<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 [ ] Confidential, For Use
of the Commission
Only (as permitted by
Rule 14a-6(e) (2))
[X] Definitive Proxy Statement
[ ] Definitive Additional materials
[ ] Soliciting Material Under Rule 14a-12
BIOPURE CORPORATION
- --------------------------------------------------------------------------------
(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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a) (2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
BIOPURE CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 5, 2000
To our Stockholders:
The 2000 annual meeting of stockholders of Biopure Corporation will be
held at the Royal Sonesta Hotel, 5 Cambridge Parkway, Cambridge, Massachusetts,
on Wednesday, April 5, 2000, beginning at 10:00 a.m. local time. At the meeting,
the holders of class A common stock of the Company will act on the following:
(1) Election of two directors, each for a term of three years; and
(2) Any other matters that properly come before the meeting.
All holders of record of shares of class A common stock at the close of
business on February 18, 2000 are entitled to vote at the meeting or any
postponements or adjournments of the meeting.
By order of the Board of Directors,
Jane Kober
Senior Vice President and Secretary
February 28, 2000
Cambridge, Massachusetts
<PAGE> 3
TABLE OF CONTENTS
PAGE
----
ABOUT THE MEETING..............................................................1
What is the purpose of the annual meeting?............................1
Who is entitled to vote at the meeting?...............................1
What are the voting rights of class A common stockholders?............1
Who can attend the meeting?...........................................1
What constitutes a quorum?............................................1
How do I vote?........................................................2
Can I vote by telephone or electronically?............................2
Can I change my vote after I return my proxy card?....................2
What are the Board's recommendations?.................................2
What vote is required to approve each item?...........................2
STOCK OWNERSHIP................................................................3
Who are the largest owners, and what is the director and
executive officer ownership of the Company's stock? ...............3
ITEM 1 -- ELECTION OF DIRECTORS................................................5
Directors Standing for Election.......................................5
Directors Continuing in Office........................................5
How are directors compensated?...............................6
How often did the Board meet during fiscal 1999?.............6
What committees has the Board established?...................6
Certain Relationships and Related Transactions........................7
Executive Compensation................................................8
Report of the Board of Directors Relating to Compensation.............8
What is the Company's philosophy of executive officer
compensation?.............................................8
How is the Company's Chief Executive Officer
compensated?..............................................9
Compensation Committee Interlocks and Insider Participation...........9
Executive Compensation Summary Tables.................................9
Non-Competition Agreements..................................11
Deferred Compensation Agreement.............................11
Employment Agreement........................................11
1990 Incentive Compensation and Company Stock
Purchase Plan............................................12
The 1998 Stock Option Plan..................................12
1999 Omnibus Securities and Incentive Plan..................12
Incentive Compensation Plan.................................14
Comparison of Total Returns..........................................14
OTHER MATTERS.................................................................15
ADDITIONAL INFORMATION........................................................15
Advance Notice Procedures............................................15
Stockholder Proposals for the 2001 Annual Meeting....................15
Proxy Solicitation Costs.............................................15
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<PAGE> 4
BIOPURE CORPORATION
11 Hurley Street
Cambridge, Massachusetts 02141
---------------
PROXY STATEMENT
---------------
This proxy statement contains information related to the annual meeting
of stockholders of Biopure Corporation to be held on Wednesday, April 5, 2000,
beginning at 10:00 a.m., at the Royal Sonesta Hotel, 5 Cambridge Parkway,
Cambridge, Massachusetts 02141, and at any postponements or adjournments
thereof. This solicitation is being made by the Company.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the Company's annual meeting, stockholders will act upon the
election of directors. In addition, the Company's management will report on the
Company and respond to questions from stockholders.
WHO IS ENTITLED TO VOTE AT THE MEETING?
Only stockholders of record at the close of business on the record
date, February 18, 2000, are entitled to receive notice of the annual meeting
and to vote the shares of common stock that they held on that date at the
meeting, or any postponements or adjournments of the meeting.
The Company has only one class of voting common stock outstanding, its
class A common stock.
WHAT ARE THE VOTING RIGHTS OF CLASS A COMMON STOCKHOLDERS?
Each outstanding share of class A common stock will be entitled to one
vote on each matter to be voted upon at the meeting.
WHO CAN ATTEND THE MEETING?
All stockholders as of the record date, or their duly appointed
proxies, may attend the meeting. Admission to the meeting will be on a
first-come, first-served basis.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person by proxy, of the holders of a
majority of the shares of class A common stock outstanding on the record date
will constitute a quorum, permitting the meeting to conduct its business. As of
the record date, 22,343,775 shares of class A common stock of the Company were
outstanding. Proxies received but marked as abstentions will be included in the
calculation of the number of shares considered to be present at the meeting.
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<PAGE> 5
HOW DO I VOTE?
If you complete and properly sign the accompanying proxy card and
return it to the Company, it will be voted as you direct. If you are a
registered stockholder and attend the meeting, you may deliver your completed
proxy card in person. "Street name" stockholders who wish to vote at the meeting
will need to obtain a proxy form from the institution that holds their shares.
CAN I VOTE BY TELEPHONE OR ELECTRONICALLY?
You will NOT be able to vote by telephone or electronically.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy, you may change your vote
at any time before the proxy is exercised by filing with the Secretary of the
Company either a notice of revocation or a duly executed proxy bearing a later
date. The powers of the proxy holders will be suspended if you attend the
meeting in person and so request, although attendance at the meeting will not by
itself revoke a previously granted proxy.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the persons
named as proxy holders on the proxy card will vote in accordance with the
recommendations of the Board of Directors. The Board recommends a vote:
for election of the nominated slate of directors.
With respect to any other matter that properly comes before the
meeting, the proxy holders will vote as recommended by the Board of Directors
or, if no recommendation is given, in their own discretion.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
ELECTION OF DIRECTORS. The affirmative vote of a plurality of the votes
cast at the meeting is required for the election of directors. A properly
executed proxy marked "WITHHOLD AUTHORITY" with respect to the election of one
or more directors will not be voted with respect to the director or directors
indicated, although it will be counted for purposes of determining whether there
is a quorum.
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<PAGE> 6
STOCK OWNERSHIP
WHO ARE THE LARGEST OWNERS, AND WHAT IS THE DIRECTOR AND EXECUTIVE OFFICER
OWNERSHIP OF THE COMPANY'S STOCK?
Except as set forth below, the Company knows of no single person or
group that is the beneficial owner of more than 5% of the Company's class A
common stock. The following table also shows the amount of class A common stock
of the Company beneficially owned (unless otherwise indicated) by the Company's
directors, the executive officers of the Company named in the Summary
Compensation Table below and the directors and executive officers of the Company
as a group. Except as otherwise indicated, all information is as of February 14,
2000 and ownership consists of sole voting and investment power.
<TABLE>
<CAPTION>
---------------------
CLASS A
COMMON STOCK
---------------------
SHARES PERCENT
--------- -------
<S> <C> <C>
NAME AND ADDRESS OF BENEFICIAL OWNERS
Carl W. Rausch(1)........................................ 2,506,325 11.1
11 Hurley Street
Cambridge, MA 02141
Biopure Associates Limited
Partnership II(2)...................................... 1,528,000 6.7
c/o Biopure Corporation
11 Hurley Street
Cambridge, MA 02141
OCM Principal Opportunities
Fund, L.P.(3).......................................... 3,212,750 14.2
c/o Oaktree Capital Management
333 S. Grand Avenue
Los Angeles, CA 90071
HTV Industries, Inc.(4).................................. 1,502,729 6.6
Pavilion Office Building
24100 Chagrin Boulevard
Suite 340
Beachwood, OH 44122
Aspen Venture Partners, L.P.(5).......................... 1,301,973 5.7
222 Berkeley Street
Boston, MA 02116
Daniel P. Harrington(6).................................. 1,511,895 6.7
David N. Judelson(7)..................................... 2,151,915 9.5
Stephen A. Kaplan(8)..................................... 3,217,750 14.2
C. Everett Koop, M.D.(9)................................. 11,667 *
Paul A. Looney........................................... -- --
Charles A. Sanders, M.D.(10)............................. 23,649 *
Edward E. Jacobs, Jr., M.D.(11).......................... 528,226 2.3
Maria S. Gawryl, Ph.D.(12)............................... 37,000 *
William D. Hoffman, M.D.(13)............................. 2,667 *
Jane Kober (14).......................................... 12,333 *
All Officers and Directors as a Group(15) ............... 10,361,641 45.7
</TABLE>
- ------------------------
* Less than one percent.
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<PAGE> 7
(1) Mr. Rausch's shares of class A common stock consist of: sole power to vote
and dispose of 1,528,000 shares owned by Biopure Associates Limited Partnership
II; sole power to vote and dispose of 936,657 shares owned directly by Mr.
Rausch, his family and family trusts; and options exercisable 60 days from
February 1, 2000 to purchase 41,667 shares.
(2) Biopure Associates Limited Partnership II is a Massachusetts limited
partnership originally formed to hold shares owned primarily by our officers,
employees and consultants. Mr. Rausch, as the sole General Partner, has sole
power to vote and dispose of these shares. The underlying shares of class A
common stock in the partnerships owned indirectly by directors and persons named
in the compensation table are as follows: Mr. Rausch 841,667 shares; Dr. Koop
33,333 shares; and Dr. Gawryl 36,667 shares.
(3) Includes warrants to purchase 180,140 shares and does not include options to
purchase 5,000 shares held by Mr. Kaplan for the benefit of the fund.
(4) Includes warrants to purchase 11,111 shares.
(5) Includes warrants to purchase 29,979 shares.
(6) Mr. Harrington's shares include 1,502,729 shares owned by HTV Industries,
Inc., for which he shares voting and investment power.
(7) Mr. Judelson's shares consist of sole power to vote and dispose of 2,110,248
shares and include options exercisable 60 days from February 1, 2000 to purchase
41,667 shares.
(8) Mr. Kaplan's shares consist of 3,032,610 shares and warrants to purchase
180,140 shares owned of record by OCM Principal Opportunities Fund, L.P., for
which Mr. Kaplan has sole power to vote and dispose, and options exercisable 60
days from February 1, 2000 to purchase 5,000 shares, the economic interest in
which is owned by OCM Principal Opportunities Fund, L.P.
(9) Dr. Koop's shares include options exercisable 60 days from February 1, 2000
to purchase 5,000 shares and do not include his 33,333 shares referenced above
in note 2.
(10) Dr. Sanders' shares include options exercisable 60 days from February 1,
2000 to purchase 5,000 shares and warrants to purchase 667 shares.
(11) Dr. Jacobs' shares include options exercisable 60 days from February 1,
2000 to purchase 5,000 shares.
(12) Dr. Gawryl's shares consist of options exercisable 60 days from February 1,
2000 to purchase 37,000 shares and do not include her 36,667 shares referenced
above in note 2.
(13) Dr. Hoffman's shares consist of options exercisable within 60 days of
February 1, 2000.
(14) Ms. Kober's shares include options exercisable within 60 days of February
1, 2000 to purchase 8,333 shares.
(15) Includes options exercisable 60 days from February 1, 2000 to purchase
197,333 shares and warrants to purchase 191,918 shares.
Based upon a review of filings with the Securities and Exchange
Commission and written representations that no other reports were required, the
Company believes that all of the Company's directors and executive officers
complied during fiscal 1999 with the reporting requirements of Section 16(a) of
the Securities Exchange Act of 1934, except that Bing Wong, a senior vice
president, reported on October 27, 1999, an August 6, 1999 purchase of 2,000
shares.
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<PAGE> 8
ITEM 1 -- ELECTION OF DIRECTORS
DIRECTORS STANDING FOR ELECTION
The Board of Directors is currently divided into three classes, having
three-year terms that expire in successive years.
The current term of office of directors in Class I expires at the 2000
annual meeting. The Board of Directors proposes that the nominees described
below, both of whom are currently serving as Class I directors, be re-elected
for a new term of one year and until their successors are duly elected and
qualified.
Each of the nominees has consented to serve a three-year term. If
either of them becomes unavailable to serve as a director, the Board may
designate a substitute nominee. In that case, the persons named as proxies will
vote for the substitute nominee designated by the Board.
CLASS I DIRECTORS. The directors standing for election are:
C. EVERETT KOOP, M.D., 83, has served as a director of Biopure since
December 1990. From September 1994 to November 1997, Dr. Koop was the Chairman
of the Board of Patient Education Media, Inc. Dr. Koop serves as director of
drkoop.com, an Internet health site company, and Biomedics, a pharmaceutical
company. Dr. Koop served as the Surgeon General of the United States from 1981
until 1989 and continues to educate the public about health issues through his
writings and the electronic media, as Senior Scholar of the C. Everett Koop
Institute at Dartmouth College. Dr. Koop received an Sc.D. degree from the
Graduate School of the University of Pennsylvania, an M.D. degree from the
Cornell University Medical College and an A.B. degree from Dartmouth College.
PAUL A. LOONEY, 61, has served as President of Biopure since July 1999
and as a director since August 1999. From May 1995 until July 1999, Mr. Looney
was a consultant to various biotechnology companies. Between September 1993 and
May 1995, Mr. Looney was the Chief Executive Officer, Chief Operating Officer
and President of Corning Costar Inc. Mr. Looney is a director of Biosphere
Medical, Inc.
DIRECTORS CONTINUING IN OFFICE
CLASS II DIRECTORS. The following directors have terms ending in 2001:
DANIEL P. HARRINGTON, 43, has served as a director of Biopure since
August 1999. He has been President of HTV Industries, Inc. since 1991. HTV
Industries, Inc. is a holding company with manufacturing operations and
investments in various industries. He holds a B.B.A. degree from Stetson
University and an M.B.A. from Xavier University. Mr. Harrington is a director of
Churchill Downs, Inc.
STEPHEN A. KAPLAN, 40, has served as a director of Biopure since
November 1997. Since June 1995, Mr. Kaplan has been a principal in Oaktree
Capital Management LLC. From November 1993 to May 1995, he was Managing Director
of Trust Company of the West. Since November 1993, Mr. Kaplan has also served as
portfolio manager of The Principal Fund. He holds a J.D. degree from New York
University School of Law and a B.S. degree in political science from the State
University of New York at Stony Brook. Mr. Kaplan serves on the boards of
directors of Acorn Products, Inc., Cherokee International LLC, CollaGenex
Pharmaceuticals, Inc., Geologistics Corporation, KinderCare Learning Centers
Inc. and Roller Bearing Holding Company, Inc.
-5-
<PAGE> 9
CLASS III DIRECTORS. The following directors have terms ending in
2002:
DAVID N. JUDELSON, 71, is a co-founder and serves as Vice Chairman of
Biopure since 1984. Mr. Judelson is also a co-founder of Gulf and Western
Industries, Inc., currently known as Paramount Communications, Inc., where he
served as President and Chief Operating Officer from 1967 to 1983. Since 1985,
he has been Vice Chairman of Horsehead Industries, Inc., a privately owned
industrial company. Mr. Judelson holds a bachelor of mechanical engineering
degree from New York University College of Engineering.
CARL W. RAUSCH, 51, is a co-founder and has served as Chairman and
Chief Executive Officer of Biopure since 1984. From 1996 until July 1999, Mr.
Rausch was also President of Biopure. Prior to Biopure's founding, Mr. Rausch
was Vice President, Preparative and Process, at Millipore Corporation. He holds
an M.S. degree in chemical engineering from Tufts University, an M.S. degree in
chemical engineering from the Massachusetts Institute of Technology and a B.S.
degree in chemical engineering from Tufts University.
CHARLES A. SANDERS, M.D., 67, has served as a director of Biopure since
October 1997. From July 1989 until his retirement in May 1995, Dr. Sanders was
the Chairman and Chief Executive Officer of Glaxo Inc. Dr. Sanders serves on the
boards of Genentech, Inc., Magainin Pharmaceuticals Inc., Vertex
Pharmaceuticals, Inc., StaffMark, Inc., Scios Inc., Trimens, Inc., Kendle
International Inc. and Pharmacopeia, Inc. and is a member of the President's
Committee of Advisors on Science and Technology. He was previously General
Director of Massachusetts General Hospital and Professor of Medicine at Harvard
Medical School. He received his M.D. degree from the Southwestern Medical
College of the University of Texas.
HOW ARE DIRECTORS COMPENSATED?
BASE COMPENSATION. Each non-employee director receives a fee of $500
per Board meeting attended. Directors who are also employees of the Company
receive no additional compensation for service as directors.
OPTIONS. Non-employee directors have received grants of options to
purchase shares of class A common stock. In fiscal 1999 each non-employee
director received options to purchase 10,000 shares, except Mr. Judelson, who
received an option to purchase 166,680 shares, and Dr. Koop, who received an
option to purchase 240,000 shares. Each option grant, vesting in equal
installments over two years or four years and having a ten-year term, permits
the holder to purchase shares at their fair market value on the date of grant.
All of these options have an exercise price of $12.00 per share.
HOW OFTEN DID THE BOARD MEET DURING FISCAL 1999?
The Board of Directors met 11 times during fiscal 1999. Each director
attended more than 75% of the total number of meetings of the Board and
Committees on which he served, except for Dr. Koop.
WHAT COMMITTEES HAS THE BOARD ESTABLISHED?
The Board of Directors has standing Compensation and Audit Committees.
The Compensation Committee of the board of directors consists of Mr.
Kaplan, Dr. Sanders and Mr. Judelson. Mr. Rausch serves as a non-voting member
of this committee.
The Audit Committee consists of Mr. Harrington and Dr. Sanders.
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<PAGE> 10
COMPENSATION COMMITTEE. The Compensation Committee is charged with
reviewing the Company's general compensation strategy; establishing salaries and
reviewing benefit programs for the Chief Executive Officer, the Chief Operating
Officer and those persons who report directly to them; reviewing, approving,
recommending and administering the Company's incentive compensation and stock
option plans; and approving any employment and certain consultants' contracts.
The Compensation Committee was elected during the second half of 1999 and did
not meet in fiscal 1999.
AUDIT COMMITTEE. The Audit Committee met once in fiscal 1999. Its
functions are to recommend the appointment of independent accountants; review
the arrangements for and scope of the audit by independent accountants; review
the independence of the independent accountants; consider the adequacy of the
system of internal accounting controls and review any proposed corrective
actions; and discuss with management and the independent accountants the
Company's draft annual financial statements and key accounting and/or reporting
matters.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR BOTH OF THE DIRECTOR NOMINEES.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1987, the Company entered into a license agreement with B. Braun
Melsungen AG, also known as Braun, a German hospital supply company. The license
and related agreements contemplated product testing, approval, manufacture and
marketing of Hemopure by Braun in Europe. In 1997, the Company and Braun
mutually agreed to end this collaboration. The termination agreement with Braun
provided for both the repurchase by the Company of all of the shares of its
class A common stock then owned by Braun and the reacquisition of the exclusive
rights to manufacture and market Hemopure in Europe for the approximate amount
previously paid by Braun for these shares and rights.
The Company paid one installment of $1.0 million in 1998 and completed
the repurchase of 319,683 shares. The Company paid a second installment of $1.0
million in February 1999. With the proceeds from the Company's initial public
offering, it completed the repurchase in fiscal 1999 of the remaining 1,694,273
shares of class A common stock held by Braun for $5.0 million. The license
repurchase price is $7.5 million, payable without interest from a 5% royalty on
future sales in the European countries covered by Braun's terminated license.
The Company has a consulting arrangement with C. Everett Koop, M.D., a
director. For the fiscal years ended October 31, 1997, 1998 and 1999, it paid
Dr. Koop $92,941, $123,780 and 146,132, respectively. It paid $75,500 to Mr.
Judelson, a director, for services in each of fiscal 1997 and fiscal 1998.
In August 1990, the Company made loans to some of its directors and
officers and they used the proceeds from such loans to purchase class A common
stock. A loan to Mr. Rausch with $1.4 principal and interest outstanding on
January 31, 2000 bears interest at an annual interest rate of 4.71% and
principal and interest are due July 31, 2003. The principal and interest on the
remaining loan amounts are due to be paid in full on July 31, 2000. The interest
rate on these remaining loans is set with reference to the "base rate" announced
by Fleet Bank of Massachusetts, N.A. At January 31, 2000, this interest rate was
8.50%. At October 31, 1999, the amount of indebtedness due under these loans
where the amount involved is $60,000 or more was:
Carl W. Rausch, Chairman and Chief Executive Officer - approximately
$1.7 million;
Edward E. Jacobs, Jr., Senior Vice President - $377,713; Dr. Jacobs
subsequently paid his loan in full.
Bing L. Wong, Senior Vice President, International - $101,899; and
Geoffrey J. Filbey, Vice President, Engineering - $68,746.
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<PAGE> 11
EXECUTIVE COMPENSATION
The following Report of the Board of Directors and the performance
graph included elsewhere in this proxy statement do not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other Company filing under the Securities Act of 1933 or the Securities Exchange
Act of 1934, except to the extent the Company specifically incorporates this
Report or the performance graph by reference therein.
REPORT OF THE BOARD OF DIRECTORS RELATING TO COMPENSATION
The Compensation Committee was first created in the second half of
fiscal 1999 and did not act on fiscal 1999 compensation. Prior to the creation
of a Compensation Committee, the whole Board of Directors approved key
compensation matters. Consequently, the Board of Directors has furnished the
following report for fiscal year 1999.
WHAT IS THE COMPANY'S PHILOSOPHY OF EXECUTIVE OFFICER COMPENSATION?
The Company's compensation program for executives consists of three key
elements:
* a base salary,
* a performance-based annual bonus, and
* periodic grants of stock options.
The Board of Directors believes that this three-part approach best
serves the interests of the Company and its stockholders. It provides for
executive officer compensation that advances both the short- and long-term
interests of stockholders. Under this approach, compensation for these officers
involves a high proportion of pay that is "at risk" -- namely, the annual bonus
and stock options. The annual bonus portion of the Company's compensation
program was suspended for executive officers in 1999. Stock options relate a
significant portion of long-term remuneration directly to stock price
appreciation realized by all of the Company's stockholders.
BASE SALARY. Base salaries for the Company's executive officers, as
well as changes in such salaries, are based upon recommendations by the Chief
Executive Officer, Carl Rausch, taking into account such factors as competitive
industry salaries; a subjective assessment of the nature of the position; the
contribution and experience of the officer; and the length of the officer's
service. Mr. Rausch reviews salary recommendations with the Board, which then
approves or disapproves such recommendations.
ANNUAL BONUS. No annual bonuses were paid to executive officers of the
Company for fiscal 1999.
For bonus-eligible executives other than executive officers, the
Company's Chief Operating Officer, working with the Company's Chief Executive
Officer, develops a Company-wide bonus pool. The size of the bonus pool is based
upon a subjective assessment of overall Company and individual unit performance,
the extent to which the Company achieved its overall goals or milestones and the
Company's available funds. In addition, consideration is given to the need to
keep the Company competitive in overall compensation. Once the overall bonus
pool is approved, the Company's senior management make individual bonus
recommendations, within the limits of the pool, for eligible employees based
upon an evaluation of their individual performance and contribution to the
Company's overall performance.
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<PAGE> 12
STOCK OPTIONS. Mr. Rausch and Mr. Looney recommend for review and
approval the number of options to be granted.
HOW IS THE COMPANY'S CHIEF EXECUTIVE OFFICER COMPENSATED?
As Chief Executive Officer Mr. Rausch is compensated based on a
subjective assessment of overall Company performance, the extent to which the
Company achieved its overall goals or milestones and, as the Company has been
development stage, its cash resources.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Board's Compensation Committee is or has
been an officer or employee of the Company, except Mr. Rausch, who is a
non-voting member. Jane Kober, Senior Vice President and General Counsel, serves
as a member of the board of directors of HTV Industries, Inc., of which Mr.
Harrington is President. No other executive officer of Biopure serves as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of our board of directors
or compensation committee.
EXECUTIVE COMPENSATION SUMMARY TABLES
The following table sets forth information concerning total
compensation earned or paid to the Chief Executive Officer and the four other
most highly compensated executive officers of the Company who served in such
capacities as of October 31, 1999 (the "named executive officers") for services
rendered to the Company during each of the last three fiscal years.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
ANNUAL
COMPENSATION LONG - TERM COMPENSATION
-----------------------------------------------------------------------------------------
AWARDS PAYOUTS
---------- -----------
SECURITIES EARNINGS ON
FISCAL OTHER ANNUAL UNDERLYING DEFERRED
YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) COMPENSATION($) 401(k)($)
------ --------- -------- --------------- ----------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
NAME AND PRINCIPAL POSITION
Carl W. Rausch........................ 1999 307,008 -- -- 166,680 94,097 4,550
Chairman and Chief Executive 1998 307,008 75,000 -- 83,333 104,408 4,370
Officer 1997 252,866 30,000 -- -- 94,353 4,725
Edward E. Jacobs, Jr., M.D ........... 1999 205,010 -- -- 16,680 -- 4,983
Senior Vice President 1998 205,010 25,000 -- 10,000 -- 4,565
1997 169,698 -- 228,000 -- -- 4,852
Maria S. Gawryl, Ph.D ................ 1999 202,501 -- -- 100,000 -- 4,929
Senior Vice President -- 1998 195,000 40,000 -- 53,334 -- 4,653
Research and Development 1997 162,040 20,000 -- -- -- 4,839
William D. Hoffman, M.D. ............. 1999 184,692 -- 7,162 68,000 -- 3,381
Chief Medical Officer 1998 123,767 -- 30,000 5,333 -- --
1997 -- -- -- -- -- --
Jane Kober............................ 1999 220,012 -- 80,001 133,340 -- 2,285
Senior Vice President -- 1998 102,390 -- 40,000 33,333 -- --
General Counsel and Secretary 1997 -- -- -- -- -- --
</TABLE>
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<PAGE> 13
Option Grants in Last Fiscal Year
The following table summarizes information regarding options granted to
the Chief Executive Officer and the Company's other four most highly compensated
executive officers during the fiscal year ended October 31, 1999.
Amounts in the following table represent hypothetical gains that could
be achieved for the options if they were exercised at the end of the option
term. The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the rules of the Securities and Exchange Commission and do not
represent an estimate or projection of our future class A common stock prices.
These amounts represent certain assumed rates of appreciation in the value of
the class A common stock from the fair market value on the date of grant. Actual
gains, if any, on stock option exercises are dependent on the future performance
of the class A common stock and overall stock market conditions. The amounts
reflected in the following table may not necessarily be achieved.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
INDIVIDUAL GRANTS
----------------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE AT
NUMBER OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM($)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION --------------------------
GRANTED(#) 1999(%) SHARE($) DATE 5% 10%
---------- ------------ --------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
NAME AND PRINCIPAL POSITION
Carl W. Rausch........................... 166,680 11.17 12.00 08/04/09 1,257,890 3,187,740
Chairman and Chief
Executive Officer
Edward E. Jacobs, Jr., M.D............... 16,880 1.12 12.00 08/04/09 125,880 319,003
Senior Vice President
Maria S. Gawryl, Ph.D.................... 100,000 6.70 12.00 08/04/09 754,674 1,912,491
Senior Vice President --
Research and Development
William D. Hoffman, M.D. ................ 68,000 4.56 12.00 08/04/09 513,178 1,300,494
Chief Medical Officer
Jane Kober............................... 133,340 8.94 12.00 08/04/09 1,006,282 2,550,115
Senior Vice President --
General Counsel and Secretary
</TABLE>
Fiscal Year-End Option Values
The following table shows the number and value of unexercised options
held by the Chief Executive Officer and the Company's other four most highly
compensated executive officers at October 31, 1999. None of these individuals
exercised options in fiscal 1999.
In accordance with SEC rules, values are calculated by subtracting the
exercise price from the fair market value of the underlying common stock. For
purposes of this table, the fair market value on October 31, 1999 was determined
to be $ 9.88 per share, the closing price of the class A common stock as quoted
on The Nasdaq National Market on October 29, 1999.
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<PAGE> 14
<TABLE>
<CAPTION>
--------------------------------------------------------------
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR END(#) FISCAL YEAR END($)
------------------------------ ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C>
NAME AND PRINCIPAL POSITION
Carl W. Rausch................................. 20,833 229,180 -- --
Chairman and Chief Executive Officer
Edward E. Jacobs, Jr., M.D. 2,500 24,180 -- --
Senior Vice President
Maria S. Gawryl, Ph.D. 23,084 140,583 -- --
Senior Vice President--
Research and Development
William D. Hoffman, M.D........................ 1,333 72,000 -- --
Chief Medical Officer
Jane Kober..................................... 8,333 158,340 -- --
Senior Vice President--
General Counsel and Secretary
</TABLE>
NON-COMPETITION AGREEMENTS
All of our executive officers have agreed not to engage in any activities that
would compete with our current business or any potential business during their
employment terms and for five years thereafter.
DEFERRED COMPENSATION AGREEMENT
On August 8, 1990, we entered into a deferred compensation agreement with Carl
Rausch, our Chairman, Chief Executive Officer and President, which provided that
we would pay him a lump sum of $700,000 plus interest accrued from August 8,
1990 to the date of payment. The total payment will be due July 31, 2003. The
amount of the payment with interest, calculated at the prime interest rate
through July 1999 and thereafter at 4.71%, will be $1,686,000. The deferred
compensation agreement was entered into as part of Mr. Rausch's overall
long-term compensation agreement. Mr. Rausch borrowed money from us in 1990 to
purchase class A common stock. See "Certain Relationships and Related
Transactions" for more information about this loan.
EMPLOYMENT AGREEMENT
The Company has an employment agreement with Paul A. Looney. The agreement has a
three-year term and may be extended. Under the terms of his employment
agreement, Mr. Looney will serve as president of Biopure with all the duties and
responsibilities of chief operating officer. He is entitled to an annual base
salary of not less than $295,000, subject to annual adjustment, and is eligible
to participate in all incentive, savings and retirement plans and welfare
benefit plans and programs that the Company maintains or implements. In
addition, under the agreement, Mr. Looney was promised and has received stock
options to purchase 233,340 shares of class A common stock at an exercise price
equal to the price to the public in the Company's initial public offering,
$12.00 per share. These options have terms of 10 years and will be immediately
exercisable in the event of a change of control or in the event of Mr. Looney's
death, disability, retirement, termination of employment for reasons other than
cause or voluntary termination under certain circumstances. Otherwise, the
options shall become exercisable in 25% increments on July 1, 2000, 2001, 2002
and 2003.
This employment agreement also includes non-solicitation and non-competition
provisions, restricting Mr. Looney's ability to engage in any activities that
would compete with the Company's business.
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<PAGE> 15
1990 INCENTIVE COMPENSATION AND COMPANY STOCK PURCHASE PLAN
Under an Incentive Compensation and Company Stock Purchase Plan, the Company
sold approximately 1,606,000 "non-lapse" restricted shares of class A common
stock in August 1990 to certain key employees, consultants and directors at a
purchase price of $1.35 per share. At the time of purchase, these shares had an
estimated fair market value of $5.40 per share. The price paid for these shares
represented a discount of $4.05 per share. All of these shares were contributed
to Biopure Associates Limited Partnership II.
Under the terms of separate stock purchase agreements entered into with each
purchaser, the resale price of these shares, whether sold to the Company or to a
third party, would be equal to the price of the class A common stock less the
discount with accrued interest. Any purchaser of such shares would be subject to
the same restrictions. At May 1, 1999, the discount plus accrued interest per
share was $7.92. These shares are subject to certain transfer and resale
restrictions, including a right of first refusal granted to the Company.
The board has agreed to modify these resale restrictions. In particular, the
discount plus accrued interest per share has been fixed at $7.92, and holders
may sell their shares or eliminate the restrictions at any time by the payment
to the Company of $7.92 per share. In addition, the Company will have the right,
exercisable at any time during the 12 months beginning August 1, 2004, to
exchange these restricted shares for a number of shares of class A common stock
having equivalent value after taking into account the discount of $7.92 per
share.
THE 1998 STOCK OPTION PLAN
In 1998, the Board of Directors adopted the 1998 Stock Option Plan as a
replacement for the 1988 Stock Option Plan which expired in March 1998. Awards
under the 1999 plan were in the form of incentive options, which are defined in
the Internal Revenue Code of 1986, or non-statutory options. Options granted
under this plan vest in such installments, cumulative or non-cumulative, as the
Board may determine.
1999 OMNIBUS SECURITIES AND INCENTIVE PLAN
In 1999, the Board adopted the 1999 Omnibus Securities and Incentive Plan, which
has the terms described below. This plan is intended to promote the Company's
long-term financial interests and growth by providing incentives to employees
and directors and to align their interests with those of the Company's
stockholders by acquiring a proprietary interest in the Company's long-term
success.
General
The 1999 Omnibus Securities and Incentive Plan provides for the granting of
stock options, restricted stock awards, unrestricted stock awards, performance
unit awards, performance share awards, distribution equivalent rights, or any
combination of the foregoing to employees and directors of the Company and its
affiliates. The Company's Compensation Committee administers this plan. The
maximum number of shares of class A common stock reserved for issuance under
this plan is 1,866,666.
Stock Options
Under the plan, the committee may award stock options, the term and vesting
rules of which are to be specified in the respective stock option award
agreements. The committee will determine whether to award incentive stock
options or nonqualified stock options, as described in the applicable stock
option award agreement. The granting of incentive stock options, as defined in
the Internal Revenue Code of 1986, is subject to certain limitations as
described in the plan, including the requirement that incentive stock options
cannot be granted to non-employee directors. The committee will determine the
option price, but, in the case
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<PAGE> 16
of an incentive stock option, the option price will not be less than the fair
market value of a share of class A common stock on the date of the grant of the
option.
Restricted Stock Awards
The committee may grant restricted stock awards to key management employees and
directors pursuant to a restricted stock award agreement. The restricted stock
award agreements will describe the rights of the recipient of the restricted
stock award, which rights may include or exclude voting rights. During the
restriction period, the recipient of a restricted stock award will not receive
the certificate representing shares of class A common stock, will not receive
dividends and will not be entitled to sell, transfer, pledge or otherwise
dispose of the shares. At the end of the restriction period, assuming the
recipient has not breached the terms and conditions contained in the restricted
stock award agreement, the recipient will receive the certificate representing
shares of class A common stock.
Unrestricted Stock Awards
The committee may, in its discretion, award, or sell at a discount, as
compensation for past services rendered to us, unrestricted shares of class A
common stock. Unrestricted stock is not subject to restrictions on transfer.
Performance Unit Awards
The committee has discretion to set performance goals for an employee or
director and related performance units with their dollar value. If the goals are
met, the Company will make payment of a cash award equal to the number of
bookkeeping units awarded at the dollar value assigned to each such unit.
Performance Share Awards
The committee has discretion to set performance goals for an employee or
director which, if met, will result in the receipt of shares of class A common
stock. The holder of a performance share award will have no rights as a
stockholder until such time, if any, as the holder actually receives shares of
class A common stock pursuant to the performance share award.
Distribution Equivalent Rights
The committee has discretion to grant an award entitling the holder to receive
bookkeeping credits, cash payments
and/or class A common stock distributions equal in an amount to the
distributions that would have been made to
the holder had the holder held a specified number of shares of class A common
stock during the period that the holder held the distribution equivalent right.
Other Features of the 1999 Omnibus Securities and Incentive Plan
Unless otherwise provided in an award agreement, the plan provides that in the
event of a change of control, as defined in the plan, and the termination of
employment or removal, in the case of a director, under specified circumstances,
the holder's outstanding awards will become fully vested and immediately
exercisable, all transfer restrictions will lapse and all performance goals will
be deemed to have been fully satisfied. The committee, however, can determine
that upon a change of control, all outstanding awards will terminate and be
cashed out within a specified time period.
The Board of Directors may terminate, alter or amend the 1999 Omnibus Securities
and Incentive Plan;
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<PAGE> 17
provided, however, that no such action may, without the consent of a holder,
materially and adversely impair the rights under any outstanding award.
INCENTIVE COMPENSATION PLAN
We have an incentive compensation plan in place for employees selected at the
beginning of each fiscal year by a committee of the board of directors. At the
end of each fiscal year, the committee determines the total amount of funds to
be made available for incentive compensation for the previous fiscal year. The
allotment of the incentive compensation funds among the participants is at the
sole discretion of the committee. Awards are not paid out until the April
following the third anniversary of the date on which the award was credited to
the participant's account. Biopure's general funds are the sole source of
payment under this plan.
COMPARISON OF TOTAL RETURNS
The following graph compares the performance of the Company's class A common
stock (the single class of common stock of the Company that has a public market)
with the performance of the CRSP Total Return Index for the Nasdaq Stock Market
(U.S. Companies) and the Nasdaq Pharmaceutical Stocks Index from the first day
the stock became publicly traded, July 30, 1999, through the end of fiscal 1999.
The total stockholder return assumes that $100 was invested on July 30, 1999 in
the Company's class A common stock, the CRSP Total Return Index for the Nasdaq
Stock Market (U.S. Companies) and the Nasdaq Pharmaceutical Stocks Index, and
that all dividends were reinvested.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
7/30/99 10/31/99
-------- --------
<S> <C> <C>
Biopure $ 100.00 $ 82.29
Nasdaq US $ 100.00 $ 111.28
Nasdaq Pharmaceuticals $ 100.00 $ 103.82
</TABLE>
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<PAGE> 18
INDEPENDENT ACCOUNTANTS
The Company has appointed Ernst & Young LLP as the Company's
independent accountants for the fiscal year ending October 31, 2000. Ernst &
Young LLP has served as the Company's independent accountants since 1990.
Services provided to the Company and its subsidiaries by Ernst & Young LLP in
fiscal 1999 included the examination of the Company's consolidated financial
statements, limited reviews of quarterly reports, services related to filings
with the Securities and Exchange Commission, and consultations on various tax
and information services.
Representatives of Ernst & Young LLP will be present at the annual
meeting to respond to appropriate questions and to make such statements as they
desire.
OTHER MATTERS
As of the date of this proxy statement, the Company knows of no
business that will be presented for consideration at the annual meeting other
than the item referred to above. If any other matter is properly brought before
the meeting for action by stockholders, proxies in the enclosed form returned to
the Company will be voted in accordance with the recommendation of the Board of
Directors or, in the absence of such a recommendation, in accordance with the
judgment of the proxy holder.
ADDITIONAL INFORMATION
ADVANCE NOTICE PROCEDURES. Under the Company's bylaws, no business may
be brought before an annual meeting unless it is specified in the notice of the
meeting (which includes stockholder proposals that the Company is required to
include in its proxy statement pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934) or is otherwise brought before the meeting by or at the
direction of the Board or by a stockholder entitled to vote who has delivered
notice to the Company (containing certain information specified in the bylaws)
not less than 45 or more than 75 days prior to the first anniversary of the
date on which the Company first mailed its proxy materials for the preceding
year's annual meeting. These requirements are separate from and in addition to
the SEC's requirements that a stockholder must meet in order to have a
stockholder proposal included in the Company's proxy statement.
STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING. Stockholders
interested in submitting a proposal for inclusion in the proxy materials for the
Company's annual meeting of Stockholders in 2001 may do so by following the
procedures prescribed in SEC Rule 14a-8. To be eligible for inclusion,
stockholder proposals must be received by the Company's Corporate Secretary no
later than November 5, 2000.
PROXY SOLICITATION COSTS. The proxies solicited hereby are being
solicited by the Company. The cost of soliciting proxies in the enclosed form
will be borne by the Company. Officers and regular employees of the Company may,
but without compensation other than their regular compensation, solicit proxies
by further mailing or personal conversations, or by telephone, telex, facsimile
or electronic means. The Company will, upon request, reimburse brokerage firms
and others for their reasonable expenses in forwarding solicitation material to
the beneficial owners of stock.
By order of the Board of Directors,
Jane Kober
Senior Vice President and Secretary
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<PAGE> 19
APPENDIX
FORM OF PROXY
-------------
This Proxy is solicited on behalf of the Board of Directors of
BIOPURE CORPORATION
The undersigned hereby (a) acknowledges receipt of the Notice of Annual
Meeting of Stockholders of Biopure Corporation to be held on April 5, 2000 at
10:00 A.M. at the Royal Sonesta Hotel, 5 Cambridge Parkway, Cambridge,
Massachusetts, and the Proxy Statement in connection therewith, each dated
February 28, 2000; (b) appoints Francis H. Murphy and Jane Kober, as proxies,
each with the power to appoint his or her substitute, and hereby authorizes them
to represent and to vote, as designated on the reverse side of this Form of
Proxy, all of the shares of Class A Common Stock of Biopure Corporation held of
record by the undersigned on February 18, 2000 at the Annual Meeting of
Stockholders to be held on April 5, 2000 or any adjournment thereof.
(TO BE SIGNED ON REVERSE SIDE)
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
<TABLE>
<CAPTION>
FOR NOMINEES WITHHOLD AUTHORITY
LISTED AT TO VOTE FOR NOMINEES
RIGHT LISTED AT RIGHT
<S> <C> <C> <C> <C>
Election of NOMINEES C. Everett Koop, M.D. 2. In their discretion the Proxies
Class I Paul A. Looney are authorized to vote upon such
Directors ______ _________ other business as may properly come
before the meeting.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL THIS PROXY, WHEN PROPERLY EXECUTED,
NOMINATED, STRIKE A LINE THROUGH THAT NOMINEE'S WILL BE VOTED IN THE MANNER DIRECTED
NAME IN LIST AT RIGHT. HEREIN BY THE UNDERSIGNED
STOCKHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2.
SIGNATURE________________________________ DATE_______________ _________________________________ DATE__________________
SIGNATURE IF HELD JOINTLY
</TABLE>
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