
---- ARTICLE I


PURCHASE AND SALE OF SHARES................................................. 1
Section 1.1 PURCHASE AND SALE............................................ 1
Section 1.2 CLOSING DATE................................................. 1
Section 1.3 TRANSACTIONS AT THE CLOSING.................................. 2


ARTICLE II


REPRESENTATIONS AND WARRANTIES.............................................. 2
Section 2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY................ 2
Section 2.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER.................. 11


ARTICLE III


EQUITY PURCHASES FROM THE COMPANY............................................ 12
Section 3.1 SUBSCRIPTION RIGHTS........................................... 12
Section 3.2 ISSUANCE AND DELIVERY OF NEW SECURITIES AND VOTING STOCK...... 13
Section 3.3 TERMINATION OF ARTICLE III.................................... 13


ARTICLE IV


LIMITATIONS ON PURCHASES OF ADDITIONAL EQUITY SECURITIES..................... 13
Section 4.1 PURCHASES OF EQUITY SECURITIES................................ 13


ARTICLE V


TRANSFER OF COMMON STOCK..................................................... 16
Section 5.1 LIMITATIONS ON TRANSFER....................................... 16


ARTICLE VI


COVENANTS AND ADDITIONAL AGREEMENTS.......................................... 18
Section 6.1 ORDINARY COURSE............................................... 18
Section 6.2 ACCESS AND INFORMATION........................................ 18
Section 6.3 FURTHER ACTIONS............................................... 18
Section 6.4 FURTHER ASSURANCES............................................ 19
Section 6.5 BOARD ATTENDANCE RIGHTS AND RIGHTS TO INFORMATION ABOUT
BOARD AND THE COMPANY......................................... 19


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ARTICLE VII


CONDITIONS PRECEDENT......................................................... 19
Section 7.1 EACH PARTY'S OBLIGATIONS...................................... 20
Section 7.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY.................. 20
Section 7.3 CONDITIONS TO THE OBLIGATIONS OF PURCHASER.................... 20


ARTICLE VIII


TERMINATION.................................................................. 21
Section 8.1 TERMINATION................................................... 21
Section 8.2 EFFECT OF TERMINATION......................................... 23


ARTICLE IX


INDEMNIFICATION.............................................................. 23
Section 9.1 INDEMNIFICATION OF PURCHASER.................................. 23
Section 9.2 INDEMNIFICATION PROCEDURES.................................... 23
Section 9.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES................... 24


ARTICLE X


INTERPRETATION; DEFINITIONS.................................................. 24
Section 10.1 INTERPRETATION................................................ 24
Section 10.2 DEFINITIONS................................................... 25


ARTICLE XI

MISCELLANEOUS................................................................ 29
Section 11.1 SEVERABILITY.................................................. 30
Section 11.2 SPECIFIC ENFORCEMENT.......................................... 30
Section 11.3 ENTIRE AGREEMENT.............................................. 30
Section 11.4 COUNTERPARTS.................................................. 30
Section 11.5 NOTICES....................................................... 30
Section 11.6 AMENDMENTS.................................................... 32
Section 11.7 COOPERATION................................................... 32
Section 11.8 SUCCESSORS AND ASSIGNS........................................ 32
Section 11.9 EXPENSES AND REMEDIES......................................... 32
Section 11.10 TRANSFER OF SHARES............................................ 32
Section 11.11 GOVERNING LAW................................................. 33
Section 11.12 PUBLICITY..................................................... 33
Section 11.13 NO THIRD PARTY BENEFICIARIES.................................. 33
Section 11.14 CONSENT TO JURISDICTION....................................... 33


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INVESTMENT AGREEMENT


THIS INVESTMENT AGREEMENT (the "Agreement") is made as of September 22, 1998 by and between MILLENNIUM PHARMACEUTICALS, INC., a Delaware corporation (the "Company"), and BAYER AG, a corporation organized under the laws of the Federal Republic of Germany ("Purchaser").


WHEREAS, the Company and Purchaser are parties to that certain Agreement, dated as of the date hereof (the "Collaboration Agreement"), which contains the terms and conditions on which the parties have agreed to collaborate on a small molecule drug discovery program; and


WHEREAS, in connection with the execution of the Collaboration Agreement, Purchaser wishes to purchase from the Company, and the Company wishes to sell to Purchaser, shares of the Company's Common Stock, $.001 par value per share ("Common Stock"), on the terms and subject to the conditions set forth herein;


WHEREAS, in connection with such sale and purchase of shares of Common Stock, the Company and Purchaser wish to enter into a registration rights agreement (the "Registration Rights Agreement"), substantially in the form attached hereto as Exhibit A.


NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth herein, the Company and Purchaser agree as follows:


ARTICLE I


PURCHASE AND SALE OF SHARES


Section 1.1 PURCHASE AND SALE. Subject to the terms and conditions of this Agreement, the Company agrees to issue and sell to Purchaser and Purchaser agrees to purchase from the Company 4,957,660 shares of the Company's Common Stock (the "Shares"), at a purchase price of $19.485 per share (which purchase price reflects the greater of (i) 115% of the average daily closing price of a share of the Company's Common Stock over the period from March 1, 1998 to August 31, 1998 or (ii) 100% of the closing price of a share of the Company's Common Stock on September 21, 1998) for an aggregate purchase price of Ninety Six Million, Six Hundred Thousand Dollars ($96,600,000) (the "Purchase Price").


Section 1.2 CLOSING DATE. The closing of the purchase and sale of the Shares hereunder (the "Closing") shall be held at the offices of Hale and Dorr, 60 State Street, Boston, Massachusetts, at 10:00 a.m., Boston time, on the third Business Day following the first date on which all the conditions to Closing set forth in Article VII have been satisfied or


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waived, or at such other, place, time and date as the Company and Purchaser shall agree. The Company shall give Purchaser three (3) Business Days prior notice of the date the Closing is scheduled to occur. The date of the Closing is hereinafter referred to as the "Closing Date."


Section 1.3 TRANSACTIONS AT THE CLOSING. At the Closing, subject to the terms and conditions of this Agreement, (a) the Company shall issue and sell to Purchaser and Purchaser shall purchase the Shares; (b) the Company shall deliver to Purchaser a certificate representing the Shares, registered in the name of Purchaser against payment of the Purchase Price by wire transfer of immediately available funds to an account or accounts previously designated by the Company no less than five (5) Business Days prior to the Closing Date; and (c) the Company and Purchaser shall enter into the Registration Rights Agreement.


ARTICLE II


REPRESENTATIONS AND WARRANTIES


Section 2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to Purchaser as follows:


(a) CORPORATE ORGANIZATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. Each Subsidiary is duly organized and validly
existing and, if applicable, is in good standing, under the laws of the
jurisdiction of its incorporation or organization. Each of the Company
and its Subsidiaries is duly qualified or licensed and, if applicable,
is in good standing as a foreign corporation, in each jurisdiction in
which the properties owned, leased or operated, or the business
conducted, by it require such qualification or licensing, except for
any such failure so to qualify or be in good standing which,
individually or in the aggregate, would not have a Material Adverse
Effect on the Company and its Subsidiaries, taken as a whole. Each of
the Subsidiaries has the requisite power and authority to carry on its
business as it is now being conducted. The Company has heretofore made
available to Purchaser complete and correct copies of the Certificate
of Incorporation of the Company (the "Company Charter") and the By-laws
of the Company (the "Company By-Laws") and the certificate of
incorporation and by-laws, or the comparable organizational documents,
of each of its Subsidiaries, each as amended to date and currently in
full force and effect.


(b) Corporate Authority. The Company has the requisite
corporate power and authority to execute, deliver and perform this
Agreement and the Registration Rights Agreement and to consummate the
transactions contemplated hereby and thereby. The execution, delivery
and performance of this Agreement and the Registration Rights Agreement
by the Company, the issuance and sale by the Company of the Shares and
the performance by the Company of the other transactions


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contemplated hereby and thereby have been duly authorized by the
Company's Board of Directors, and no other corporate proceedings on the
part of the Company are necessary to authorize this Agreement or the
Registration Rights Agreement or for the Company to consummate the
transactions so contemplated herein and therein. This Agreement is, and
the Registration Rights Agreement, when executed or delivered will be,
valid and binding agreements of the Company, enforceable against the
Company in accordance with their respective terms, assuming that this
Agreement and the Registration Rights Agreement are valid and binding
agreements of Purchaser, subject as to enforcement of remedies to
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting generally the enforcement of creditors' rights
and subject to a court's discretionary authority with respect to the
granting of a decree ordering specific performance or other equitable
remedies.


(c) NO VIOLATIONS; CONSENTS AND APPROVALS. (i) Neither the
execution, delivery or performance by the Company of this Agreement or
the Registration Rights Agreement or the consummation by the Company of
the transactions contemplated hereby or thereby (A) will result in a
violation or breach of the Company Charter or the Company By-Laws or
the charter or by-laws of any of the Company's Subsidiaries or (B) will
result in a violation or breach of (or give rise to any right of
termination, revocation, cancellation or acceleration under or
increased payments under), or constitute a default (with or without due
notice or lapse of time or both) under, or result in the creation of
any lien, mortgage, charge, encumbrance or security interest of any
kind (a "Lien") upon any of the properties or assets of the Company or
any of its Subsidiaries under, (1) any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, contract, agreement,
obligation, instrument, offer, commitment, understanding or other
arrangement (each a "Contract") or of any license, waiver, exemption,
order, franchise, permit or concession (each a "Permit") to which the
Company or any of its Subsidiaries is a party or by which any of their
properties or assets may be bound, or (2) subject to the governmental
filings and other matters referred to in clause (ii) below, any
judgment, order, decree, statute, law, regulation or rule applicable to
the Company or any of its Subsidiaries, except, in the case of clause
(B), for violations, breaches, defaults, rights of cancellation,
termination, revocation or acceleration or Liens that would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole.


(ii) Except for filings as may be required under, and other
applicable requirements of, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), no consent,
approval, order or authorization of, or registration, declaration or
filing with, any government or any court, administrative agency or
commission or other governmental authority or agency, federal, state,
local or foreign (a "Governmental Entity"), is required with respect to
the Company in connection with the execution, delivery or performance
by the Company of this Agreement or the consummation by the Company of
the transactions contemplated hereby (except where the failure to
obtain such consents, approvals, orders or


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authorizations, or to make such filings would not, individually or in
the aggregate, have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole).


(d) CAPITAL STOCK. The authorized capital stock of the Company
consists of (i) 100,000,000 shares of Common Stock, of which an
aggregate 29,550,646 shares of Common Stock were issued and outstanding
as of the close of business on August 31, 1998, and (ii) 5,000,000
shares of preferred stock, $.001 par value per share, of which none
were issued and outstanding as of the close of business on August 31,
1998. As of the close of business on August 31, 1998, there were
outstanding under the Company's stock option and incentive plans
(collectively, the "Company Stock Plans"), options to acquire an
aggregate of 6,215,608 shares of Common Stock (subject to adjustment on
the terms set forth therein). All of the outstanding shares of Common
Stock have been duly authorized and validly issued, and are fully paid
and nonassessable. Except as set forth on Schedule 2.1(d), there are no
preemptive or similar rights on the part of any holders of any class of
securities of the Company or of any of its Subsidiaries. Except for the
Common Stock, the Company has outstanding no bonds, debentures, notes
or other obligations or securities the holders of which have the right
to vote (or are convertible or exchangeable into or exercisable for
securities having the right to vote) with the stockholders of the
Company on any matter. Except as set forth above or on Schedule 2.1(d),
as of the date of this Agreement, there are no securities convertible
into or exchangeable for, or options, warrants, calls, subscriptions,
rights, contracts, commitments, arrangements or understandings of any
kind to which the Company or any of its Subsidiaries is a party or by
which any of them is bound obligating the Company or any of its
Subsidiaries contingently or otherwise to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital
stock or other voting securities of the Company or of any of its
Subsidiaries. Except as set forth on Schedule 2.1(d), there are no
outstanding agreements of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of
the Company or any of its Subsidiaries.


(e) SUBSIDIARIES. (i) Schedule 2.1(e) contains a complete and
correct description of the shares of stock or other equity interests
that are authorized, or issued and outstanding, of each of the
Company's Subsidiaries. The Company has no equity interests with a
value of $100,000 or more in any Person other than its Subsidiaries,
and there are no commitments on the part of the Company or any
Subsidiary to contribute additional capital in respect of any equity
interest in any Person. Each of the outstanding shares of capital stock
of each of the Subsidiaries has been duly authorized and validly
issued, and is fully paid and nonassessable. Except as set forth on
Schedule 2.1(e), all of the outstanding shares of capital stock of each
Subsidiary are owned, either directly or indirectly, by the Company
free and clear of all Liens.


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(ii) Schedule 2.1(e)(ii) contains a complete
and correct list of all Subsidiaries of the Company.


(f) SEC FILINGS. The Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed
by it with the SEC under the Securities Act and the Exchange Act since
May 1996 (the "Company SEC Documents"). As of its filing date, each
Company SEC Document filed, as amended or supplemented, if applicable,
(i) complied in all material respects with the applicable requirements
of the Securities Act or the Exchange Act, as applicable, and the rules
and regulations thereunder and (ii) did not, at the time it was filed,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances under which they were
made, not misleading.


(g) ABSENCE OF CERTAIN EVENTS AND CHANGES. Except as disclosed
in the Company SEC Documents filed with the SEC and publicly available
prior to the date hereof, or as otherwise contemplated or permitted by
this Agreement, and except for any items referred to in Schedule
2.1(g), since June 30, 1998, the Company and its Subsidiaries have
conducted their respective businesses in the ordinary course consistent
with past practice and there has not been any event, change or
development which, individually or in the aggregate, would have a
Material Adverse Effect on the Company and its Subsidiaries, taken as a
whole.


(h) COMPLIANCE WITH APPLICABLE LAW. Except as disclosed in the
Company SEC Documents, each of the Company and its Subsidiaries is in
compliance with all statutes, laws, regulations, rules, judgments,
orders and decrees of all Governmental Entities applicable to it that
relate to its respective business, and neither the Company nor any of
its Subsidiaries has received any notice alleging noncompliance except,
with reference to all the foregoing, where the failure to be in
compliance would not, individually or in the aggregate, have a Material
Adverse Effect on the Company and its Subsidiaries, taken as a whole.
This Section 2.1(h) does not relate to employee benefits matters (for
which Section 2.1(l) is applicable, environmental matters, (for which
Section 2.1(m) is applicable) or tax matters (for which Section 2.1(k)
is applicable). Each of the Company and its Subsidiaries has all
Permits that are required in order to permit it to carry on its
business as it is presently conducted, except where the failure to have
such Permits or rights would not, individually or in the aggregate,
have a Material Adverse Effect on the Company and its Subsidiaries,
taken as a whole. All such Permits are in full force and effect and the
Company and its Subsidiaries are in compliance with the terms of such
Permits, except where the failure to be in full force and effect or in
compliance would not, individually or in the aggregate, have a Material
Adverse Effect on the Company and its Subsidiaries, taken as a whole.


(i) LITIGATION. Except as disclosed in the Company SEC
Documents filed


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with the SEC and publicly available prior to the date hereof or
referred to in Schedule 2.1(i), there are no civil, criminal or
administrative actions, suits, or proceedings pending or, to the
Knowledge of the Company, threatened, against the Company or any of its
Subsidiaries that, individually or in the aggregate, are likely to have
a Material Adverse Effect on the Company and its Subsidiaries, taken as
a whole. Except as disclosed in the Company SEC Documents filed with
the SEC and publicly available prior to the date hereof, there are no
outstanding judgments, orders, decrees, or injunctions of any
Governmental Entity against the Company or any of its Subsidiaries
that, insofar as can reasonably be foreseen, individually or in the
aggregate, in the future would have a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole.


(j) CONTRACTS. (i) The Company has filed as exhibits to the
Company SEC Documents all material agreements required to be filed
under the rules and regulations of the SEC (the "Material Contracts").


(ii) All Material Contracts are legal, valid, binding, in full
force and effect and enforceable against each party thereto, except to
the extent that any failure to be enforceable, individually or in the
aggregate, would not reasonably be expected to have or result in a
Material Adverse Effect on the Company and its Subsidiaries, taken as a
whole, PROVIDED that no representation is made as to the enforceability
of any non-competition provision in any employment agreement. There
does not exist under any Material Contract any violation, breach or
event of default, or event or condition that, after notice or lapse of
time or both, would constitute a violation, breach or event of default
thereunder, on the part of any of the Company or its Subsidiaries or,
to the Knowledge of the Company or any of its Subsidiaries, any other
Person, other than such violations, breaches or events of default as
would not, individually or in the aggregate, have a Material Adverse
Effect on the Company and its Subsidiaries, taken as a whole. The
enforceability of all Material Contracts will not be adversely affected
in any manner by the execution, delivery or performance of this
Agreement or the Registration Rights Agreement or the consummation of
the transactions contemplated hereby or thereby, and no Material
Contract contains any change in control or other terms or conditions
that will become applicable or inapplicable as a result of the
consummation of such transactions. Except as set forth on Schedule
2.1(j), neither the Company nor the Subsidiaries are a party to any
contract prohibiting or materially restricting the ability of the
Company or any of its Subsidiaries to conduct its business, to engage
in any business or operate in any geographical area or compete with any
person.


(k) TAXES. (i) Except as set forth on Schedule 2.1(k), (A) all
Tax Returns required to be filed by or on behalf of each of the Company
and its Subsidiaries have been filed except to the extent that a
failure to file, individually or in the aggregate, would not have a
Material Adverse Effect on the Company and its Subsidiaries, taken as a
whole; (B) all such filed Tax Returns are complete and accurate in all
respects,


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other than any incompleteness or any inaccuracy that would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole, and all Taxes shown to
be due on such Tax Returns have been paid; (C) no written claim (other
than a claim that has been finally settled) has been made by a taxing
authority that any of the Company or its Subsidiaries is subject to an
obligation to file Tax Returns or to pay or collect Taxes imposed by
any jurisdiction in which either the Company or its Subsidiaries does
not file Tax Returns or pay or collect Taxes, other than any such claim
that would not have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole, or for which adequate reserves have
been provided on the b ...