<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 22, 2000.
REGISTRATION NO. 333-30382
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
------------------------
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BIOPURE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 2836 04-2836871
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
11 HURLEY STREET
CAMBRIDGE, MA 02141
(617) 234-6500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JANE KOBER, ESQ.
BIOPURE CORPORATION
11 HURLEY STREET
CAMBRIDGE, MA 02141
(617) 234-6500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
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LARS BANG-JENSEN, ESQ. GERALD S. TANENBAUM, ESQ.
LEBOEUF, LAMB, GREENE & MACRAE, L.L.P. CAHILL GORDON & REINDEL
125 WEST 55TH STREET 80 PINE STREET
NEW YORK, NY 10019-5389 NEW YORK, NY 10005
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER
TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
PROSPECTUS
SUBJECT TO COMPLETION
DATED FEBRUARY 22, 2000
2,500,000 Shares
[Biopure Logo]
Class A Common Stock
Biopure Corporation is selling all of the shares of class A common stock in this
offering.
Biopure's class A common stock is listed on The Nasdaq National Market under the
symbol "BPUR". On February 18, 2000, the last reported sale price of our class A
common stock on The Nasdaq National Market was $37.00 per share.
INVESTING IN OUR CLASS A COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 10.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<CAPTION>
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT BIOPURE
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<S> <C> <C> <C>
Per share $ $ $
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Total $ $ $
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</TABLE>
We have agreed to grant the underwriters the right to purchase up to an
additional 375,000 shares of class A common stock to cover over-allotments.
The underwriters expect to deliver the shares of class A common stock to
investors on or about , 2000.
J.P. MORGAN & CO.
SALOMON SMITH BARNEY
ROBERT W. BAIRD & CO.
ADAMS, HARKNESS & HILL, INC.
, 2000
<PAGE> 3
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of class A common stock only in jurisdictions where we are permitted
to make offers and sales. The information in this prospectus is current only as
of its date.
------------------------
TABLE OF CONTENTS
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<CAPTION>
PAGE
<S> <C>
Prospectus Summary.......................... 5
Risk Factors................................ 10
Forward-Looking Statements.................. 15
Use of Proceeds............................. 16
Dividend Policy............................. 16
Capitalization.............................. 17
Price Range of Common Stock................. 17
Selected Consolidated Financial Data........ 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................ 19
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Business.................................... 22
Management.................................. 35
Certain Relationships and Related
Transactions.............................. 43
Principal Stockholders...................... 44
Description of Capital Stock................ 46
Underwriting................................ 48
Legal Matters............................... 50
Experts..................................... 50
Available Information....................... 50
Index to Consolidated Financial
Statements................................ F-1
</TABLE>
------------------------
Biopure(R), Hemopure(R) and Oxyglobin(R) are registered trademarks of Biopure.
3
<PAGE> 4
PROSPECTUS SUMMARY
This summary may not contain all the information that may be important to you.
You should read the entire prospectus, especially "Risk Factors" and the
Consolidated Financial Statements and the related Notes, before deciding to
invest in shares of our class A common stock. Unless otherwise indicated, all
information in this prospectus assumes that the underwriters will not exercise
their right to purchase an additional 375,000 shares of class A common stock.
BIOPURE CORPORATION
Biopure is a leading developer, manufacturer and marketer of oxygen
therapeutics. Our oxygen therapeutics are pharmaceuticals administered
intravenously into the circulatory system to increase oxygen transport to the
body's tissues. We have developed and manufacture two hemoglobin-based oxygen
therapeutic products -- Hemopure, for human use, and Oxyglobin, for veterinary
use. Hemopure is currently in a pivotal Phase III clinical trial in the United
States. Oxyglobin, the only hemoglobin-based oxygen carrier approved by the U.S.
Food and Drug Administration, or the FDA, has been commercially available in the
United States since March 1998 for the treatment of anemia in dogs, regardless
of cause.
Acute blood loss and other medical conditions can disrupt the delivery of oxygen
to the body's tissues. A red blood cell transfusion is the standard therapy for
blood loss. Hemopure compares favorably to transfused red blood cells in that
it:
- - is highly purified by proprietary and patented processes to remove possible
infectious agents;
- - has a 30-month shelf life as compared to blood's 42-day shelf life;
- - does not require refrigeration;
- - maintains full oxygen-releasing capability during storage;
- - does not require blood typing or other tests for compatibility; and
- - has an abundant, low-cost raw material source -- bovine red blood cells.
We believe that Hemopure also has potential for use in the treatment of other
critical care conditions such as trauma, ischemic conditions, including stroke
and heart attack, and malignant hypoxic, or oxygen deficient, tumors. Hemopure:
- - is significantly smaller in molecular size than red blood cells, so it can
flow around partial blockages and through constricted vessels;
- - is less viscous than red blood cells and, therefore, possesses better flow
characteristics;
- - is chemically designed to release oxygen more readily than the hemoglobin
contained in red blood cells; and
- - facilitates the release of oxygen from red blood cells.
We have infused Hemopure into more than 650 humans in 21 completed or ongoing
clinical trials at doses of up to 300 grams of hemoglobin contained in
approximately two and one-half liters, or ten units, of Hemopure. We believe
Hemopure is a safe, effective alternative to red blood cell transfusions after
blood loss from surgery. Our trials demonstrate Hemopure's efficacy as measured
by the elimination of a significant percentage of red blood cell transfusions.
Biopure filed for Hemopure marketing approval as an alternative to red blood
cell transfusions for specified surgical procedures in South Africa in July
1999. We expect to file an application for marketing approval for Hemopure in
the United States in 2000 and in the European Union after the U.S. filing.
Oxyglobin is identical to Hemopure except for its molecular size distribution.
Veterinarians report successful use of Oxyglobin in critical care situations
involving blood loss, destruction of red blood cells and ineffective production
of red blood cells in dogs.
Biopure operates a manufacturing facility with adequate capacity to produce both
Oxyglobin for commercial sale, and Hemopure for clinical trials and initial
commercial launch immediately following FDA approval. Biopure believes that its
manufacturing facilities comply with current Good Manufacturing Practices
established by the FDA.
5
<PAGE> 5
PRINCIPAL DEVELOPMENTS SINCE OUR INITIAL PUBLIC OFFERING IN JULY 1999
Since our initial public offering in July 1999, the following events have
occurred:
- - Our pivotal Phase III clinical trial has now reached approximately 75%
enrollment. In December 1999, we received approval from Canada's Health
Protection Branch to include Canadian sites in this trial, thereby expanding
the pool of eligible patients. We now have a total of 45 sites enrolling
patients in the United States, Europe, South Africa and Canada.
- - Following 50% enrollment of our pivotal Phase III clinical trial, an
independent panel reviewed safety data from the trial. The role of the
independent panel, or safety data monitoring committee, is to determine
whether there are safety issues that would warrant modification or early
termination of the study. The committee completed its second and final
scheduled meeting in January 2000, and the trial is proceeding without
modification.
- - Our Phase II trial in non-cardiac surgery patients that allows enrollment of
consenting, stable trauma patients has reached approximately 40% enrollment.
This 60-patient study is taking place at Brooke Army Medical Center, Wilford
Hall Air Force Hospital and the University of Texas at San Antonio.
- - At a workshop on Criteria for Safety and Efficacy Evaluation of Oxygen
Therapeutics as Red Cell Substitutes, which was held in September 1999 and
sponsored by multiple government agencies, FDA representatives indicated that
elimination of red blood cell transfusions is an appropriate end point for
approval of oxygen therapeutics for surgery. This is the primary efficacy
endpoint of our pivotal Phase III clinical trial. These statements do not
necessarily represent the agency's official position.
- - The peer-reviewed Journal of Vascular Surgery published in its February 2000
issue an article describing the results from our Phase II study in aortic
aneurysm reconstruction surgery. The article reported that Hemopure eliminated
the need for allogeneic red blood cell transfusions in a significant number of
patients undergoing vascular surgery. The article also reported that Hemopure
was well tolerated in a patient population consisting largely of elderly
patients with complex medical conditions.
- - The peer-reviewed journal Shock reported in its February 2000 issue the
results of a preclinical study in animals with uncontrolled lethal hemorrhage
due to liver injury. The article showed that, in comparison with animals that
received Ringer's lactate, Hemopure improved early survival and stabilized
hemodynamics and metabolic parameters. This study simulated the pre-hospital
care environment where blood is not available.
- - An abstract published in The Journal of Trauma in January 2000 and scheduled
to be presented at the upcoming Western Trauma Association meeting describes a
preclinical study using a pre-hospital hemorrhagic shock in an animal model
designed to model what happens to humans after an accident. The study
demonstrates that small-volume resuscitation with Hemopure can restore and
sustain brain oxygenation, blood pressure and cardiac output following severe
hemorrhagic shock.
- - At the August 1999 annual meeting of the International Society on Oxygen
Transport to Tissue, investigators presented the results of three preclinical
studies:
-- A study conducted at the University of California San Francisco showed in
an animal model that small-volume administration of Hemopure significantly
increased brain tissue oxygen tension, a measure of brain oxygenation.
-- Another study, conducted at Dartmouth Hitchcock Medical Center, showed
significantly higher levels of oxygenated hemoglobin in the brains of
animals treated with Hemopure than in animals that did not receive
Hemopure.
-- A study conducted at Louisiana State University Medical Center showed that
Hemopure significantly protected cardiac function and reduced the extent of
injury to the heart muscle following heart ischemia as compared to animals
not receiving Hemopure.
- - In the initial response to our application for human approval, the Medicines
Control Council, the South African regulatory agency reviewing the filing for
Hemopure, has indicated that our results look promising, but the evidence
submitted in support of the safety and efficacy of the product was not
accepted because the data base of patients is currently too limited to
consider approval. The Council's response contains no other information on
this issue. We are seeking through the local sponsor of the application, to
initiate a dialogue on this point and are hopeful that we can meet the
conditions for approval with the data on over 700 patients that we have
already submitted. However, there is no assurance that this issue can be
satisfactorily resolved. The Council's additional comments did not indicate
any significant issues regarding the approval of our application.
6
<PAGE> 6
- - In January 2000, the FDA approved expanding the Oxyglobin label to allow for
flexible dosing. This change will permit veterinarians to adjust the dosage
based on the type of anemia and the severity of the animal's medical condition
and thereby afford the veterinarian greater treatment flexibility on a more
cost efficient basis.
- - In December 1999, Oxyglobin was approved for sale in all countries of the
European Union. We are currently evaluating our strategic options for European
marketing of Oxyglobin.
- - We received two additional U.S. patents covering improvements in our
ultra-purification process. We also received two European patents, each
covering a different fractionation process for cross-linked hemoglobin.
------------------------
Biopure's incorporation occurred in 1984 in Delaware. Our address is 11 Hurley
Street, Cambridge, Massachusetts 02141 and our telephone number is (617)
234-6500.
7
<PAGE> 7
THE OFFERING
The following information is based on 22,303,912 shares of class A common stock
outstanding as of February 1, 2000. The number of outstanding shares of class A
common stock does not include 2,689,827 shares of class A common stock issuable
on the exercise of outstanding stock options and warrants as of February 1,
2000. In addition, the number of outstanding shares of class A common stock does
not include between 646,667 and 1,272,119 shares of class A common stock
issuable upon the conversion of our class B common stock following FDA approval
of Hemopure.
CLASS A COMMON STOCK OFFERED.............2,500,000 shares of class A common
stock
CLASS A COMMON STOCK TO BE OUTSTANDING
AFTER THE OFFERING.......................24,803,912 shares of class A common
stock; 25,178,912 shares of class A
common stock if the underwriters' over-
allotment option is exercised in full
OVER-ALLOTMENT OPTION....................375,000 shares of class A common stock
USE OF PROCEEDS..........................We expect to use the net proceeds of
this offering as follows:
- $7.0 million for pre-marketing and
marketing of Hemopure;
- $10.0 million for Hemopure clinical
trials other than our ongoing pivotal
Phase III clinical trial;
- $10.0 million for expansion of our
existing manufacturing facility;
- $10.0 million for engineering and
site selection for a new
manufacturing facility; and
- the balance for other general
corporate purposes.
NASDAQ NATIONAL MARKET SYMBOL............"BPUR"
8
<PAGE> 8
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table summarizes our consolidated statements of operations data
for the fiscal years ended October 31, 1999, 1998 and 1997. Also included in
this table are our consolidated balance sheet data at October 31, 1999, on an
actual and on an as adjusted basis. The following consolidated statements of
operations data for the fiscal years ended October 31, 1999, 1998 and 1997 are
derived from our consolidated financial statements that appear elsewhere in this
prospectus and that have been audited by Ernst & Young LLP, independent
auditors. You should read the consolidated financial data in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and the related Notes
included elsewhere in this prospectus. Diluted earnings per share are not
presented in the consolidated statements of operations data because we had
losses in all periods.
The unaudited pro forma basic net income (loss) per common share is computed
using the weighted-average number of outstanding common shares assuming
conversion of all convertible preferred shares into common shares at date of
original issuance. The actual conversions occurred upon completion of the
initial public offering. The as adjusted balance sheet data reflect the sale of
2,500,000 shares of our class A common stock in this offering, after deducting
the underwriting discounts and offering expenses payable by us, based upon an
assumed public offering price of $37.00 per share.
<TABLE>
<CAPTION>
--------------------------------
FISCAL YEAR ENDED OCTOBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
In thousands, except per share data
STATEMENTS OF OPERATIONS DATA:
Total revenues.............................................. $ 2,866 $ 1,131 $ --
Cost of revenues............................................ 6,814 1,543 --
-------- -------- --------
Gross profit (loss)......................................... (3,948) (412) --
Operating expenses:
Research and development.................................. 24,166 22,950 23,494
Sales and marketing....................................... 2,922 2,444 694
General and administrative................................ 5,266 4,660 2,920
-------- -------- --------
Total operating expenses.................................... 32,354 30,054 27,108
-------- -------- --------
Income (loss) from operations............................... (36,302) (30,466) (27,108)
Total other income (expense)................................ 772 419 (310)
-------- -------- --------
Net income (loss)........................................... (35,530) (30,047) (27,418)
Stock dividends on preferred stock.......................... (17,915) -- --
-------- -------- --------
Net loss applicable to common stockholders.................. $(53,445) $(30,047) $(27,418)
======== ======== ========
Historical basic net income (loss) per common share......... $ (3.61) $ (2.41) $ (2.23)
Historical weighted-average common shares outstanding....... 14,813 12,460 12,300
Pro forma basic net income (loss) per common share.......... $ (2.62)
Pro forma weighted-average common shares outstanding........ 20,369
</TABLE>
<TABLE>
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OCTOBER 31, 1999
----------------------
ACTUAL AS ADJUSTED
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(UNAUDITED)
<S> <C> <C>
In thousands
BALANCE SHEET DATA:
Cash and cash equivalents................................... $30,778 $117,108
Total current assets........................................ 38,277 124,607
Working capital............................................. 27,872 114,202
Net property and equipment.................................. 27,447 27,447
Total assets................................................ 66,230 152,560
Total stockholders' equity.................................. 54,037 140,367
</TABLE>
9
<PAGE> 9
RISK FACTORS
You should carefully consider each of the risks and uncertainties described
below and all of the other information contained in this prospectus before
deciding to invest in shares of our class A common stock. The trading price of
our class A common stock could decline if any of the following risks and
uncertainties develop into actual events, and you may lose all or part of the
money you paid to buy our class A common stock.
COMPANY RISKS
IF WE CANNOT GENERATE ADEQUATE, PROFITABLE SALES OF HEMOPURE, WE WILL NOT BE
SUCCESSFUL
In order to succeed as a company, we must develop Hemopure commercially and sell
adequate quantities of Hemopure at a high enough price to generate a profit. We
may not accomplish either of these objectives.
Even if we succeed in developing Hemopure commercially, a number of factors may
affect future sales of our product. These factors include:
- - whether physicians, patients and clinicians accept Hemopure as a
cost-effective and therapeutic alternative to other products, including
donated human blood;
- - whether reimbursement for the cost of Hemopure is available; and
- - whether the public accepts the use of a natural protein product extracted from
bovine red blood cells in transfusions, particularly in light of public
perceptions in Europe and elsewhere about the risk of "mad cow disease".
IF WE FAIL TO OBTAIN FDA APPROVAL, WE CANNOT MARKET HEMOPURE IN THE UNITED
STATES
We will not be able to market Hemopure in the United States until we receive FDA
approval. Obtaining FDA approval generally takes years and consumes substantial
capital resources with no assurance of ultimate success. We cannot apply for FDA
approval to market Hemopure until the product successfully completes an ongoing
U.S. pivotal Phase III clinical trial. Several factors may prevent successful
completion of this clinical trial, including an inability to enroll the required
number of patients and insufficient demonstration that Hemopure is safe and
effective for use in humans. If safety problems develop, the FDA could stop our
trial before its completion. Publicity about enrollment abuses in the
pharmaceutical industry and regulatory actions taken with respect to some major
research institutes engaged in the clinical testing of pharmaceutical products
could affect the ability of Biopure to enroll patients in its clinical studies.
Even if we complete the trial, we are not certain that we will be able to obtain
FDA approval of Hemopure. We believe that our ongoing U.S. pivotal Phase III
clinical trial is consistent with the FDA's most recent guidance on the design
and efficacy and safety endpoints required for approval of products such as
Hemopure as a replacement for red blood cells in surgical indications. However,
the FDA could change its view or require a change in study design, additional
data or even further clinical trials, including trials for indications other
than those for which we are likely to seek approval in the near term, prior to
approval of Hemopure. If we fail to complete our ongoing U.S. pivotal Phase III
clinical trial and obtain FDA approval, we cannot market Hemopure in the United
States.
OUR FAILURE TO OBTAIN REGULATORY APPROVALS IN FOREIGN JURISDICTIONS WILL PREVENT
US FROM MARKETING HEMOPURE ABROAD
We also intend to market our products in international markets, including the
European Union and South Africa. We must obtain separate regulatory approvals in
order to market our products in the European Union, South Africa and many other
foreign jurisdictions. The regulatory approval processes may differ among these
jurisdictions. Approval in any one jurisdiction does not ensure approvals in a
different jurisdiction. As a result, obtaining foreign approvals may require
additional trials and additional expenses.
WE CANNOT EXPAND INDICATIONS FOR OUR PRODUCTS UNLESS WE RECEIVE FDA APPROVAL FOR
EACH PROPOSED INDICATION
The FDA requires a separate approval for each proposed indication for the use of
Hemopure. We expect that our first indication for Hemopure will only involve its
use in elective orthopedic surgery. Subsequently, we expect to expand Hemopure's
indications. In order to do so, we will have to design additional clinical
trials, submit the trial designs to the FDA for review and complete those trials
successfully. We cannot guarantee that the FDA will approve Hemopure for any
indication. We can only promote Hemopure for indications which have been
approved by the FDA. The FDA may require a label cautioning against Hemopure's
use for indications for which it has not been approved.
10
<PAGE> 10
The FDA has approved the use of our veterinary product, Oxyglobin, for the
treatment of anemia in dogs, regardless of cause. Supplemental approvals are
required to market Oxyglobin for any new indications or additional species. We
cannot guarantee that we will receive such approvals.
IF WE CANNOT FIND APPROPRIATE MARKETING PARTNERS, WE MAY NOT BE ABLE TO MARKET
AND DISTRIBUTE HEMOPURE EFFECTIVELY
Our success depends, in part, on our ability to market and distribute Hemopure
effectively. We have no experience in the sale or marketing of medical products
for humans. In the past, we entered into agreements with two established
pharmaceutical companies to market our products upon successful completion of
clinical development. These arrangements ended in 1996 and 1997. In the event
that we obtain FDA approval of Hemopure, we may require the assistance of one or
more experienced pharmaceutical companies to market and distribute Hemopure
effectively.
If we seek an alliance with an experienced pharmaceutical company:
- - we may be unable to find a collaborative partner, enter into an alliance on
favorable terms or enter into an alliance that will be successful;
- - any partner to an alliance might, at its discretion, limit the amount and
timing of resources it devotes to marketing Hemopure; and
- - any marketing partner or licensee may terminate its agreement with us and
abandon our products at any time for any reason without significant payments.
If we do not enter into an alliance with a pharmaceutical company to market and
distribute our products, we may not be successful in entering into alternative
arrangements, whether engaging independent distributors or recruiting, training
and retaining a marketing staff and sales force of our own.
FAILURE TO INCREASE MANUFACTURING CAPACITY MAY IMPAIR HEMOPURE'S MARKET
ACCEPTANCE
We will need to construct additional manufacturing facilities to meet annual
demand in excess of 100,000 units of Hemopure. If Hemopure receives rapid market
acceptance, we may experience difficulty manufacturing enough of the product to
meet demand. If we cannot fill orders for Hemopure, customers might turn to
alternative products and choose not to use Hemopure even after we have addressed
our capacity shortage.
FAILURE TO RAISE ADDITIONAL FUNDS IN THE FUTURE MAY AFFECT THE DEVELOPMENT,
MANUFACTURE AND SALE OF OUR PRODUCTS
We require substantial working capital to properly develop, manufacture and sell
our products. We expect to use the net proceeds of this offering as follows:
- - $7.0 million for pre-marketing and marketing of Hemopure;
- - $10.0 million for Hemopure clinical trials other than our ongoing pivotal
Phase III clinical trial;
- - $10.0 million for expansion of our existing manufacturing facility;
- - $10.0 million for engineering and site selection for a new manufacturing
facility; and
- - the balance for other capital expenditures and general corporate purposes.
Additional manufacturing facilities will require additional financing. If such
financing is not available when needed or is not available on acceptable terms,
we may experience a delay in developing products, building manufacturing
capacity or fulfilling other important goals.
OUR LACK OF OPERATING HISTORY MAKES EVALUATING OUR BUSINESS DIFFICULT
Licensing fees, payments to us from investors and payments to fund our research
and development activities comprise almost all of our funding to date. We have
no operating history upon which to base an evaluation of our business and our
prospects. We must successfully develop our products and product enhancements,
achieve market acceptance of our products and respond to competition. We cannot
guarantee that we will be successful in doing so, that we will ever be
profitable or, if we are, that we will remain profitable on a quarterly or
annual basis.
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<PAGE> 11
WE HAVE A HISTORY OF LOSSES AND EXPECT FUTURE LOSSES
We have had annual losses from operations since our inception in 1984. We expect
to continue to incur losses from operations until we are able to develop
Hemopure commercially and generate a profit. As of October 31, 1999, we had
accumulated a deficit of $250.4 million. Our 1999 auditors' report stated that
our recurring losses from operations raise substantial doubt about our ability
to continue as a going concern.
IF WE ARE NOT ABLE TO PROTECT OUR INTELLECTUAL PROPERTY, COMPETITION COULD FORCE
US TO LOWER OUR PRICES, WHICH MIGHT REDUCE PROFITABILITY
We believe that our patents, trademarks and other intellectual property rights,
including our proprietary know-how, will be important to our success. Our
business position will depend, in part, upon our ability to defend our existing
patents and engage in our business free of claims of infringement by third
parties. We will need to obtain additional patents for our products, the
processes utilized to make our products and our product uses. We cannot
guarantee that additional products or processes will achieve patent protection.
In addition, third parties may successfully challenge our patents. Oppositions
to one of our European patents have already led to a narrowing of this patent in
Europe and, since some oppositions are still pending, may lead to further
narrowing or even a loss of this European patent.
We have not filed patent applications in every country of the world. In certain
countries, obtaining patents for our products, processes and uses may be
difficult or impossible. Patents issued in countries other than the United
States and in regions other than Europe may be harder to enforce than, and may
not provide the same protection as, patents obtained in the United States and
Europe.
OUR PROFITABILITY WILL BE AFFECTED IF WE INCUR PRODUCT LIABILITY CLAIMS IN
EXCESS OF OUR INSURANCE COVERAGE
The testing and marketing of medical products, even after FDA approval, have an
inherent risk of product liability. We maintain limited product liability
insurance coverage in the total amount of $10.0 million. Our profitability will
be affected by a successful product liability claim in excess of our insurance
coverage. We cannot guarantee that product liability insurance will be available
in the future or be available on reasonable terms.
REPLACING OUR SOLE SOURCE SUPPLIERS FOR KEY MATERIALS COULD RESULT IN UNEXPECTED
DELAYS AND EXPENSES
We obtain some key materials, including membranes and chemicals, from sole
source suppliers. If such materials were no longer available at a reasonable
cost from our existing suppliers, we would need to obtain supply contracts with
new suppliers for substitute materials. If we need to locate a new supplier, the
substitute or replacement materials will most likely be tested for equivalency.
Such evaluations could delay development of a product, limit commercial sales of
an FDA-approved product and cause us to incur significant additional expense. In
addition, the time expended for such tests could delay the marketing of an
FDA-approved product.
PROVISIONS OF OUR RESTATED CERTIFICATE OF INCORPORATION COULD DISCOURAGE
TAKEOVER TRANSACTIONS THAT A STOCKHOLDER MIGHT CONSIDER TO BE IN ITS BEST
INTEREST
Certain provisions of our Restated Certificate of Incorporation and by-laws, as
well as our stockholders rights plan, could discourage others from initiating a
potential merger, takeover or other change of control transaction, including a
potential transaction at a premium over market price that a stockholder might
consider to be in its best interest. For more information, see "Description of
Capital Stock -- Anti-Takeover Effects of Various Provisions of Delaware Law,
Biopure's Restated Certificate of Incorporation and By-laws and a Stockholders
Rights Plan".
INDUSTRY RISKS
INTENSE COMPETITION COULD HARM OUR FINANCIAL PERFORMANCE
The biotechnology and pharmaceutical industries are highly competitive. There
are a number of companies, universities and research organizations actively
engaged in research and development of products that may be similar to Hemopure.
Increased competition could diminish our ability to become profitable or affect
our profitability in the future. Our existing and potential competitors:
- - are also conducting clinical trials of their products;
- - may have substantially greater resources than we do and may be better equipped
to develop, manufacture and market their products;
- - may have their products approved for marketing prior to Hemopure; and
- - may develop superior technologies or products rendering our technology and
products non-competitive or obsolete.
12
<PAGE> 12
STRINGENT, ONGOING GOVERNMENT REGULATION AND INSPECTION OF OUR PRODUCTS COULD
LEAD TO DELAYS IN THE MANUFACTURE, MARKETING AND SALE OF OUR PRODUCTS
The FDA continues to review products even after they receive FDA approval. If
and when the FDA approves Hemopure, its manufacture and marketing will be
subject to ongoing regulation, including compliance with current Good
Manufacturing Practices, adverse event reporting requirements and the FDA's
general prohibitions against promoting products for unapproved or "off-label"
uses. We are also subject to inspection and market surveillance by the FDA for
compliance with these and other requirements. Any enforcement action resulting
from failure to comply with these requirements could affect the manufacture and
marketing of Hemopure. In addition, the FDA could withdraw a previously approved
product from the market upon receipt of newly discovered information.
Furthermore, the FDA could require us to conduct additional, and potentially
expensive, studies in areas outside our approved indications.
We will be subject to a variety of regulations governing clinical trials and
sales of our products outside the United States. Whether or not FDA approval has
been obtained, we must secure approval of a product by the comparable non-U.S.
regulatory authorities prior to the commencement of marketing of the product in
a country. The approval process varies from country to country and the time
needed to secure additional approvals may be longer than that required for FDA
approval. These applications may require the completion of preclinical and
clinical studies and disclosure of information relating to manufacturing and
controls. Unanticipated changes in existing regulations or the adoption of new
regulations could affect the manufacture and marketing of our products.
HEALTH CARE REFORM AND CONTROLS ON HEALTH CARE SPENDING MAY LIMIT THE PRICE WE
CHARGE FOR HEMOPURE AND THE AMOUNT WE CAN SELL
The federal government and private insurers have considered ways to change, and
have changed, the manner in which health care services are provided in the
United States. Potential approaches and changes in recent years include controls
on health care spending and the creation of large purchasing groups. In the
future, it is possible that the government may institute price controls and
limits on Medicare and Medicaid spending. These controls and limits might affect
the payments we collect from sales of our products. Assuming we succeed in
bringing Hemopure to market, uncertainties regarding future health care reform
and private market practices could impact our ability to sell Hemopure in large
quantities at profitable pricing.
UNCERTAINTY OF THIRD-PARTY REIMBURSEMENT COULD AFFECT OUR PROFITABILITY
Sales of medical products largely depend on the reimbursement of patients'
medical expenses by governmental health care programs and private health
insurers. There is no guarantee that governmental health care programs or
private health insurers will reimburse our sales of Hemopure, or permit us to
sell our products at high enough prices to generate a profit.
OFFERING RISKS
THERE ARE SUBSTANTIAL SHARES ELIGIBLE FOR FUTURE SALE. THE SALE OF THESE SHARES
MAY DEPRESS OUR STOCK PRICE
Sales of substantial amounts of our class A common stock in the public market
could adversely affect prevailing market prices for our class A common stock and
our ability to raise equity capital in the future. As of February 1, 2000, we
had outstanding 22,303,912 shares of class A common stock. Of these shares, all
but 2,398,557 shares are either freely tradable in the public market, unless
acquired by our affiliates, or are "restricted securities" as that term is
defined in Rule 144 under the Securities Act of 1933 and eligible for immediate
sale in the public market pursuant to Rule 144, subject to certain volume and
manner of sale limitations.
Biopure and our directors, executive officers and some of our stockholders
holding an aggregate of 9,972,390 shares have agreed with the underwriters not
to transfer, dispose of or hedge any of our class A common stock, or securities
convertible into or exchangeable for shares of class A common stock, for a
period of 90 days after the date of this prospectus, except with the prior
written consent of J.P. Morgan Securities Inc. This agreement with respect to
Biopure does not apply to any of our employee benefit plans existing on the date
of this prospectus.
Approximately 290,829 shares of class A common stock underlying stock options
outstanding as of February 1, 2000 under our 1988 Stock Option Plan and our 1998
Stock Option Plan are available for immediate sale in the public market. There
were also 688,952 shares of our class A common stock underlying certain warrants
outstanding as of February 1, 2000, none of which have been registered for
public sale and all of which will be subject to the public sale restrictions of
Rule 144 under the Securities Act.
13
<PAGE> 13
OUR STOCK PRICE MAY BE HIGHLY VOLATILE
In its brief market history, our class A common stock has generally experienced
relatively low daily trading volumes in relation to the aggregate number of
shares outstanding.
Factors that may have a significant impact on the market price or the liquidity
of our class A common stock include:
- - actual or potential clinical trial results relating to products under
development by us or our competitors;
- - delays in our testing and development schedules;
- - events or announcements relating to our relationships with others;
- - announcements of technological innovations or new products by us or our
competitors;
- - developments or disputes concerning patents or proprietary rights;
- - regulatory developments in both the United States and foreign countries;
- - FDA approval of Hemopure or competitors' products;
- - economic and other factors, as well as period-to-period fluctuations in our
financial results;
- - market conditions for pharmaceutical and biotechnology stocks; and
- - publicity regarding actual or potential medical results relating to products
under development by us or our competitors.
External factors may also adversely affect the market price for our class A
common stock. Our class A common stock currently trades on The Nasdaq National
Market. The price and liquidity of our class A common stock may be significantly
affected by the overall trading activity and market factors on The Nasdaq
National Market.
INVESTORS IN THIS OFFERING WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION
The public offering price of our class A common stock in this offering will be
substantially higher than the net tangible book value per share of our
outstanding class A common stock. As of October 31, 1999, our net tangible book
value was approximately $54.0 million. If we receive FDA approval of Hemopure,
shares of our class B common stock will be converted into shares of our class A
common stock. If we assume conversion of our class B common stock into 1,272,119
shares of class A common stock, the maximum number of shares that could be
issued on conversion, then our pro forma net tangible book value per share is
$2.29 as of October 31, 1999. On a pro forma basis adjusted for this offering,
based on an assumed public offering price of $37.00 per share, the pro forma
adjusted net tangible book value will be approximately $140.4 million, and the
pro forma adjusted net tangible book value will be $5.39 per share of class A
common stock. The amount of the increase in pro forma adjusted net tangible book
value to existing stockholders will be approximately $3.10 per share of class A
common stock. Purchasers of our class A common stock in this offering will
experience immediate pro forma dilution of approximately $31.61 per share of
class A common stock.
14
<PAGE> 14
FORWARD-LOOKING STATEMENTS
This prospectus contains and incorporates by reference certain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements give our current expectations or forecasts of
future events. You can identify these statements by the fact that they do not
relate strictly to historical or current facts. Such statements may include
words such as "anticipate", "estimate", "expect", "project", "intend", "plan",
"believe" and other words or terms of similar meaning in connection with any
discussion of future operating or financial performance. In particular, these
forward-looking statements include statements relating to:
- - our history of operating losses and anticipation of future losses;
- - our need for additional capital and uncertainty of additional funding;
- - uncertainty of our product development;
- - government regulation and uncertainties of obtaining regulatory approval on a
timely basis or at all;
- - uncertainties related to our patent and proprietary rights;
- - uncertainties relating to clinical trials;
- - our lack of experience in marketing or selling products;
- - uncertainties regarding the acceptance, purchase and use of our products;
- - intense competition in the biopharmaceutical industry;
- - the price of our class A common stock; and
- - uncertainties relating to health care reform measures and third-party
reimbursement.
Any or all of our forward-looking statements in this prospectus may turn out to
be wrong. They can be affected by inaccurate assumptions we might make or by
known or unknown risks and uncertainties. Many factors mentioned in our
discussion in this prospectus, including those listed under the caption "Risk
Factors", will be important in determining future results. Consequently, no
forward-looking statement can be guaranteed. Actual future results may vary
materially from these Forward-Looking Statements.
We will not update these forward-looking statements, whether as a result of new
information, future events or otherwise. You should, however, review additional
disclosures we make in our Quarterly Reports on Form 10-Q, Annual Reports on
Form 10-K and Current Reports on Form 8-K filed with the Securities and Exchange
Commission, or SEC.
15
<PAGE> 15
USE OF PROCEEDS
The net proceeds we will receive from the sale of the 2,500,000 shares of class
A common stock offered by us are estimated to be $86,330,000, or $99,372,500 if
the underwriters' over-allotment option is exercised in full, after deducting
the underwriting discounts and estimated offering expenses payable by us, based
upon an assumed public offering price of $37.00 per share.
We currently intend to use the net proceeds of this offering as follows:
- - $7.0 million for pre-marketing and marketing of Hemopure;
- - $10.0 million for Hemopure clinical trials other than our ongoing pivotal
Phase III clinical trial;
- - $10.0 million for expansion of our existing manufacturing facility;
- - $10.0 million for engineering and site selection for a new manufacturing
facility; and
- - the balance for other capital expenditures and general corporate purposes.
Pending such uses, we intend to invest the proceeds in high grade commercial
paper. Although we do not contemplate any changes in the use of proceeds, we may
adjust the amounts shown among the uses indicated above or use portions of the
net proceeds for other purposes. Our cash on hand as of the date of this
prospectus is sufficient to fund the completion of our pivotal Phase III
clinical trial.
DIVIDEND POLICY
We do not intend to pay any cash dividends on our common stock in the
foreseeable future. We currently intend to retain future earnings, if any, to
fund the development and growth of our business. Our board of directors will
determine whether we will pay dividends in the future.
16
<PAGE> 16
CAPITALIZATION
The following table summarizes, as of October 31, 1999, our cash and cash
equivalents and capitalization on an actual and an as adjusted basis. The as
adjusted data reflect the sale of 2,500,000 shares of class A common stock in
this offering, after deducting the underwriting discounts and offering expenses
payable by us, based on assumed public offering price of $37.00 per share. You
should read this information in conjunction with our Consolidated Financial
Statements and the related Notes appearing elsewhere in this prospectus.
This table does not include 2,577,159 shares of class A common stock issuable
upon the exercise of outstanding options and warrants as of October 31, 1999. In
addition, this table does not include between 646,667 and 1,272,119 shares of
class A common stock issuable upon conversion of our class B common stock
following FDA approval of Hemopure.
<TABLE>
<CAPTION>
------------------------
OCTOBER 31, 1999
------------------------
ACTUAL AS ADJUSTED
--------- -----------
<S> <C> <C>
In thousands, except par value and share data
Cash and cash equivalents................................... $ 30,778 $ 117,108
========= =========
Long-term debt.............................................. $ -- $ --
--------- ---------
Stockholders' equity:
Common stock (100,000,179 shares authorized actual and as
adjusted):
Class A common stock, $0.01 par value (22,280,867
shares outstanding actual; 24,780,867 shares
outstanding as adjusted).............................. 223 248
Class B common stock, $1.00 par value (117.7 shares
outstanding actual and as adjusted)................... -- --
Capital in excess of par value.............................. 282,054 368,359
Contributed capital......................................... 24,574 24,574
Notes receivable............................................ (2,463) (2,463)
Accumulated deficit......................................... (250,351) (250,351)
--------- ---------
Total stockholders' equity............................. 54,037 140,367
--------- ---------
Total capitalization.............................. $ 54,037 $ 140,367
========= =========
</TABLE>
PRICE RANGE OF COMMON STOCK
Our class A common stock has been traded on The Nasdaq National Market under the
symbol "BPUR" since July 30, 1999. The following table sets forth, for the
quarters indicated, the high and low intra-day sale prices per share of our
class A common stock as reported on The Nasdaq National Market.
<TABLE>
<CAPTION>
----------------
HIGH LOW
------ ------
<S> <C> <C>
Fiscal 1999
Fourth Quarter............................................ $14.19 $ 6.31
Fiscal 2000
First Quarter............................................. $54.50 $ 9.00
Second Quarter (through February 18, 2000)................ $40.00 $23.50
</TABLE>
On February 18, 2000, the last reported sale price of our class A common stock
on The Nasdaq National Market was $37.00 per share. As of February 1, 2000,
there were approximately 455 stockholders of record of our class A common stock.
17
<PAGE> 17
SELECTED CONSOLIDATED FINANCIAL DATA
The following table summarizes our consolidated statements of operations data
for the fiscal years ended October 31, 1999, 1998, 1997, 1996 and 1995. Also
included in this table are our consolidated balance sheet data at October 31,
1999, 1998, 1997, 1996 and 1995. The following consolidated financial data with
respect to our statements of operations for the years ended October 31, 1999,
1998 and 1997, and our balance sheets as of October 31, 1999 and 1998 are
derived from our consolidated financial statements that appear elsewhere in this
prospectus and that have been audited by Ernst & Young LLP, independent
auditors. The following consolidated financial data with respect to our
statements of operations for the years ended October 31, 1996 and 1995 and our
balance sheets as of October 31, 1997, 1996 and 1995 are derived from our
audited consolidated financial statements that are not included herein. You
should read the consolidated financial data in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and the related Notes included elsewhere
in this prospectus. Diluted earnings per share are not presented in the
consolidated statement of operations data because we had losses in all periods.
The unaudited pro forma basic net income (loss) per common share is computed
using the weighted-average number of outstanding common shares assuming
conversion of all convertible preferred shares into common shares at date of
original issuance. The actual conversions occurred upon completion of the
initial public offering.
<TABLE>
<CAPTION>
--------------------------------------------------------
FISCAL YEAR ENDED OCTOBER 31,
--------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
In thousands, except per share data
STATEMENTS OF OPERATIONS DATA:
Total revenues.............................................. $ 2,866 $ 1,131 $ -- $ 71 $ 46
Cost of revenues............................................ 6,814 1,543 -- -- --
-------- -------- -------- -------- --------
Gross profit (loss)......................................... (3,948) (412) -- 71 46
Operating expenses:
Research and development.................................. 24,166 22,950 23,494 18,924 16,498
Sales and marketing....................................... 2,922 2,444 694 -- --
General and administrative................................ 5,266 4,660 2,920 3,506 3,945
-------- -------- -------- -------- --------
Total operating expenses.................................... 32,354 30,054 27,108 22,430 20,443
-------- -------- -------- -------- --------
Income (loss) from operations............................... (36,302) (30,466) (27,108) (22,359) (20,397)
Total other income (expense)................................ 772 419 (310) 765 (623)
-------- -------- -------- -------- --------
Net income (loss)........................................... (35,530) (30,047) (27,418) (21,594) (21,020)
Stock dividends on preferred stock.......................... (17,915) -- -- -- --
-------- -------- -------- -------- --------
Net loss applicable to common stockholders.................. $(53,445) $(30,047) $(27,418) $(21,594) $(21,020)
======== ======== ======== ======== ========
Historical basic net income (loss) per common share......... $ (3.61) $ (2.41) $ (2.23) $ (1.77) $ (1.73)
Historical weighted-average common shares outstanding....... 14,813 12,460 12,300 12,215 12,171
Pro forma basic net income (loss) per common share.......... $ (2.62)
Pro forma weighted-average common shares outstanding........ 20,369
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------
AT OCTOBER 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
In thousands
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 30,778 $ 6,063 $ 13,527 $ 12,772 $ 7,924
Total current assets........................................ 38,277 13,175 15,221 13,636 10,453
Working capital............................................. 27,872 1,986 5,368 8,111 3,406
Net property and equipment.................................. 27,447 29,606 27,408 29,438 28,272
Total assets................................................ 66,230 44,848 44,054 43,462 40,218
Long-term debt (including current portion).................. -- 6,000 8,000 9,000 --
Common stock to be repurchased.............................. -- 6,300 6,300 -- --
Total stockholders' equity.................................. 54,037 21,449 20,222 26,417 31,875
</TABLE>
18
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations
should be read in conjunction with the Consolidated Financial Statements and the
related Notes included elsewhere in this prospectus. This discussion contains
forward-looking statements that involve risks and uncertainties. Our actual
results may differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including, but not limited to, those
set forth under "Risk Factors" and elsewhere in this prospectus.
OVERVIEW
We are a leading developer, manufacturer and marketer of oxygen therapeutics.
Our oxygen therapeutics are pharmaceuticals that one administers intravenously
into the circulatory system to increase oxygen delivery to the body's tissues.
We have developed and manufacture, using a proprietary process and patented
technology, two hemoglobin-based oxygen carriers. Hemopure, for human use, is
currently in a pivotal Phase III clinical trial in the United States. Oxyglobin,
for veterinary use, is the only hemoglobin-based oxygen carrier approved by the
FDA and the European Medicines Evaluation Agency.
Since inception, we have devoted substantially all of our resources to our
research and development programs and manufacturing. We have been dependent upon
funding from debt and equity financings, strategic corporate alliances,
licensing agreements and interest income. We have not been profitable since
inception and had an accumulated deficit of $250.4 million as of October 31,
1999. We expect to incur additional operating losses over the next several years
in connection with clinical trials, pre-marketing expenditures for Hemopure,
expanded marketing of Oxyglobin and increases in production. We began generating
revenue from the sale of Oxyglobin in fiscal 1998.
RESULTS OF OPERATIONS
Fiscal Years Ended October 31, 1999 and 1998
Total revenues were $2.9 million in fiscal 1999, as compared to $1.1 million in
fiscal 1998, an increase of approximately 153.4%. Revenues in fiscal 1999
included $2.7 million of Oxyglobin sales as compared to $942,000 in fiscal 1998,
an increase of approximately 191.8%. Product sales of Oxyglobin represent
approximately 95.9% of our total revenues in fiscal 1999 as compared to 83.3% in
fiscal 1998. Oxyglobin sales commenced in mid-March 1998 to emergency and
specialty practices in the United States. We launched Oxyglobin nationally in
October 1998. Total revenues also reflect $117,000 and $189,000 in fiscal 1999
and 1998, respectively, from license and development activities, grants and
product sales unrelated to our oxygen therapeutic products.
Cost of revenues totaled $6.8 million in fiscal 1999, an increase of $5.3
million or 341.6% as compared to fiscal 1998. We did not record any cost of
revenues in the first nine months of fiscal 1998. Cost of revenues in fiscal
1999 reflects the direct costs associated with the production of Oxyglobin and
allocation of a portion of the fixed costs of the unused production capacity.
The remainder of these fixed costs and the direct costs of production of
clinical trial materials were allocated to research and development.
Research and development expenses increased 5.3% to $24.2 million in fiscal 1999
from $23.0 million in fiscal 1998. The increase was primarily due to the
expenses associated with the pivotal Phase III clinical trial activities for
Hemopure and an increase in other development efforts related to ongoing
research and development programs. We expect that in the near term, research and
development expenses will remain stable as we continue our development efforts
with respect to potential uses for Hemopure.
Sales and marketing expenses increased 19.6% to $2.9 million in fiscal 1999 from
$2.4 million in fiscal 1998. This increase was primarily due to increased sales
and marketing personnel, as well as selling, advertising, marketing and
distribution expenses related to the U.S. product launch of Oxyglobin.
General and administrative expenses increased 13.0% to $5.3 million in fiscal
1999 from $4.7 million in fiscal 1998. This increase was primarily due to
increased management personnel, in part due to Biopure's becoming publicly
traded, offset by decreased market research, public relations and other
consulting expenses.
Total other income (expense) consists primarily of interest income and other
non-product related income partially offset by interest expense and other
non-operating expenses. Total other income (expense) was income of $772,000 in
fiscal 1999 compared to $419,000 in fiscal 1998. This increase of $353,000 was
primarily attributable to a reduction in interest expense resulting from the
retirement of long term debt with proceeds utilized from our initial public
offering, or IPO.
19
<PAGE> 19
Historical basic net loss per common share for fiscal 1999 was $3.61, compared
to $2.41 for the same period in 1998. The 1999 historical and pro forma basic
net loss per common share include a one-time charge of $1.21 and $0.88,
respectively, associated with $17.9 million in common stock dividends issued to
preferred stockholders. Historical basic net loss per share is computed based on
the weighted-average number of common shares outstanding during the period. Pro
forma basic net loss per share is computed using the weighted-average number of
outstanding common shares assuming conversion of all convertible preferred
shares into common shares at date of original issuance.
Fiscal Years Ended October 31, 1998 and 1997
Total revenues were $1.1 million in fiscal 1998. We did not realize any revenues
in fiscal 1997. Revenues in fiscal 1998 included $942,000 of Oxyglobin sales.
Oxyglobin sales commenced in mid-March of fiscal 1998 to a discrete number of
emergency and specialty practices in the United States. We launched Oxyglobin
nationally in October 1998. Total revenues in fiscal 1998 also reflect $189,000
from license and development activities and product sales unrelated to our
oxygen therapeutic products.
Cost of revenues was $1.5 million in fiscal 1998. We did not realize any cost of
revenues in fiscal 1997. Cost of revenues in fiscal 1998 reflects the allocation
of a portion of the manufacturing costs after FDA approval for Oxyglobin and
completion of a process expansion project in August 1998. These costs were
entirely allocated to research and development expenses prior to August 1998.
Research and development expenses decreased 2.3% to $23.0 million in fiscal 1998
from $23.5 million in fiscal 1997. This decrease was attributable to the $1.5
million allocation of manufacturing expenses associated with the production of
Oxyglobin to cost of revenues from research and development expenses. This
decrease was partially offset by an increase in preclinical activities during
fiscal 1998 as compared to fiscal 1997.
Sales and marketing expenses increased 252.2% to $2.4 million in fiscal 1998
from $694,000 in fiscal 1997. This increase was primarily attributable to
increased sales and marketing personnel and product launch, selling, marketing
and distribution expenses related to Oxyglobin.
General and administrative expenses increased 59.6% to $4.7 million in fiscal
1998 from $2.9 million in fiscal 1997. This increase was primarily attributable
to the addition of five people in the general and administrative department and
expenses related to Hemopure market research and public relations activities.
Total other income (expense) was income of $419,000 in fiscal 1998 compared to
an expense of $310,000 in fiscal 1997. This change of $729,000 was primarily
associated with increased interest income from higher average cash balances
which were approximately $21.6 million in fiscal 1998 compared to $10.6 million
in fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 1999, we had current assets of $38.3 million, which consisted
primarily of $30.8 million in cash and cash equivalents, $3.2 million in net
inventory and $3.5 million held in an escrow account by Biopure as a settlement
payment by which we reacquired shares of class A common stock and license
rights. At October 31, 1999, current liabilities were $10.4 million. The $30.8
million in cash and cash equivalents at October 31, 1999 is a net increase of
$24.7 million since October 31, 1998. The increase in cash and cash equivalents
is primarily attributable to $67.8 million in net proceeds from the sale of
preferred and common stock offset by expenditures of $30.2 million in
operations, $6.0 million to repay long-term debt, $6.0 million to repurchase
common stock and $1.8 million invested in property and equipment.
We have financed operations from inception primarily through sales of equity
securities, development and license agreement payments, interest income and
debt. Our primary investment objective is preservation of principal and
currently we invest in high grade commercial paper. We have not been profitable
since inception and had an accumulated deficit of $250.4 million as of October
31, 1999. We will continue to generate losses for the foreseeable future. We
believe our current cash and cash equivalents, together with the net proceeds of
this offering, should be sufficient to meet our projected operating requirements
at least through fiscal 2001. Our cash requirements may vary significantly from
current projections. We are exploring opportunities to obtain funds for the
construction of an additional manufacturing facility. However, additional
funding may not be available when needed, or, if available, may not be on
favorable terms.
On August 4, 1999, we received $39.1 million of proceeds from our initial public
offering of 3,500,000 shares of class A common stock at a price of $12.00 per
share, before estimated expenses of $1.4 million.
On August 5, 1999, we paid $4.0 million, which was in addition to an existing
balance of $1.0 million in an escrow account, to complete the repurchase of
1,694,273 shares of our class A common stock from a stockholder.
20
<PAGE> 20
In fiscal 1999, 1998 and 1997, our research and development expenses, including
clinical trials, were $24.2 million, $23.0 million and $23.5 million.
We plan to spend approximately $10.0 million for expansion of our existing
manufacturing facility and $2.0 million on general capital expenditures for our
existing facilities over the next two years. We will also need to construct
additional manufacturing facilities to attain annual capacity in excess of
approximately 100,000 units of Hemopure. We expect to spend $10.0 million in
calendar year 2000 to begin engineering and design work for these facilities.
As of October 31, 1999, we had net operating loss carryforwards of approximately
$161.0 million to offset future federal and state taxable income through 2019.
Due to the degree of uncertainty related to the ultimate realization of such
prior losses, no benefit has been recognized in our financial statements as of
October 31, 1999. Utilization of such losses in future years may be limited
under the change of stock ownership rules of the Internal Revenue Service.
YEAR 2000 COMPUTER SYSTEMS COMPLIANCE
All of our computer hardware and software has been upgraded for Year 2000
compliance. All of our key vendors have provided assurance that they are Year
2000 compliant. While there were no Year 2000 related problems at the transition
in the Year 2000, we are maintaining our contingency plans in the event any
problems arise in the future.
RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1998, the Accounting Standards Executive Committee, or AcSEC, issued
Statement of Position No. 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use, or SOP No. 98-1. SOP No. 98-1 provides
guidance for the capitalization of certain costs incurred for the development or
acquisition of internal-use software. SOP No. 98-1 is effective for fiscal 2000.
We do not expect the adoption of this standard to have a material effect on our
financial position or operating results.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which will be effective for us in the first
quarter of fiscal 2001. We are currently evaluating the effect that
implementation of the new standard will have on our financial statements but
believe the effect will be immaterial.
21
<PAGE> 21
BUSINESS
The following section contains forward-looking statements which involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including those set forth in "Risk Factors" and elsewhere in this prospectus.
Biopure develops, manufactures and markets oxygen therapeutics. Its products are
Hemopure, for human use, and Oxyglobin, for veterinary use. Biopure is
developing Hemopure as an alternative to red blood cell transfusions as well as
for use in the treatment of other critical care conditions. Hemopure is
currently in a pivotal Phase III clinical trial in the United States. In 1998,
following FDA approval, Biopure began selling Oxyglobin in the United States.
SCIENTIFIC OVERVIEW
Oxygen is indispensable to the life of all human tissues. Hemoglobin, a protein
normally contained within red blood cells, is the molecule responsible for
carrying and releasing oxygen to the body's tissues. Hemoglobin's protein
structure is similar in many different animal species, including humans. Under
normal conditions, hemoglobin contained within red blood cells carries
approximately 98% of the body's oxygen and the remaining two percent is
dissolved in the plasma, or fluid part of the blood.
As the heart pumps blood, hemoglobin within the red blood cells takes up oxygen
in the lungs and carries it to various parts of the body. Blood travels through
progressively smaller blood vessels to the capillaries, some of which are so
narrow that red blood cells can only pass through them in single file. Most of
the oxygen release occurs in the capillaries. Blood then returns to the lungs to
reload the red blood cells with oxygen. Adequate blood pressure and red blood
cell counts are crucial to this process. Oxygen deprivation, even for several
minutes, can result in cell damage, organ dysfunction and, if prolonged, death.
The causes of inadequate tissue oxygenation generally can be classified into
three categories:
- - anemia -- insufficient hemoglobin. Blood loss from injury or surgery or
disorders that affect red blood cell production or maintenance, such as bone
marrow disease, can cause anemia;
- - ischemia -- inadequate red blood cell flow for tissue oxygenation. Obstructed
or constricted blood vessels can result in ischemia. Ischemia can lead to
stroke, heart attack or other organ or tissue dysfunction; and
- - cardiopulmonary failure -- impaired function of the heart or lungs. The
heart's inability to pump sufficient quantities of blood to meet the needs of
the tissues or the failure of the lungs to oxygenate blood adequately can
cause cardiopulmonary failure.
A red blood cell transfusion is the standard therapy for anemia resulting from
blood loss. Sources of red blood cells for transfusions include stored supplies
of donated blood or of the recipient's own pre-donated blood. Health care
professionals also may use medications that stimulate red blood cell production
if anemia is anticipated, for example, as a result of planned surgery.
Red blood cell transfusions have certain risks and limitations. As HIV,
hepatitis and other diseases have infected the world's blood supply, the need
for a sterile blood product has become increasingly apparent. There is currently
no 100% effective method for detecting blood-borne diseases or for sterilizing
donated blood. As a result, the risk of disease transmission from donated blood
is an ongoing concern to physicians and patients, although less so than in the
past. Handling errors in typing and cross-matching blood, as well as the
inadvertent introduction of pathogens, can also result in significant medical
problems. Blood typing and handling requirements, particularly refrigeration,
limit the feasibility of red blood cell transfusions in pre-hospital emergency
treatment situations. Shortages of certain types of blood can occur due to
seasonal factors or disasters. Donated red blood cells are available for use in
transfusions for only 42 days after collection and this limitation affects the
ability to stockpile red blood cell supplies. Although freezing can extend the
life of red blood cells, the freezing and thawing processes require chemical
treatment of the red blood cells and reduce the efficacy of those red blood
cells. Finally, the longer red blood cells are stored, the longer it takes them
to reach their maximum oxygen-releasing capacity and the more they break down,
limiting their effectiveness in delivering oxygen. Red blood cells lose
approximately 75% of their oxygen-releasing ability after eight days of storage.
Blood banks generally release the oldest stored blood first to prevent outdating
after 42 days.
Red blood cell transfusions generally are not effective for ischemic conditions.
In such situations, an obstructed or constricted blood vessel that is too narrow
to permit the normal passage of red blood cells can prevent oxygen from reaching
the body's tissues.
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<PAGE> 22
Similarly, red blood cell transfusions are generally not effective in overcoming
poor oxygenation due to impaired heart or lung function.
Existing alternatives to red blood cell transfusions are limited. In trauma
situations, victims may experience massive bleeding resulting in rapid loss of
blood volume and oxygen-carrying capacity. In an effort to stabilize trauma
patients, emergency caregivers typically administer commonly used intravenous
fluids, such as Ringer's lactate or saline. Ringer's lactate consists of water
and electrolytes and is generally administered to patients who have lost
substantial amounts of bodily fluids as a result of bleeding, vomiting or
diarrhea. Both Ringer's lactate and saline restore blood volume, but do not
carry oxygen.
For anemia in non-acute situations, there are currently two biological products
on the market. Both of these products are formulations of a protein called
erythropoietin. Erythropoietin stimulates the body's ability to produce its own
red blood cells. This stimulation is called an erythropoietic effect. In a
surgical setting, these products are administered in anticipation of blood loss
during surgery, thereby potentially reducing the need for red blood cell
transfusions. However, erythropoietin does not deliver oxygen to the body's
tissues and does not act as a blood volume expander. As a result, these products
are not effective in treating acute blood loss and are generally not used in
cases of unplanned surgeries or emergency need. In addition, the labels on these
products caution against their use in cardiac surgery patients.
BIOPURE'S OXYGENATION TECHNOLOGY
Biopure has two proprietary oxygen therapeutic products that are identical
except for their molecular size distributions. Biopure defines its products as
therapeutics because they remediate oxygen deprived tissues. One administers
these products intravenously. Biopure's products consist of hemoglobin that has
been extracted from bovine red blood cells, purified, chemically modified and
cross-linked for stability. The resulting hemoglobin solutions do not contain
red blood cells and are formulated in a balanced salt solution similar to
Ringer's lactate.
The average Hemopure molecule is less than 1/1000th the size of a red blood
cell. Once infused into a patient, the Hemopure molecules disperse throughout
the entire plasma space, including the area between and around red blood cells,
and are in continuous contact with the blood vessel wall where oxygen transport
to tissues takes place. The following schematic illustrates the movement of red
blood cells and Hemopure in blood vessels.
[Schematic of Blood Vessel]
In the above schematic, the large circles represent red blood cells, which are
surrounded by plasma. The small particles shown in the plasma solution represent
Hemopure molecules. Hemopure, by filling plasma with hemoglobin molecules,
immediately turns the plasma into an oxygen-delivering substance. Plasma
containing Hemopure flows everywhere that blood ordinarily flows and can also
bypass partial blockages or pass through constricted vessels that impede the
normal passage of red blood cells. Furthermore, introducing Hemopure into the
bloodstream enables red blood cells to release more oxygen to the tissues than
they otherwise would. In addition to delivering oxygen to tissues, Hemopure also
acts as a blood volume expander and may have an erythropoietic effect,
supporting the body's ability to produce red blood cells.
Hemopure molecules hold the same amount of oxygen as the hemoglobin molecules in
red blood cells on a gram-for-gram basis. Hemopure molecules, however, are
chemically modified to have less affinity for oxygen than red blood cells,
enabling
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<PAGE> 23
Hemopure to release oxygen to tissues more efficiently than red blood cells.
Human hemoglobin, unlike bovine hemoglobin, depends on the action of 2,3
diphosphoglycerate, or 2,3 DPG, a substance found in high concentrations only
within the red blood cell, for optimal offloading, or release, of oxygen to
tissues. The 2,3 DPG breaks down rapidly in stored blood causing red blood cells
to lose approximately 75% of their ability to release oxygen after eight days of
storage. The 2,3 DPG breakdown reduces the oxygen offloading efficiency of
transfused red blood cells until its levels are restored. Transfused red blood
cells can require hours to regain their oxygen offloading capability. Biopure's
bovine hemoglobin permits the efficient offloading of oxygen in the absence of
2,3 DPG, thereby allowing Hemopure to be at its optimal oxygen offloading
effectiveness immediately upon infusion.
Hemoglobin molecules in different species have demonstrated low antigenicity,
which means that they do not readily elicit an immune or allergic response.
Biopure has confirmed Hemopure's low antigenicity, as indicated by the absence
of certain effects, through in vitro and in vivo studies. No clinically
significant levels of antibodies were observed in Biopure's trials, including
one human study lasting more than a year with multiple doses.
The following chart lists Hemopure's characteristics in comparison to transfused
red blood cells:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CHARACTERISTIC HEMOPURE TRANSFUSED RED BLOOD CELLS
-------------- -------- --------------------------
<S> <C> <C>
Onset of action Immediate -- not 2,3 DPG-dependent Initially limited -- 2,3
DPG-dependent
Oxygen affinity More efficient oxygen release to Less efficient oxygen release to
tissues tissues
Oxygen transport Red blood cells and plasma Red blood cells only
Risk of disease transmission Product purity maintained through Risk minimized by testing, donor
a reproducible and controllable selection and administration
manufacturing process that protocols and ongoing surveillance
complies with current Good for emerging pathogens; leukocyte
Manufacturing Practices; no exposure
leukocyte, or white blood cell,
exposure
Storage Room temperature; no loss of Refrigeration required; loss of
efficacy efficacy
Shelf life 30 months 42 days
Compatibility Universal Type-specific
Preparation Ready-to-use Requires typing and cross-matching
Viscosity Low High
Raw material source Controlled Not controlled
Duration of action Maximum of 3 days Estimated 60 to 90 days
</TABLE>
In addition to Hemopure's use as an alternative to red blood cell transfusions
in surgery, human clinical testing and preclinical studies suggest that Hemopure
also could be a readily available therapeutic with a broad range of potential
applications. These applications include the treatment of trauma, ischemic
conditions, including stroke and heart attack, and malignant hypoxic tumors.
Hemopure has a 30-month shelf life at room temperature, is universally
compatible and can be stocked well in advance of anticipated use. Consequently,
when blood is not available, Hemopure could be used to maintain a patient until
the needed type and quantity of red blood cells arrive, until the patient can be
transported to a hospital or until a patient's body produces its own red blood
cells. Hemopure thus could be an effective "oxygen bridge" to a red blood cell
transfusion or the body's ability to regenerate its own fresh red blood cells.
Hemopure may be particularly well-suited for this "oxygen bridge" function
because the duration of action of a single infusion is about two to three days
with 50% of the Hemopure molecules retained in the circulatory system for 24 to
36 hours following administration. In clinical trial data, Biopure has observed
that the redosing of Hemopure over several days can prolong Hemopure's "oxygen
bridge" effect.
Transfused red blood cells, however, have some advantages when compared to
Hemopure. Transfused red blood cells have a longer duration of action and can
persist in the body for an estimated 60 to 90 days. Hemopure, on the other hand,
depending on the amount infused, can last between one and three days and may
require repeat administration. Biopure has also observed slight increases in
blood pressure and abdominal discomfort in Hemopure-infused patients.
Fluctuations in a patient's blood pressure can affect the manner in which health
care professionals, who are accustomed to transfusing red blood cells, manage a
patient's care. Furthermore, Biopure cannot be certain that Hemopure will not
elicit an immune response in some individuals as do some other proteins. In
addition, it is anticipated that the cost of Hemopure will be significantly
greater to the patient than the cost of transfused red blood cells.
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<PAGE> 24
STRATEGY
Biopure intends to expand its leadership position in the development,
manufacture and marketing of oxygen therapeutics through the following strategy:
- - Develop and Commercialize Hemopure as an Alternative to Red Blood Cell
Transfusions. Biopure's advanced clinical trials have demonstrated Hemopure's
efficacy as an alternative to red blood cell transfusions in certain surgical
procedures. While Biopure does not anticipate that Hemopure will replace all
red blood cell transfusions, Biopure expects that Hemopure's use in surgery
will demonstrate Hemopure to be a safe and effective oxygen therapeutic in a
wide range of patients. Biopure filed for marketing approval of Hemopure in
South Africa in July 1999 and expects to complete its U.S. pivotal Phase III
clinical trial and file for approval in the United States in 2000.
- - Pursue Approvals of Hemopure for Additional Therapeutic Applications. Biopure
will seek regulatory approvals for the use of Hemopure as an adjunct to red
blood cell transfusions. In addition, because of its special oxygen
therapeutic characteristics, Biopure will seek to develop Hemopure as a
therapy for indications such as trauma, ischemic conditions, including stroke
and heart attack, and as an adjunct to therapy for malignant hypoxic tumors.
Observations from Biopure's clinical trials and the results of preclinical
studies and field reports support the use of Hemopure for these conditions.
- - Increase Market Awareness for Hemopure. Biopure intends to increase market
awareness for Hemopure by identifying the issues and promoting standards
necessary for widespread acceptance of oxygen therapeutics by the medical
community.
- - Expand Market for Oxyglobin. Biopure will seek to broaden Oxyglobin's use to
other canine indications, other animal species and selected international
markets. In December 1999, Biopure received marketing approval in the European
Union for anemia in dogs, regardless of cause. Biopure will continue
advertising and educational initiatives to further penetrate U.S. veterinary
practices and is currently evaluating our strategic options for European
marketing of Oxyglobin.
BIOPURE'S PRODUCTS
Biopure's two products are oxygen therapeutics. Hemopure, for human use, is
currently in a U.S. pivotal Phase III clinical trial. Biopure expects that this
trial, together with the results of prior clinical trials, will form the basis
for an FDA marketing application in the year 2000 for the use of Hemopure as an
alternative to red blood cell transfusions before, during or after elective
orthopedic surgery. The FDA and the European Medicines Evaluation Agency have
approved the use of Oxyglobin, Biopure's veterinary product, for the treatment
of anemia in dogs, regardless of cause. Oxyglobin is marketed and sold to
veterinary hospitals and to small animal veterinary practices. Biopure has
tested Hemopure in 21 completed and ongoing clinical trials involving more than
650 humans and has tested Hemopure and Oxyglobin in 150 completed preclinical
studies involving animals from 10 species. Commercial sales of Oxyglobin have
resulted in thousands of administrations in animals.
HEMOPURE
Biopure is pursuing the development and approval of Hemopure both as an
alternative to red blood cell transfusions and as a therapeutic for indications
such as trauma, ischemic conditions, including stroke and heart attack, and
malignant hypoxic tumors.
Red Blood Cell Transfusion Alternative
Biopure filed an application for human approval in South Africa in July 1999 for
Hemopure's use as an alternative to red blood cell transfusions for elective
surgery. Hemopure would serve as an alternative to a red blood cell transfusion
or as an "oxygen bridge" pending the acquisition or production by the body of
suitable red blood cells. Biopure does not expect Hemopure to replace all red
blood cell transfusions. However, Hemopure's oxygen-carrying properties, storage
and infusion advantages address many of the limitations associated with red
blood cell transfusions. The National Blood Data Resource Center, a subsidiary
of the American Association of Blood Banks, estimated that approximately 11.5
million units of red blood cells and whole blood, including the patient's own
previously donated blood, were transfused in the United States in 1997. In April
1999, the Health and Human Services Advisory Committee on Blood Safety and
Availability heard testimony projecting a shortage of up to 300,000 units of red
blood cells in the United States in the year 2000. In addition, it is believed
that new FDA donor deferral criteria restricting persons who were resident in
the United Kingdom during a specified time could increase this shortage to
almost 550,000 units.
Biopure's clinical trials have demonstrated Hemopure's efficacy as an
alternative to red blood cell transfusions in surgery patients as measured by
the elimination of red blood cell transfusions. In all of Biopure's advanced
clinical trials, Biopure evaluated Hemopure's efficacy as an oxygen therapeutic
by determining, within the context of a written set of guidelines known as a
protocol, the percentage of patients given Hemopure who did not require a
subsequent transfusion of red blood cells. In
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<PAGE> 25
these trials, Hemopure was administered only to patients who needed a red blood
cell transfusion. Trial design limited the amount of Hemopure that could be
infused and the number of post-operative days during which it could be infused.
Despite these trial limitations, Hemopure's clinical trials demonstrate
clinically significant elimination of red blood cell transfusions. Elimination
was deemed to occur if the patient did not require a subsequent red blood cell
transfusion. Elimination was deemed not to occur if the patient was administered
the maximum number of Hemopure units permitted by the particular trial design
and subsequently needed a red blood cell transfusion.
In 1998, the FDA agreed to a protocol with a primary endpoint of 35% elimination
for Biopure's ongoing U.S. pivotal Phase III clinical trial in orthopedic
surgery patients. The most recently completed trial, a Phase III clinical trial
conducted in Europe and South Africa with non-cardiac surgery patients, showed
elimination of 43%.
The following chart summarizes Biopure's advanced clinical trials that Biopure
will use for the initial applications for marketing approval of Hemopure as an
alternative to red blood cell transfusions. The column labeled "Results" for the
completed trials lists efficacy, or elimination of red blood cell transfusions,
results. Another endpoint of our pivotal Phase III trial is a safety profile in
the Hemopure group that is no worse than the control group. We have attained
this safety comparability standard in the completed trials listed below.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
NO. OF TOTAL
DOSING: GRAMS PATIENTS/NO. OF
HEMOGLOBIN PATIENTS TREATED
TYPE OF SURGERY DEVELOPMENT STATUS (UNITS HEMOPURE) WITH HEMOPURE RESULTS
- --------------- ------------------ ---------------- ---------------- -------
<S> <C> <C> <C> <C>
Elective orthopedic U.S. pivotal Phase III Up to 300 grams 640/320 Pending completion
surgery (ongoing) trial ongoing (75% (10 units) over 6
enrollment achieved) days
Non-cardiac elective Phase III trial Up to 210 grams 160/83 43% elimination of red
surgery (1998) completed in Europe and (7 units) over 6 blood cell
South Africa; the basis days transfusions
for filing in South
Africa in July 1999
Post cardiopulmonary Phase II trial Up to 120 grams 98/50 34% elimination of red
bypass surgery (1996) completed in the U.S.; (4 units) over 3 blood cell
supportive trial for days; first dose transfusions
the South African July administered
1999 filing post-surgery
Aortic aneurysm Intraoperative Phase II Up to 150 grams 72/48 27% elimination of red
reconstruction surgery trial completed in the (5 units) over 4 blood cell
(1996) U.S. and Europe; days; first dose transfusions
supportive trial for administered
the South African July during surgery,
1999 filing if required
</TABLE>
U.S. Pivotal Phase III Orthopedic Surgery Trial. Biopure, with FDA agreement,
began a pivotal Phase III trial in the United States in March 1999 in elective
orthopedic surgery. Elective orthopedic surgery includes non-emergency surgery
involving bones and joints. The primary objective of this trial is the avoidance
of red blood cell transfusions for six weeks after orthopedic surgery. Biopure
designed this randomized, red blood cell controlled, multi-center study to
enroll a total of 640 patients in the United States, Europe, Canada and South
Africa, of whom approximately one-half will be in the Hemopure treatment group
and the other half will receive red blood cells. Up to 300 grams of hemoglobin,
or ten units of Hemopure, may be infused before, during or after surgery for a
total of up to six treatment days. The primary efficacy endpoint of this trial
is the elimination of red blood cell transfusions in 35% of the patients who
receive Hemopure. Another endpoint is a safety profile that is no worse than the
control group.
Non-U.S. Phase III Non-cardiac Surgery Trial. Biopure completed a Phase III
trial in Europe and South Africa in 1998 in non-cardiac surgery. Non-cardiac
surgery refers to surgery that does not involve the heart and can include
surgery of the digestive or urinary tract as well as orthopedic surgery. The
primary objective of this trial was the avoidance of red blood cell transfusions
for 28 days after non-cardiac surgery. This randomized, red blood cell
controlled, multi-center study enrolled 160 patients, 83 of whom were infused
with Hemopure. Up to 210 grams of hemoglobin, or seven units of Hemopure, were
permitted during a six-day treatment period. The trial resulted in the
clinically significant elimination of red blood cell transfusions in 43% of the
patients who received Hemopure.
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<PAGE> 26
U.S. Phase II Post Cardiopulmonary Bypass Surgery Trial. Human testing was
completed in 1997 in a double-blind, randomized, red blood cell controlled,
multi-center study in post cardiopulmonary bypass surgery patients. During
cardiopulmonary bypass surgery, patients are connected to a heart and lung
machine that replaces functions of the heart and lungs during surgery. The
primary objective of this trial was the avoidance of red blood cell transfusions
for 28 days after surgery. The study treated 98 patients, 50 of whom were
infused with Hemopure. Up to 120 grams of hemoglobin, or four units of Hemopure,
were administered over a three-day treatment period following surgery. The trial
resulted in the clinically significant elimination of red blood cell
transfusions in 34% of the patients that received Hemopure. In this study, 100%
of the patients who received Hemopure did not require any red blood cells during
the day of surgery.
Additionally, Biopure observed that the hematocrit, or packed red blood cell
volume as a percentage of total blood volume, of the patients treated with
Hemopure recovered to a degree that was indistinguishable from the red blood
cell treated patients at both six and 28 days post-surgery. This observation
supports the potential use of Hemopure as an erythropoietic support.
U.S. Phase II Aortic Aneurysm Reconstruction Surgery Trial. In 1998, Biopure
completed a randomized, red blood cell controlled, multi-center trial in
abdominal aortic aneurysm reconstruction surgery. Aortic aneurysm reconstruction
surgery involves repairing a damaged segment of the aorta, the body's principal
artery. This study treated 72 patients, 48 of whom were infused with Hemopure.
The maximum dosage was 150 grams of hemoglobin, 30 grams more than the post
cardiopulmonary bypass trial. Usually aortic aneurysm reconstruction surgery
involves much more blood loss than post cardiopulmonary bypass surgery. In this
trial, Hemopure was used during the surgery in contrast to the post
cardiopulmonary bypass trial, where use began after surgery. The trial resulted
in the clinically significant elimination of red blood cell transfusions in 27%
of the patients that received Hemopure. The trial was reported in the Journal of
Vascular Surgery, February 2000 issue.
Trauma; Stabilized Trauma Trial
Biopure has observed a 100% elimination of red blood cell transfusions on the
day of surgery in cardiac patients infused with Hemopure. As a result, Biopure
believes that Hemopure could be infused immediately at the site of an accident,
potentially extending the time that a trauma patient could be supported awaiting
definitive hospital care. Hemopure also acts as an expander of blood volume, a
common therapy used to stabilize trauma patients. As part of our approach to
trauma, Biopure is conducting a Phase II trial in non-cardiac surgery patients
that allows enrollment of consenting, stable trauma patients. This 60-patient
trial is being conducted at Brooke Army Medical Center, Wilford Hall Air Force
Hospital and University of Texas at San Antonio and has reached approximately
40% enrollment. In this controlled and randomized study, investigators dose with
Hemopure (or Ringer's lactate, the control treatment) based on the estimated
amount of blood the patient has lost. Endpoints include blood utilization and
safety. There have been no deaths in either group in this study. In this trial,
physicians are administering Hemopure to a maximum dose of 10 units or 300 grams
of hemoglobin. Biopure expects this trial to provide information useful in
designing a clinical development plan for trauma. Hemopure has been used on a
"compassionate use" basis in trauma patients. The design of pivotal trauma
trials will be complicated by heterogenous patient populations and logistical
issues. Bipoure intends to convene a panel of experts to advise in the design of
its trauma program.
In addition, preclinical animal model studies performed in academic and military
research laboratories have shown the benefit of using Hemopure in situations
involving severe trauma, hemorrhagic shock, hemorrhagic shock with tissue injury
and resuscitation from cardiac arrest resulting from severe hemorrhage.
Ischemia
The ability of Hemopure molecules to circumvent partial occlusions could
potentially benefit patients suffering from ischemic conditions by supplying
oxygen to tissues that are receiving inadequate numbers of red blood cells.
Inadequate tissue oxygenation due to partial vessel blockage or constriction can
cause heart attack, angina and transient ischemic attack, which is a precursor
to stroke. In these situations, treatment with red blood cell transfusions would
not be effective because red blood cells are too large to navigate around
blockages. Biopure has completed preclinical studies with results supporting
these potential indications. One preclinical study demonstrated that infusing
Hemopure before there is a blockage in a coronary artery leading to a heart
attack can limit potential damage to the heart. Although Hemopure would not
attack the root cause of the ischemia, such as a clot or plaque in the arteries,
it could maintain oxygenation and thereby sustain tissue pending a correction of
the blockage or could lessen the damage from ischemia if infused in time. In
1996, the American Heart Association reported that approximately 900,000 people
in the United States each year experience heart attacks, of which approximately
one quarter are fatal. In its 1999 Heart and Stroke Statistical Update, the
American Heart Association reported that approximately 600,000 people suffer a
new or recurrent stroke each year.
An abstract published in the The Journal of Trauma in January 2000 and scheduled
to be presented at the upcoming Western Trauma Association meeting describes a
study using a pre-hospital hemorrhagic shock model designed to model what
happens
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<PAGE> 27
to humans after an accident. The study demonstrates that small-volume
resuscitation with Hemopure can restore and sustain brain oxygenation, blood
pressure and cardiac output following severe hemorrhagic shock.
Cancer Therapy Adjunct
Radiation therapy and many types of chemotherapy depend on the adequate
oxygenation of tumors to kill cancer cells. Malignant cancer tumors, such as
breast, prostate and other solid tumors, are dense tumors which often outgrow
their blood supply, leaving much of the tumor without oxygen. Consequently, they
resist chemotherapy and radiation treatment. Biopure, in collaboration with the
Dana-Farber Cancer Institute in Boston, has developed a patented method for
oxygenating hypoxic, or oxygen deficient, tumor cells that could potentially
increase the tumor-killing effects of radiation and chemotherapy. Preclinical
studies have shown the feasibility of this application. In 1999, Biopure
initiated clinical development of this indication, specifically the treatment of
glioblostoma. Enrollment in a clinical trial of patients diagnosed with
glioblostoma is expected to begin in the first half of 2000.
Plasma-Expanding Agent
After blood loss, health care professionals typically administer human serum
albumin, or HSA, or other volume expanding fluids to restore blood volume.
Adequate blood volume is necessary to maintain effective blood pressure and
heart rate. HSA is a naturally occurring protein that is part of the plasma.
Hemopure molecules are also proteins. Hemopure maintains the volume of blood in
a manner similar to HSA. In patients suffering from severe blood loss, Biopure
believes that Hemopure would be preferable to currently available plasma
expanding agents, which do not carry or offload oxygen.
Hemodilution Agent
Acute normovolemic hemodilution, or ANH, is a technique that reduces the need
for donated blood. ANH refers to a practice where the patient donates one to
three units of blood immediately before surgery and is infused with a non-oxygen
plasma expander such as Ringer's lactate. The patient is then transfused with
his or her own blood during or after surgery. Biopure has administered Hemopure
in three clinical safety trials involving humans undergoing ANH. As an oxygen
carrier and a plasma-expanding agent, Hemopure could potentially temporarily
replace the oxygen-carrying support and volume lost from donating blood. Used in
this manner, Hemopure may enhance the safety of ANH or allow more units to be
safely withdrawn prior to surgery. Additionally, use of Hemopure in ANH
procedures would also allow for greater blood conservation, which could be
particularly valuable in times of shortages. At present, ANH is not widely used
in the United States but is more commonly used in Europe.
Erythropoietic Support
In Biopure's Phase II post-cardiopulmonary bypass clinical trial, which compared
the post-operative use of Hemopure to donated red blood cells in cardiac
surgery, the hematocrit, or packed red blood cell volume as a percentage of
total blood volume, was similar for both the Hemopure-infused and the control
patients on the sixth day following surgery. Both groups maintained this
similarity when measured again at a follow-up visit 28 days after surgery,
suggesting that Hemopure may support the regeneration of red blood cells. In
addition, in one "compassionate use" case, a patient with a critically low
hematocrit, who received Hemopure but not red blood cells, was stabilized for
several days and then was able to restore her hematocrit. As such, Hemopure
could potentially be used in conjunction with, or as an alternative to,
erythropoietin, a hormone that enhances the production of red blood cells. A
preclinical study supports the use of Hemopure as an erythropoietic agent. This
study involved eight conscious sheep, all of which underwent an exchange
transfusion involving the replacement of at least 95% of their blood with an
early formulation of Hemopure. Even with critically low hematocrits, these
animals achieved stable hemodynamics, demonstrated no clinical signs of distress
and survived long term with a rapid resynthesis of their red blood cells.
OXYGLOBIN
Oxyglobin is identical to Hemopure except for its molecular size distribution,
and has the same advantages over red blood cells as Hemopure. The FDA Center for
Veterinary Medicine approved Oxyglobin in January 1998 and the European
Medicines Evaluation Agency approved Oxyglobin in December 1999, in both cases
for the treatment of canine anemia, regardless of cause. Oxyglobin sales were
$2.7 million in fiscal 1999 and $942,000 in fiscal 1998.
Oxyglobin's characteristics are well suited for use by small animal
practitioners for treatment of anemia and other critical care situations
involving acute blood loss. Acute blood loss often results from surgery, trauma,
hemolysis, gastrointestinal blood loss, which is most frequently a result of
parasitism or intestinal infection, urinary tract blood loss, iron deficiency
and rodenticide toxicity. Biopure estimates that there are at least 15,000 small
animal veterinary practices in the United States and another 4,000 mixed animal
practices treating small and large animals. Biopure believes that the average
veterinary practice treats only a small percentage of canine anemia cases with a
red blood cell transfusion. The remainder receive either cage rest or a
minimally effective treatment such as fluid administration, iron supplements,
nutritional supplements or inspired oxygen.
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Biopure obtained FDA approval in January 2000 to modify its product label to
allow for flexible dosing. The original label specified 30 milliliters per
kilogram of animal patient weight. The new label permits a lower dosage range of
10 to 30 milliliters per kilogram. Biopure's strategy to increase the market for
Oxyglobin includes:
- - educating veterinarians on the range of uses for Oxyglobin and demonstrating
that using Oxyglobin represents better medical practice;
- - adding Japanese and other foreign approvals;
- - adding repeat dosing -- expected FDA filing in 2000;
- - adding other applications;
- - offering a smaller package size;
- - adding other species; and
- - increasing shelf life to three years.
MANUFACTURING
Biopure uses proprietary and patented purification and polymerization processes
in the manufacture of its oxygen therapeutic products. Biopure believes its
processes comply with current Good Manufacturing Practices established by the
FDA and comparable standards required in the European Union for
biopharmaceutical and chemical manufacturing and permit large-scale production
of the products for commercial use. Biopure's scientific and engineering team
has designed and built much of its large-scale critical equipment. A proprietary
computer software system operates and monitors most aspects of this process.
Biopure has produced consistent product, both Hemopure and Oxyglobin, since 1991
and its facilities currently have the capacity to produce 40,000 units of
Hemopure or 140,000 units of Oxyglobin per year. Through the installation of
additional water supply and the completion of its automated filling line,
Biopure can attain capacity to produce 100,000 units of Hemopure or 350,000
units of Oxyglobin per year in its current facilities. This capacity can be used
for any combination of Oxyglobin and Hemopure units.
Raw Material Source
Biopure's products consist of bovine hemoglobin that has been purified,
chemically modified and cross-linked for stability. Controlled herds of U.S.
cattle destined for meat processing provide the raw material used in Biopure's
products. Biopure monitors the source, health, location, feed consumption and
quality of the cattle to be used as a raw material source, a safety standard
that is not and cannot be established for donated human blood. Suppliers to
Biopure contract to maintain traceable records on animal origin, health, feed
and care to assure the use of known, healthy animals.
Raw Material Collection
At a high volume slaughterhouse, Biopure collects bovine whole blood into
individual presanitized containers and transports them to a separation facility.
Following blood collection, the animals pass U.S. Department of Agriculture, or
USDA, inspection for use as beef for human consumption. If an animal is not
approved for human consumption, Biopure also rejects the corresponding container
of whole blood. The USDA considers the United States to be free of pathogens
associated with "mad cow disease".
Safety
In addition to safety from bacterial and viral pathogens, such as those leading
to AIDS and hepatitis, Biopure's sourcing and manufacturing processes safeguard
humans from potential risks associated with diseases including transmissible
spongiform encephalopathies, more commonly known as the cause of diseases such
as "mad cow disease". Health and regulatory authorities have given guidance
directed at three factors to control these diseases: source of animals, nature
of tissue used and manufacturing process. Biopure complies with, and believes it
exceeds, all current guidelines regarding such risks for human pharmaceutical
products. Blood as a tissue generally has been found to have little or no
potential for transmitting transmissible spongiform encephalopathies. Bovine red
blood cells do not contain prions, the proteins necessary for transmissible
spongiform encephalopathies. Furthermore, Biopure's patented purification and
manufacturing process has been tested to demonstrate that the potential risk of
infectious disease transmission is insignificant.
Manufacturing Processes
At Biopure's separation facility, a washing and a filtration process removes
plasma proteins in the bovine blood. Washed cells are next placed in a
centrifuge that separates the red blood cells from the rest of the blood. The
hemoglobin is extracted from the red blood cells and is then diafiltered to
remove red blood cell wall debris and other contaminants. The resulting material
is a cell-free hemoglobin intermediate. A semi-continuous purification process
involving a high performance liquid chromatography process purifies the
hemoglobin intermediate. Next, the purified hemoglobin is polymerized, or
linked, by the
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addition of a cross-linking agent. Polymerized and stabilized material is then
fractionated and concentrated. The final product is filtered into sterilized
batch holding tanks until it is sterile filled into bags.
MARKETING
Hemopure
Upon receipt of FDA approval, if granted, Biopure expects to market Hemopure to
physician practices and hospitals. It also believes that military customers will
be significant. Biopure recognizes that it is crucial to establish a core belief
among opinion leaders that Hemopure fills an important medical need and that
systematic development of opinion leader advocacy is necessary for capturing and
maintaining a leadership position. As part of this process, Biopure engaged a
medical advisory board consisting of 13 leading physicians who participated in
an educational program and forum with Biopure. Biopure expects to reach
anesthesiologists, surgeons, oncologists, critical care and other
physician-specialists through publications and educational forums, such as
seminars and presentations at meetings of specialists.
Biopure will explore various means of selling Hemopure. Among other options,
Biopure may seek to enter into licensing or co-marketing agreements for parts or
all of the world in order to avail itself of the marketing expertise of one or
more seasoned pharmaceutical companies. Alternatively, it could engage
"contract" sales organizations from vendors, contract pharmaceutical companies
that supply sales services or recruit and train its own marketing and sales
force.
Oxyglobin
Biopure began selling Oxyglobin in March 1998 to a discrete number of emergency
and specialty practices in the United States. Biopure began selling Oxyglobin
nationally in October 1998. Since October 1, 1998, Biopure has sold
approximately 34,000 units of Oxyglobin. Veterinarians report successful use of
Oxyglobin in critical care situations involving blood loss, destruction of red
blood cells and ineffective production of red blood cells. In December 1999,
Biopure received veterinary approval to market Oxyglobin to treat canine anemia
in the European Union.
Biopure sells Oxyglobin directly to veterinarians in the United States through
veterinary product distributors -- one national and eight regional. Orders are
then drop shipped by Biopure directly. Biopure coordinates marketing and
distribution activities through five full-time sales employees.
Marketing programs have included advertising, direct mail, educational seminars,
conference calls and attendance at trade shows. Biopure has established a core
group of veterinary practices that use the product regularly. These
veterinarians are effective advocates of the product when interacting with other
veterinarians. Biopure sponsors evening seminars featuring these veterinarians.
Most veterinarians who buy the product reserve its use for the most severe
clinical situations. In January 2000, veterinarians paid an average of $126 per
15-gram hemoglobin unit.
COMPETITION
Hemopure will compete with traditional therapies and with other oxygen
therapeutics. Comparisons with traditional therapies, including red blood cell
transfusions, are described under "-- Scientific Overview", "-- Biopure's
Oxygenating Technology" and "-- Biopure's Products". Oxygen therapeutics under
development fall into two categories:
- - hemoglobin-based oxygen carriers, including Hemopure and Oxyglobin, consist of
natural hemoglobin from a mammal or genetically engineered source that has
been modified to improve stability, efficacy and safety; and
- - perfluorocarbon emulsions are chemicals administered intravenously.
Perfluorocarbon emulsions are effective principally under conditions of high
oxygen partial pressure to assist in oxygen delivery by forcing dissolved
oxygen into the plasma space.
Biopure believes that the competitive factors for its oxygen therapeutics will
be efficacy, safety, ease of use and cost. Biopure believes that it has
significant advantages as compared to its competitors including:
- - patents covering its processes, its products and their uses;
- - large molecule size resulting in longer duration of action than most other
oxygen therapeutics under development;
- - long-term room temperature stability;
- - completed and operational large-scale manufacturing facility compliant with
current Good Manufacturing Practices;
- - safe, ample, controlled inexpensive source of raw material;
- - FDA approval of Oxyglobin in January 1998; and
- - EMEA approval of Oxyglobin in December 1999.
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Many of Biopure's competitors and potential competitors in the development of
oxygen therapeutic products have significantly greater financial and other
resources to develop, manufacture and market their products. Existing
competitors in the development of hemoglobin-based investigational products use
outdated human red blood cells or bovine hemoglobin as their raw material.
Biopure is aware of one first generation, genetically engineered investigational
product that advanced to human clinical trials, but its development was
discontinued. We are aware of two human hemoglobin-based products currently in
advanced clinical trials. Biopure believes that its use of bovine red blood
cells is an advantage over products made from outdated donated human red blood
cells because of the availability, abundance, ability to control source, cost
and relative safety of bovine red blood cells. However, the use of bovine
derived blood products may encounter resistance from physicians and patients.
Among other things, public perceptions about the risk of "mad cow disease" may
affect market acceptance of Hemopure. Biopure also believes that competitors may
find it difficult to make or offer a hemoglobin-based oxygen carrier product
having the product characteristics of Hemopure without infringing on one or more
Biopure patents. In addition, the relatively low viscosity of Hemopure is a
potential advantage, particularly in large doses, in permitting perfusion at low
blood pressure.
Biopure is aware of one perfluorocarbon oxygen carrier in advanced clinical
trials. This product is a chemical fluid infused into the body. This chemical
attracts oxygen and takes it into the plasma. The patient needs an oxygen mask
for this process because perfluorocarbons require high oxygen environments in
order to be effective. The perfluorocarbon solution does not persist in the
body, so repeat dosing is necessary. These limitations may reduce the number of
potential applications for the product. As far as Biopure is aware, applications
pursued for this product do not include any of the applications Biopure might
pursue other than acute normovolemic hemodilution.
Biopure knows of no companies developing oxygen therapeutics intended to compete
with Oxyglobin in the veterinary market.
INTELLECTUAL PROPERTY
Patents, trademarks, trade secrets, technological know-how and other proprietary
rights are important to Biopure's business. Biopure actively seeks patent
protection both in the United States and abroad. Biopure filed its initial
patent in 1986 in the United States. Four U.S. patents have been issued from
this filing. These patents describe and claim ultra-pure semi-synthetic blood
substitutes and methods for their preparation.
In total, Biopure has 17 U.S. patents granted and nine applications pending
relating to oxygen therapeutics. Biopure's granted U.S. patents relating to
oxygen therapeutics include:
- - two patents covering an ultra-purification process for hemoglobin solutions,
regardless of the source of hemoglobin, which expire in 2006 and 2014, and two
patents covering the ultra-pure oxygen therapeutic solutions produced by this
process expiring in 2009;
- - three patents regarding compositions having improved stability, of which two
expire in 2015 and the third expires in 2016, and one patent covering
processes for producing these compositions which expires in 2016;
- - one patent, which expires in 2015, covering improvements in preservation of
such hemoglobin solutions;
- - two patents, which expire in 2015 and 2016, covering improved methods for
separating polymerized from unpolymerized hemoglobin;
- - one patent, which expires in 2015, covering methods of oxygenating tissue
affected by inadequate red blood cell flow;
- - one patent, which expires in 2016, covering the removal of pathogens, if
present, from Biopure's source material; and
- - three patents, which expire in 2011, 2014 and 2015, covering methods for
treating tumors; and
- - one patent, which expires in 2010, covering a sample valve for sterile
processing.
Biopure also filed its original patent in Europe. Although granted, third
parties subsequently opposed Biopure's original European patent. As a result of
the opposition proceeding, the patent was revoked. However, Biopure filed an
appeal that reinstated the patent during the appeal and is awaiting a decision
on the appeal. In the opposition process, Biopure narrowed its claims. Despite
the narrowing, Biopure believes that these claims provide protection for
Biopure's existing process and products. Biopure further believes that a
narrowed European patent should be sustained. During the opposition proceeding,
some pre-existing patents and articles not presented to the United States Patent
Office during the prosecution of patents already issued in the United States
were presented to the European Patent Office by the opponents. These preexisting
patents and articles are not expected to affect claims of Biopure patents in the
rest of the world. Biopure also has other foreign patents and patent
applications.
Biopure believes that it is not economically practicable to determine in advance
whether its products, product components, manufacturing processes or the uses
infringe the patent rights of others. It is likely that, from time to time,
Biopure will
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receive notices from others of claims or potential claims of intellectual
property infringement or Biopure may be called upon to defend a customer, vendee
or licensee against such third-party claims. Responding to these kinds of
claims, regardless of merit, could consume valuable time, result in costly
litigation or cause delays, all of which could harm Biopure's business.
Responding to these claims could also require Biopure to enter into royalty or
licensing agreements with the third parties claiming infringement. Such royalty
or licensing agreements, if available, may not be available on terms acceptable
to Biopure.
FACILITIES
Biopure has manufacturing facilities in Pennsylvania for the collection and
separation of blood and in Cambridge, Massachusetts where processing is
completed. The FDA has inspected these facilities and determined that they
comply with current Good Manufacturing Practices. The Medicines Control Agency,
on behalf of the European Medicines Evaluation Agency, has also inspected
Biopure's facilities.
Biopure manufactures separation materials in a 10,000 square foot plant in New
Hampshire. The current annual lease payment for this facility is $38,000. The
lease expires on March 31, 2000. Biopure has an option to extend this lease for
an additional five years and has exercised this option.
Biopure leases two facilities for office and research space in Massachusetts.
One lease covers 24,000 square feet, and its current annual lease payment is
$239,000. This lease expires on December 31, 2007. Biopure has an option to
extend this lease for ten five-year periods, or an additional 50 years. The
other lease covers 13,000 square feet, and its current annual lease payment is
$378,000. We are in negotiations to reduce our lease commitment to approximately
7,000 square feet. This lease expires on August 31, 2001. Biopure does not have
an option to extend this lease. It leases 18,000 square feet of warehouse space
in Massachusetts. The current annual lease payment for this facility is $95,000.
The lease expires on September 30, 2001. Biopure has an option to extend this
lease for two five-year periods, or an additional ten years.
Biopure leases 32,000 square feet of manufacturing space under three leases in
Massachusetts. The current annual lease payments for these facilities is
$236,000. The leases expire on November 30, 2000. Biopure has an option to
extend these leases for five five-year periods, or an additional 25 years, with
an exclusive right to negotiate for an additional 25 years. Biopure has decided
to extend the terms of these leases to November 30, 2005. Biopure also leases
18,000 square feet of manufacturing space in Pennsylvania. The current annual
payment for a ground lease for this facility is $21,000. The lease expires on
October 20, 2014. Biopure has an option to extend this lease for nine years.
Biopure's current process is designed to be scalable, such that additional
capacity can be obtained by adding duplicate equipment and additional raw
material including power and water. However, Biopure is space constrained at its
existing facility in Cambridge, Massachusetts, so it anticipates that it will
need to add a new facility at a new location prior to large-scale
commercialization of Hemopure.
EMPLOYEES
As of January 28, 2000, Biopure employed 160 persons. Of its total work force,
93 employees are engaged in manufacturing and related manufacturing support
services, 29 are engaged in research and development activities, 10 are engaged
in sales and marketing, primarily veterinary, and 28 are engaged in support and
administrative activities. None of Biopure's employees are covered by a
collective bargaining agreement. Biopure believes its relations with its
employees are good.
PAST COLLABORATIONS
In December 1990, Biopure and The Upjohn Company entered into an alliance to
develop and market Biopure's human and veterinary products. From that time until
1996, Biopure benefited from equity investment and development expenditures of
approximately $140.0 million and from the experience, personnel and facilities
of The Upjohn Company. From 1987 until 1996, Biopure had a license agreement
with B. Braun Melsungen AG, a German hospital supply company. This license
agreement and certain related agreements contemplated the product testing,
approval, manufacture and marketing of Biopure's products by B. Braun Melsungen
AG in Europe.
GOVERNMENT REGULATION
New Drug or Biologic Approval for Human Use
Governmental authorities in the United States and other countries extensively
regulate the testing, manufacturing, labeling, advertising, promotion, export
and marketing, among other things, of Biopure's oxygen therapeutic products. Any
oxygen therapeutic product administered to human patients is regulated as a drug
or a biologic drug and requires regulatory approval before it may be
commercialized.
In the United States, Hemopure is regulated as a human biologic. The FDA will
require Biopure to file and obtain approval of a Biologics License Application
covering both Hemopure and the facility in which it is manufactured.
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The steps required before approval of a biologic for marketing in the United
States generally include:
- - preclinical laboratory tests and animal tests;
- - the submission to the FDA of an Investigational New Drug, or IND, application
for human clinical testing, which must become effective before human clinical
trials may lawfully commence;
- - adequate and well-controlled human clinical trials to establish the safety and
efficacy of the product;
- - the submission to the FDA of a Biologics License Application;
- - FDA review of the Biologics License Application; and
- - satisfactory completion of an FDA inspection of the manufacturing facilities
at which the product is made to assess compliance with current Good
Manufacturing Practices which includes elaborate testing, control,
documentation and other quality assurance procedures.
The testing and approval process requires substantial time, effort and financial
resources. After approval is obtained, a supplemental approval is generally
required for each proposed new indication, often accompanied by data similar to
that submitted with the original Biologics License Application.
Preclinical studies include laboratory evaluation of the product and animal
studies to assess the safety and potential efficacy of the product. The results
of the preclinical studies, together with manufacturing information and
analytical data, are submitted to the FDA as part of the IND. The IND
automatically will become effective in 30 days unless the FDA, before that time,
raises concerns or questions and imposes a "clinical hold". In such case, the
IND sponsor and the FDA must resolve any outstanding concerns before the trial
can proceed. Once trials have commenced, the FDA may stop the trials, or
particular types of trials, by imposing a clinical hold because of concerns
about, for example, the safety of the product being tested or the adequacy of
the trial design.
Clinical trials involve the administration of investigational products to
healthy volunteers or patients under the supervision of a qualified principal
investigator consistent with an informed consent. An independent Institutional
Review Board, or IRB, or Ethics Committee must review and approve each clinical
trial at each institution at which the study will be conducted. The IRB or
Ethics Committee will consider, among other things, ethical factors, the safety
of human subjects and the possible liability of the institution.
Clinical trials typically are conducted in three sequential phases, but the
phases may overlap. In Phase I, the initial introduction of the drug into human
subjects, the drug is usually tested for safety or adverse effects, dosage
tolerance, absorption, metabolism, distribution, excretion and pharmacodynamics.
Phase II clinical trials usually involve studies in a limited patient population
to evaluate the efficacy of the drug for specific, targeted indications,
determine dosage tolerance and optimal dosage and identify possible adverse
effects and safety risks. Phase III clinical trials generally further evaluate
clinical efficacy and test further for safety within an expanded patient
population and at multiple clinical sites. Phase IV clinical trials are
conducted after approval to gain additional experience from the treatment of
patients in the intended therapeutic indication. If the FDA approves a product,
additional clinical trials may be necessary. A company may be able to use the
data from these clinical trials to meet all or part of any Phase IV clinical
trial requirement. These clinical trials are often referred to as Phase III/IV
post-approval clinical trials.
Biopure believes that its ongoing U.S. pivotal Phase III clinical trial is
consistent with the FDA's most recent guidance on the design and efficacy and
safety endpoints required for approval of products such as Hemopure. However,
the FDA could change its view or require a change in study design, additional
data or even further clinical trials prior to approval of Hemopure.
The results of the preclinical studies and clinical trials, together with
detailed information on the manufacture and composition of the product, are
submitted to the FDA in the application requesting approval to market the
product. Before approving a Biologics License Application, the FDA will inspect
the facilities at which the product is manufactured and will not approve the
product unless the manufacturing facility is in compliance with current Good
Manufacturing Practices. The FDA may delay approval of a Biologics License
Application if applicable regulatory criteria are not satisfied, require
additional testing or information, and/or require postmarketing testing and
surveillance to monitor safety, purity or potency of a product. It may also
limit the indicated uses for which an approval is given.
New Drug Approval for Veterinary Use
New drugs for companion animals must receive New Animal Drug Application, or
NADA, approval prior to marketing in the U.S. The requirements for approval are
similar to those for new human drugs. Obtaining NADA approval often requires
clinical field trials and the submission of an Investigational New Animal Drug
Application, which for non-food animals becomes effective upon acceptance for
filing.
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Pervasive and Continuing Regulation
Any product approvals that are granted remain subject to continual FDA review,
and newly discovered or developed safety or efficacy data may result in
withdrawal of products from marketing. Moreover, if and when such approval is
obtained, the manufacture and marketing of Biopure's products remain subject to
extensive regulatory requirements administered by the FDA and other regulatory
bodies, including compliance with current Good Manufacturing Practices, adverse
event reporting requirements and the FDA's general prohibitions against
promoting products for unapproved or "off-label" uses. Biopure is subject to
inspection and market surveillance by the FDA for compliance with these
regulatory requirements. Failure to comply with the requirements can, among
other things, result in warning letters, product seizures, recalls, fines,
injunctions, suspensions or withdrawals of regulatory approvals, operating
restrictions and criminal prosecutions. Any such enforcement action could have a
material adverse effect on Biopure. Unanticipated changes in existing regulatory
requirements or the adoption of new requirements could also have a material
adverse effect on Biopure.
Biopure also is subject to numerous federal, state and local laws relating to
such matters as safe working conditions, manufacturing practices, environmental
protection, fire hazard control and hazardous substance disposal.
Foreign Regulation
Biopure will be subject to a variety of regulations governing clinical trials
and sales of its products outside the United States. Biopure must obtain
approval of its products by the comparable non-U.S. regulatory authorities prior
to the commencement of product marketing in the country whether or not Biopure
has obtained FDA approval. The approval process varies from country to country
and the time needed to secure approval may be longer or shorter than that
required for FDA approval. The European Union requires approval of a Marketing
Authorization Application by the European Medicines Evaluation Agency. These
applications require the completion of extensive preclinical and clinical
studies and manufacturing and controls information.
Reimbursement
Biopure's ability to successfully commercialize its human product will depend in
significant part on the extent to which reimbursement of the cost of such
product and related treatment will be available from government health
administration authorities, private health insurers and other organizations.
Third-party payors are increasingly challenging the price of medical products
and services. Significant uncertainty exists as to the reimbursement status of
newly approved health care products, and there can be no assurance that adequate
third-party coverage will be available to enable Biopure to maintain price
levels sufficient for realization of an appropriate return on its investment in
product development. The public and the federal government have recently focused
significant attention on reforming the health care system in the United States.
A number of health care reform measures have been suggested, including price
controls on therapeutics. Public discussion of such measures is likely to
continue, and concerns about the potential effects of different possible
proposals have been reflected in the volatility of the stock prices of companies
in the health care and related industries.
LITIGATION
Biopure is a party to an action filed on July 18, 1990 in the United States
District Court for the District of Massachusetts under the caption Peter Fisher,
et al. v. William P. Trainor, et al. In this litigation, the plaintiffs alleged
breach of agreements by Biopure and against one another. Biopure is also a party
to a related action filed on November 8, 1990 in the United States District
Court for the District of Massachusetts under the caption Bio-Vita Ltd., et al.
v. Carl W. Rausch, et al.
Summary judgments were entered against the plaintiffs in both of these actions
in 1994. The plaintiffs appealed. One appeal filed in Bio-Vita Ltd., et al. v.
Carl W. Rausch, et al. was voluntarily dismissed and the other was remanded to
the trial court. The other appeal was remanded to the trial court for further
findings based on lack of jurisdiction. This jurisdictional issue has been
briefed following additional discovery and is before the trial court. The
remaining plaintiff is seeking $250.0 million in damages. Biopure believes that
the ultimate resolution of this matter will not have a material adverse effect
on its financial position or results of operations.
In addition, proceedings in Europe are ongoing with regard to Biopure's European
patent. Biopure was granted a patent on April 1, 1992 by the European Patent
Office. Within the nine-month period from the grant date for the filing of
oppositions, six parties filed oppositions requesting that all of the claims of
this patent be revoked. Of these, three opposing parties remain: Baxter
International, Enzon, Inc. and Northfield Laboratories, Inc. Following oral
proceedings conducted by the Opposition Division at the European Patent Office
in November 1995, the Opposition Division revoked the patent.
Biopure has appealed this decision of the Opposition Division and is currently
awaiting a decision on its appeal. The appeal has the technical result of
reinstating the patent during the appeal process. Prior to filing its appeal
papers, Biopure narrowed its claims further to increase the probability of
winning at the appeal level. Biopure further believes that a narrowed patent
should be sustained.
Future claims against Biopure may arise and, if they do, there can be no
assurance that they will be successfully defended.
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MANAGEMENT
The following table lists members of our board of directors and our executive
officers, with the position held by each and their ages as of January 31, 2000.
Directors may hold office until removed by a resolution of our stockholders,
removal by all members of the board of directors, resignation, death or the
expiration of the term of their appointment.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
NAME AGE POSITION
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Carl W. Rausch.................................. 51 Chairman and Chief Executive Officer
David N. Judelson............................... 71 Vice Chairman
Paul A. Looney.................................. 60 Director and President
Daniel P. Harrington............................ 44 Director
Stephen A. Kaplan............................... 41 Director
C. Everett Koop, M.D. .......................... 83 Director
Charles A. Sanders, M.D. ....................... 67 Director
Francis H. Murphy............................... 61 Chief Financial Officer
Maria S. Gawryl, Ph.D. ......................... 46 Senior Vice President, Research and Development
Edward E. Jacobs, Jr., M.D. .................... 59 Senior Vice President
Jane Kober...................................... 56 Senior Vice President, General Counsel and
Secretary
Bing L. Wong, Ph.D. ............................ 52 Senior Vice President, International
Bernadette L. Alford, Ph.D. .................... 50 Vice President, Regulatory Affairs
William A. Eudailey............................. 55 Vice President, Marketing
Geoffrey J. Filbey.............................. 56 Vice President, Engineering
Carolyn R. Fuchs................................ 47 Vice President, Human Resources
William D. Hoffman, M.D. ....................... 46 Chief Medical Officer
Andrew W. Wright................................ 40 Vice President, Veterinary Products
</TABLE>
CARL W. RAUSCH 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.
DAVID N. JUDELSON is a co-founder and has served 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.
PAUL A. LOONEY 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.
DANIEL P. HARRINGTON 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 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.
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C. EVERETT KOOP, M.D. 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. He 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.
CHARLES A. SANDERS, M.D. 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.
FRANCIS H. MURPHY has served as Chief Financial Officer of Biopure since
November 1999. Most recently Mr. Murphy had been International Vice President
and business manager for Japan, Latin America and Asia Pacific for the Science
Products Division of Corning Incorporated. He holds an M.B.A. degree from Boston
University and a B.S. degree in industrial engineering and a B.A. degree from
Rutgers University.
MARIA S. GAWRYL, PH.D. has been Senior Vice President, Research and Development
of Biopure since April 1999. From September 1990 to April 1999, she was Vice
President, Research and Development. Dr. Gawryl holds a Ph.D. in immunology from
the University of Connecticut. She did post-doctoral work at the University of
Connecticut Health Center and Rush Presbyterian, St. Luke's Medical Center. She
holds a B.S. degree in math and chemistry from Antioch College.
EDWARD E. JACOBS, JR., M.D. has been a Senior Vice President of Biopure since
August 1997. From April 1995 to August 1997, he was Senior Medical Advisor of
Biopure. Since 1988, he has been an Assistant Clinical Professor at Harvard
Medical School. He holds an M.D. degree from Harvard Medical School and a B.A.
degree in philosophy from Princeton University.
JANE KOBER has been Senior Vice President, General Counsel and Secretary of
Biopure since May 1998. From June 1989 to April 1998, she was a partner in
LeBoeuf, Lamb, Greene & MacRae, L.L.P. Ms. Kober holds a J.D. degree from Case
Western Reserve University, an M.A. degree from the University of Chicago and a
B.A. in English from the Pennsylvania State University. She serves as a director
of HTV Industries, Inc.
BING L. WONG, PH.D. has been a Senior Vice President, International of Biopure
since May 1999. From June 1992 to May 1999, Dr. Wong was a Senior Vice
President, Development of Strategic Business Ventures. Dr. Wong taught in the
Chemical Engineering Department at Tufts University as Assistant Professor and
Adjunct Associate Professor while he served as Associate and Acting Director of
the New England Enzyme Center. He holds M.S. and Ph.D. degrees from the
Department of Chemical Engineering, Tufts University and a B.S. degree from the
Department of Chemical Engineering, National Taiwan University.
BERNADETTE L. ALFORD, PH.D. has been Vice President, Regulatory Affairs of
Biopure since September 1998. From September 1994 to September 1998, she was
Senior Vice President, Product Development for Alexion Pharmaceuticals Inc. She
holds a Ph.D. degree in molecular biology and an M.S. degree in biochemistry
from Texas University and a B.S. degree in biology from Marywood University.
WILLIAM A. EUDAILEY became Vice President, Marketing on February 14, 2000. From
1996 through 1999, Mr. Eudailey was Vice President of Separations Business of
Corning Incorporated, and from 1995 to 1996 he was Vice President World Wide
Marketing for the Science Products Division of Corning Incorporated. He holds a
Doctor of Pharmacy degree and a B.S. in pharmacy from the University of
Tennessee College of Pharmacy.
GEOFFREY J. FILBEY joined Biopure in 1985 and has served as Vice President,
Engineering since 1995. Mr. Filbey holds a B.Sc. degree in engineering from the
City University in London, England.
CAROLYN R. FUCHS has served as Vice President, Human Resources since June 1998.
From October 1996 to June 1998, she was an independent consultant. From May 1991
to October 1996, she worked at National Medical Care. Ms. Fuchs holds an M.Ed.
degree in counseling and a B.S. degree in psychology from the University of
Massachusetts at Amherst.
WILLIAM D. HOFFMAN, M.D. joined Biopure in January 1998 as Director of Medical
Affairs and was named Chief Medical Officer in March 1999. From 1994 until
January 1998, Dr. Hoffman was Director of Surgical Intensive Care at The
Cleveland Clinic Foundation. He holds an M.D. degree from the University of
Massachusetts Medical School and a B.S. degree in physics from Carnegie-Mellon
University.
36
<PAGE> 36
ANDREW W. WRIGHT has been Vice President, Veterinary Products of Biopure since
August 1996. From March 1992 to August 1996, Mr. Wright worked with IDEXX
Laboratories, Inc. where he held several management positions, including
Director of Corporate Development, Director of Marketing and Senior Product
Manager. He holds an M.B.A. degree from the University of Chicago and a B.A.
degree in economics from Carleton College.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
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. Of the four, only Mr. Rausch has been an officer or employee of
Biopure at any time since our inception. Jane Kober, our 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. Certain members of
our board of directors are or have been parties to consulting agreements with
Biopure. These agreements are described under "Certain Relationships and Related
Transactions".
Our audit committee consists of Mr. Harrington and Dr. Sanders.
DIRECTOR COMPENSATION
For each board of directors' meeting attended, our non-employee directors
receive a fee of $500 plus expenses.
37
<PAGE> 37
EXECUTIVE COMPENSATION
Summary Compensation Table
The following summary compensation table summarizes information regarding the
compensation of our Chief Executive Officer and our other four most highly
compensated executive officers for the fiscal years ended October 31, 1999, 1998
and 1997.
<TABLE>
<CAPTION>
--------------------------------------------------
ANNUAL
COMPENSATION
--------------------------------------------------
FISCAL OTHER ANNUAL
YEAR SALARY($) BONUS($) COMPENSATION($)
NAME AND PRINCIPAL POSITION ------ --------- -------- ---------------
<S> <C> <C> <C> <C>
Carl W. Rausch.............................................. 1999 307,008 -- --
Chairman and Chief Executive Officer 1998 307,008 75,000 --
1997 252,866 30,000 --
Edward E. Jacobs, Jr., M.D. ................................ 1999 205,010 -- --
Senior Vice President 1998 205,010 25,000 --
1997 169,698 -- 228,000
Maria S. Gawryl, Ph.D. ..................................... 1999 202,501 -- --
Senior Vice President -- 1998 195,000 40,000 --
Research and Development 1997 162,040 20,000 --
William D. Hoffman, M.D. ................................... 1999 184,692 -- 7,162
Chief Medical Officer 1998 123,767 -- 30,000
1997 -- -- --
Jane Kober.................................................. 1999 220,012 -- 80,001
Senior Vice President -- 1998 102,390 -- 40,000
General Counsel and Secretary 1997 -- -- --
</TABLE>
Summary Long-Term Compensation
The following table sets forth information regarding the long-term compensation
of our Chief Executive Officer and our other four most highly compensated
executive officers for the fiscal years ended October 31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
----------------------------------------------------
AWARDS PAYOUTS
---------- ----------------------------
SECURITIES EARNINGS ON
FISCAL UNDERLYING DEFERRED
YEAR OPTIONS(#) COMPENSATION($) 401(K)($)
NAME AND PRINCIPAL POSITION ------ ---------- --------------- ---------
<S> <C> <C> <C> <C>
Carl W. Rausch............................................. 1999 166,680 94,097 4,550
Chairman and Chief Executive Officer 1998 83,333 104,408 4,370
1997 -- 94,353 4,725
Edward E. Jacobs, Jr., M.D. ............................... 1999 16,680 -- 4,983
Senior Vice President 1998 10,000 -- 4,565
1997 -- -- 4,852
Maria S. Gawryl, Ph.D. .................................... 1999 100,000 -- 4,929
Senior Vice President -- 1998 53,334 -- 4,653
Research and Development 1997 -- -- 4,839
William D. Hoffman, M.D. .................................. 1999 68,000 -- 3,381
Chief Medical Officer 1998 5,333 -- --
1997 -- -- --
Jane Kober................................................. 1999 133,340 -- 2,285
Senior Vice President -- 1998 33,333 -- --
General Counsel and Secretary 1997 -- -- --
</TABLE>
38
<PAGE> 38
Option Grants in Last Fiscal Year
The following table summarizes information regarding options granted to our
Chief Executive Officer and our 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 respective options if 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
our 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%
NAME AND PRINCIPAL POSITION ----------- ------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
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>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table summarizes information concerning options to purchase our
class A common stock exercised by our Chief Executive Officer and our other four
most highly compensated executive officers during the fiscal year ended October
31, 1999 and the number and value of unexercised options held by each of them at
October 31, 1999.
The fair market value on October 31, 1999 was determined to be $9.88 per share,
the closing price of our class A common stock as quoted on The Nasdaq National
Market on October 29, 1999.
<TABLE>
<CAPTION>
------------------------------------------------------------
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR END(#) Fiscal Year End($)
---------------------------- ----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME AND PRINCIPAL POSITION ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
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>
39
<PAGE> 39
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
We have 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 we maintain or implement. In addition, under the
agreement, Mr. Looney was promised and has received stock options to purchase
233,340 shares of our class A common stock at an exercise price equal to the
price to the public in our initial public offering, $12.00 per share. These
options will 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 our business during his employment and for one year
thereafter.
CONSULTING AGREEMENT
Dr. Hoffman, our Chief Medical Officer, will become the Director of Cardiac
Surgical Critical Care at Massachusetts General Hospital in May 2000. At that
time he will become a consultant to us and will no longer be an employee. He has
agreed, among other things, in his role as a consultant:
- - To become a member of a medical advisory board we are forming;
- - To be available as needed for medical advice;
- - To consult both with us and the FDA on our pivotal trial and our non-U.S.
elective surgery trial completed in 1998;
- - To advise on protocols, or designs, for future clinical trials;
- - To give input into educational programs for the use of Hemopure.
He will be compensated by an option to purchase 24,800 shares of class A common
stock to vest in equal increments over a four-year period.
1990 INCENTIVE COMPENSATION AND COMPANY STOCK PURCHASE PLAN
Under an Incentive Compensation and Company Stock Purchase Plan, we sold
approximately 1,606,000 "non-lapse" restricted shares of class A common stock in
August 1990 to certain of our 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 us or to a third
party, would be equal to the price of our 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 us.
40
<PAGE> 40
Our 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 us of $7.92 per share. In addition, we 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 in account the discount of $7.92 per share.
THE 1998 STOCK OPTION PLAN
In March 1998, our 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 this 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
On June 24, 1999, our board adopted the 1999 Omnibus Securities and Incentive
Plan, which has the terms described below. This plan is intended to promote our
long-term financial interests and growth by providing incentives to employees
and directors and to align their interests with those of our stockholders by
acquiring a proprietary interest in our 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 Biopure or our
affiliates. Our Compensation Committee will administer 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 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, we 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.
41
<PAGE> 41
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.
Our board of directors may terminate, alter or amend the 1999 Omnibus Securities
and Incentive Plan; 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, if any, 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.
42
<PAGE> 42
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 1990, we entered into an alliance with The Upjohn Company, or
Upjohn, to develop and market our human and veterinary products. From that time
until the alliance ended in July 1996, we received equity investment and funding
for development of approximately $140.0 million from Upjohn benefited from its
experience, personnel and facilities. When our company and Upjohn mutually
agreed to end the alliance in July 1996, Upjohn loaned us $9.0 million, at an
interest rate based on the prime rate. With the proceeds from our initial public
offering, we repaid the $4.5 million remaining principal and interest
outstanding on this loan. Upjohn retained no license or other rights to our
technology or products. Upjohn maintains an equity stake in Biopure, holding
class B common stock convertible, according to a formula, into a maximum of
1,272,119 shares of our class A common stock after FDA approval of Hemopure.
In 1987, we 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, our company and Braun mutually agreed to
end this collaboration. Our termination agreement with Braun provided for both
the repurchase by us of all of the shares of our 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.
We agreed to pay Braun a total of $6.3 million by 2002 in order to reacquire the
2,013,956 shares of class A common stock owned by Braun. Our termination
agreement with Braun required us to place in escrow installment payments of the
purchase price equal to an annual amount of $1.0 million plus five percent of
our revenues from human product sales and license fees in a certain European
region. We paid one installment of $1.0 million in 1998 and completed the
repurchase of 319,683 shares. We paid a second installment of $1.0 million in
February 1999. With the proceeds from our initial public offering, we completed
the repurchase 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.
We have a consulting arrangement with C. Everett Koop, M.D., one of our
directors. For the fiscal years ended October 31, 1999, 1998 and 1997, we paid
Dr. Koop $146,132, $123,780 and $92,941, respectively. We paid $75,500 to Mr.
Judelson, a director, for services in each of fiscal 1998 and fiscal 1997.
In August 1990, we made loans to some of our directors and officers and they
used the proceeds from such loans to purchase our class A common stock. A loan
to Mr. Rausch with $1.4 million 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%. As of
January 31, 2000, the amount of indebtedness due under these loans with a
balance of $60,000 or more was as follows:
Carl W. Rausch, Chairman and Chief Executive Officer, owed us approximately $1.7
million;
Edward E. Jacobs, Jr., M.D., Senior Vice President, owed us $377,713. Dr. Jacobs
subsequently paid his loan in full on February 8, 2000.
Bing L. Wong, Senior Vice President, International, owed us $101,899; and
Geoffrey J. Filbey, Vice President, Engineering, owed us $68,746.
43
<PAGE> 43
PRINCIPAL STOCKHOLDERS
The following table summarizes certain information as of February 1, 2000, with
respect to the beneficial ownership of shares of our class A common stock.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Beneficial ownership generally includes
voting or investment power with respect to securities. A person is deemed to be
the beneficial owner of shares that he or she can acquire within 60 days of
February 1, 2000, upon the exercise of options or warrants. Biopure has
determined each beneficial owner's percentage ownership by assuming that options
or warrants held by such person which are exercisable within 60 days from
February 1, 2000, have been exercised. Except as indicated by the footnotes to
the table below, we believe, based on information furnished to us, that the
persons and entities named in the table below have sole voting and investment
power with respect to all shares of class A common stock shown as beneficially
owned by them.
Prior to February 1, 2000, Mr. Rausch had sole voting and investment power with
respect to 2,693,905 shares owned by Biopure Associates Limited Partnership, a
partnership originally formed to hold shares owned primarily by our officers,
employees and consultants. This partnership distributed all of its shares to its
partners on February 1, 2000. Mr. Rausch received 554,930 shares representing
his interest in the partnership, and his beneficial ownership was reduced by the
balance of the partnership's shares, which were distributed to others.
<TABLE>
<CAPTION>
---------------------
CLASS A
COMMON STOCK
---------------------
SHARES PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNERS ---------- -------
<S> <C> <C>
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.
(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.
44
<PAGE> 44
(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, include options exercisable 60 days from February 1, 2000 to
purchase 41,667 shares and include 333,333 shares owned of record by Biopure
Associates Limited Partnership II as of February 1, 2000 but distributed to him
prior to the date of this prospectus.
(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 60 days from February
1, 2000.
(14) Ms. Kober's share's include options exercisable 60 days from 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.
45
<PAGE> 45
DESCRIPTION OF CAPITAL STOCK
Upon completion of this offering, our authorized capital stock will consist of
100,000,179 shares of common stock, consisting of 100,000,000 shares of class A
common stock, par value $.01 per share, 179 shares of class B common stock, par
value $1.00 per share, and 30,000,000 shares of preferred stock, par value $.01
per share.
CLASS A COMMON STOCK
The holders of our class A common stock are entitled to one vote per share on
all matters submitted to our stockholders. The holders of our class A common
stock are entitled to receive dividends as and when declared by our board of
directors.
Upon any liquidation, dissolution or winding up of Biopure, holders of class A
common stock are entitled to ratable distribution, with the holders of the class
B common stock, of the assets available for distribution to our stockholders,
after payment of the liquidation preferences due to the holders of our
convertible preferred stock.
Holders of class A common stock do not have preemptive rights or cumulative
voting rights.
CLASS B COMMON STOCK
Except as required by law, the holders of class B common stock have no voting
rights and have no right to receive dividends on their class B common stock.
The shares of class B common stock are convertible into class A common stock
after the receipt of FDA approval for the commercial sale of Hemopure for use as
an oxygen transport material in humans. The conversion ratio is based on a
valuation of Biopure at the time of conversion which cannot exceed $3.0 billion.
The maximum number of shares of class A common stock issuable upon conversion of
the class B common stock is 1,272,119 and the minimum is 646,667. We will not
issue any additional shares of class B common stock.
In the event of a liquidation, dissolution or winding up of Biopure, holders of
class B common stock are entitled to ratable distribution, with the holders of
the class A common stock, of the assets available for distribution to our
stockholders, after payment of the liquidation preferences due to the holders of
our convertible preferred stock.
ANTI-TAKEOVER EFFECTS OF VARIOUS PROVISIONS OF DELAWARE LAW, BIOPURE'S RESTATED
CERTIFICATE OF INCORPORATION AND BY-LAWS AND A STOCKHOLDERS RIGHTS PLAN
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Subject to various exceptions, Section 203 prohibits a publicly
held Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
interested stockholder attained that status with the approval of the board of
directors or unless the business combination is approved in a prescribed manner.
A "business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Subject to
various exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within three years did own, fifteen percent
or more of the corporation's voting stock. This statute could prohibit or delay
the success of mergers or other takeover or change in control attempts with
respect to Biopure and, accordingly, may discourage attempts to acquire us.
In addition, various provisions of our restated certificate of incorporation and
our by-laws, which provisions will be in effect upon the completion of this
offering and are summarized in the following paragraphs, may be deemed to have
an anti-takeover effect and may delay, defer or prevent a tender offer or
takeover attempt that a stockholder might consider in its best interest,
including those attempts that might result in a premium over the market price
for the shares held by stockholders.
Classified Board of Directors
Our board of directors is currently divided into three classes of directors
serving staggered three-year terms. As a result, approximately one-third of the
board of directors are elected each year. These provisions, when coupled with
the provision of the by-laws authorizing the board of directors to fill vacant
directorships or increase the size of the board of directors, may deter a
stockholder from voting to remove incumbent directors and simultaneously gaining
control of the board of directors by filling the vacancies created by that
removal with its own nominees.
Dr. Koop and Mr. Looney are Class I directors, whose terms expire in 2000; Mr.
Harrington and Mr. Kaplan are Class II directors, whose terms expire in 2001;
and Mr. Rausch, Mr. Judelson and Dr. Sanders are Class III directors, whose
terms expire in 2002.
46
<PAGE> 46
Supermajority Voting Requirement for Mergers and Business Combinations
Our restated certificate of incorporation requires that two-thirds, rather than
a majority, of the voting power of our outstanding capital stock approve any
merger, consolidation or sale of "all or substantially all" of our assets. This
two-thirds vote will be necessary until July 31, 2003, after which a majority of
the voting power of Biopure will be able to approve these transactions. By
requiring a two-thirds rather than a majority vote, it is more difficult for an
outside entity to successfully acquire our company.
Advance Notice Requirements for Stockholder Proposals and Director Nominations
The by-laws provide that stockholders who wish to bring business before an
annual meeting of stockholders, or to nominate candidates for election as
directors at an annual meeting of stockholders, must provide timely notice in
writing to the secretary of Biopure. To be timely, a stockholder's notice must
be delivered at our principal executive offices, not less than 90 days prior to
the first anniversary of the date of our previous year's annual meeting of
stockholders. However, if no annual meeting of stockholders was held in the
previous year or the date of the annual meeting of stockholders has been changed
to be more than 30 calendar days earlier than or 60 calendar days after the
anniversary, notice by the stockholder, to be timely, must be received by us not
later than the close of business on the later of the 90th day prior to such
annual meeting or the 10th day following the day on which the public
announcement of the date of such meeting is first made. The by-laws also provide
specific notice requirements applicable where the number of directors has been
increased. The by-laws specify various requirements as to the form and content
of a stockholder's notice. These provisions may preclude stockholders from
bringing matters for a vote before an annual meeting of stockholders or from
making nominations for directors at an annual meeting of stockholders.
Authorized But Unissued Shares
The authorized but unissued shares of common stock and preferred stock are
available for future issuance without further stockholder approval. These
additional shares may be used for a variety of corporate purposes, including
future public or private offerings to raise additional capital, corporate
acquisitions and employee benefit plans. The existence of authorized but
unissued and unreserved common stock and preferred stock could make more
difficult or discourage an attempt to obtain control of Biopure by means of a
proxy contest, tender offer, merger or otherwise.
The Delaware General Corporation Law generally provides that the affirmative
vote of a majority of the shares entitled to vote on any matter is required to
amend a corporation's certificate of incorporation or by-laws, unless a
corporation's certificate of incorporation or by-laws, as the case may be,
requires a greater percentage, or unless the by-law provision being amended was
originally adopted by the board of directors, in which case the amendment
requires only the affirmative vote of a majority of the members of the board of
directors or unless the certificate of incorporation provides that the board of
directors may amend the by-laws, in which case the amendment requires only the
affirmative vote of a majority of the members of the board of directors.
Stockholders Rights Plan
Biopure's board of directors has adopted a stockholders rights plan which became
effective following the completion of the initial public offering. This
stockholders rights plan has an anti-takeover effect. Under this plan, a
preferred stock purchase right will be distributed to each holder of class A
common stock. The plan is likely to discourage any person or group that wishes
to acquire more than 20% of our class A common stock from acquiring this stock
prior to obtaining Biopure's agreement to redeem the rights. If the rights are
not redeemed, the exercise of the preferred stock purchase rights following an
acquisition will cause substantial dilution to the acquiring person or group.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the class A common stock is American Stock
Transfer & Trust Company. The transfer agent's address is 40 Wall Street, New
York, New York 10005 and its telephone number is (212) 936-5100.
47
<PAGE> 47
UNDERWRITING
Biopure and the underwriters named below have entered into an underwriting
agreement covering the class A common stock to be offered in this offering. J.P.
Morgan Securities Inc., Salomon Smith Barney Inc., Robert W. Baird & Co.
Incorporated and Adams, Harkness & Hill, Inc. are acting as representatives of
the underwriters. Each underwriter has agreed to purchase the number of shares
of class A common stock set forth opposite its name in the following table.
<TABLE>
<CAPTION>
-----------
NUMBER OF
SHARES
-----------
<S> <C>
UNDERWRITERS
J.P. Morgan Securities Inc..................................
Salomon Smith Barney Inc. ..................................
Robert W. Baird & Co. Incorporated..........................
Adams, Harkness & Hill, Inc.................................
-----------
Total............................................. 2,500,000
===========
</TABLE>
The underwriting agreement provides that if the underwriters take any of the
shares set forth in the table above, then they must take all of these shares. No
underwriter is obligated to take any shares allocated to a defaulting
underwriter except under limited circumstances.
The underwriters are offering the shares of class A common stock, subject to the
prior sale of shares, and when, as and if such shares are delivered to and
accepted by them. The underwriters will initially offer to sell shares to the
public at the initial public offering price set forth on the cover page of this
prospectus. The underwriters may sell shares to securities dealers at a discount
of up to $ per share from the initial public offering price. Any such
securities dealers may resell shares to certain other brokers or dealers at a
discount of up to $ per share from the initial public offering price. After
the initial public offering, the underwriters may vary the public offering price
and other selling terms.
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have the option to buy up to an additional 375,000
shares of class A common stock from Biopure to cover such sales. They may
exercise this option during the 30-day period from the date of this prospectus.
If any shares are purchased with this option, the underwriters will purchase
shares in approximately the same proportion as set forth in the table above.
The following table shows the per share and total underwriting discounts that
Biopure will pay to the underwriters. These amounts are shown assuming both no
exercise and full exercise of the underwriters' option to purchase additional
shares.
<TABLE>
<CAPTION>
----------------------------
PAID BY BIOPURE
----------------------------
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per share.............................................. $ $
----------- -----------
Total............................................. $ $
=========== ===========
</TABLE>
The underwriters may purchase and sell shares of class A common stock in the
open market in connection with this offering. These transactions may include
short sales, stabilizing transactions and purchases to cover positions created
by short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or slowing a decline in the market price of the class A common stock
while the offering is in progress. The underwriters may also impose a penalty
bid, which means that an underwriter must repay to the other underwriters a
portion of the underwriting discount received by it. An underwriter may be
subject to a penalty bid if the representatives of the underwriters, while
engaging in stabilizing or short covering transactions, repurchase shares sold
by or for the account of that underwriter. These activities may stabilize,
maintain or otherwise affect the market price of the class A common stock. As a
result, the price of the class A common stock may be higher than the price that
otherwise might exist in the open market. If the underwriters commence these
activities, they may discontinue them at any time. The underwriters may carry
out these transactions on The Nasdaq National Market, in the over-the-counter
market or otherwise.
We estimate that the total expenses of this offering, excluding underwriting
discounts and commissions, will be $620,000.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933.
48
<PAGE> 48
Biopure and our directors, executive officers and some of our other stockholders
have agreed with the underwriters not to transfer, dispose of or hedge any of
our class A common stock, or securities convertible into or exchangeable for
shares of class A common stock, for a period of 90 days after the date of this
prospectus, except with the prior written consent of J.P. Morgan Securities Inc.
This agreement does not apply to any of our employee benefit plans existing on
the date of this prospectus.
Our class A common stock is listed on The Nasdaq National Market under the
symbol "BPUR".
The underwriters expect to deliver the shares of class A common stock to
investors on or about , 2000.
From time to time in the ordinary course of their respective businesses, certain
of the underwriters and their affiliates have in the past and may in the future
engage in commercial banking and/or investment banking transactions with Biopure
and our affiliates.
49
<PAGE> 49
LEGAL MATTERS
The validity of the class A common stock offered hereby will be passed upon for
us by LeBoeuf, Lamb, Greene & MacRae, L.L.P., a limited liability partnership
including professional corporations, New York, New York.
Legal matters in connection with the offering will be passed upon for the
underwriters by Cahill Gordon & Reindel, New York, New York.
Legal matters in connection with our patents and intellectual property interests
will be passed upon for us by Hamilton, Brook, Smith & Reynolds, P.C.,
Lexington, Massachusetts.
Legal matters in connection with FDA regulation will be passed upon for us by
Hogan & Hartson, L.L.P., Washington, D.C.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our Consolidated Financial
Statements at October 31, 1999 and 1998, and for each of the three years in the
period ended October 31, 1999, as set forth in their report, which contains an
explanatory paragraph describing conditions that raise substantial doubt about
our ability to continue as a going concern as described in Note 2 to the
Consolidated Financial Statements. We have included our financial statements in
the prospectus and elsewhere in the Registration Statement in reliance on Ernst
& Young LLP's report, given on their authority as experts in accounting and
auditing.
AVAILABLE INFORMATION
We are subject to the reporting requirements of the Securities Exchange Act of
1934. We have filed with the Securities and Exchange Commission, or the
Commission, a Registration Statement, which term shall include all amendments,
exhibits, schedules and supplements thereto, on Form S-1 under the Securities
Act with respect to the class A common stock offered hereby. This prospectus,
which constitutes a part of the Registration Statement, does not contain all the
information set forth in the Registration Statement, certain portions of which
have been omitted as permitted by the rules and regulations of the Commission.
For further information with respect to Biopure and the class A common stock
offered hereby, reference is made to the Registration Statement. In addition, we
file reports, proxy statements and other information with the commission. You
may read or copy any document we file at the Commission's principal office at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and the regional
offices of the Commission located at 7 World Trade Center, New York, New York
10048 and 500 West Madison Street, 14th Floor, Chicago, Illinois 60661. Copies
of such materials may be obtained from the Public Reference Section of the
Commission, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at its public reference facilities in New York, New York and Chicago, Illinois
at prescribed rates, or on the internet at http://www.sec.gov. Please call the
Commission at 1-800-SEC-0330 for more information. Statements contained in this
prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each statement being qualified in all respects by such reference.
50
<PAGE> 50
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2
Consolidated Balance Sheets at October 31, 1999 and October
31, 1998.................................................. F-3
Consolidated Statements of Operations for the Years Ended
October 31, 1999, 1998 and 1997........................... F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended October 31, 1999, 1998 and 1997............... F-5
Consolidated Statements of Cash Flows for the Years Ended
October 31, 1999, 1998 and 1997........................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 51
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Stockholders
Biopure Corporation
We have audited the accompanying consolidated balance sheets of Biopure
Corporation (the Company) as of October 31, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended October 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Biopure
Corporation at October 31, 1999 and 1998, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
October 31, 1999, in conformity with accounting principles generally accepted in
the United States.
As discussed in Note 2 to the consolidated financial statements, the Company's
recurring losses from operations raise substantial doubt about its ability to
continue as a going concern. Management's plans as to these matters are
described in Note 2. The 1999 consolidated financial statements do not include
any adjustment that might result from the outcome of this uncertainty.
ERNST & YOUNG LLP
Boston, Massachusetts
December 10, 1999
F-2
<PAGE> 52
BIOPURE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
----------------------
OCTOBER 31,
----------------------
1999 1998
--------- ---------
<S> <C> <C>
In thousands, except share and per share data
ASSETS:
Current assets:
Cash and cash equivalents................................. $ 30,778 $ 6,063
Accounts receivable, less allowance of $65 and $28 at
October 31, 1999 and 1998, respectively................. 321 346
Inventory, net............................................ 3,182 3,072
Current portion of restricted cash........................ 3,508 3,508
Other current assets...................................... 488 186
--------- ---------
Total current assets............................... 38,277 13,175
Property and equipment:
Equipment................................................. 24,699 23,021
Leasehold improvements.................................... 13,567 13,330
Furniture and fixtures.................................... 1,100 1,078
Construction in progress.................................. 4,979 5,144
--------- ---------
44,345 42,573
Accumulated depreciation and amortization................. (16,898) (12,967)
--------- ---------
Net property and equipment.................................. 27,447 29,606
Investment in affiliate..................................... 101 131
Other assets................................................ 405 1,936
--------- ---------
Total assets....................................... $ 66,230 $ 44,848
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable.......................................... $ 741 $ 1,523
Accrued expenses.......................................... 9,664 7,666
Current portion of long-term debt......................... -- 2,000
--------- ---------
Total current liabilities.......................... 10,405 11,189
Long-term debt.............................................. -- 4,000
Deferred compensation....................................... 1,788 1,910
Commitments and contingencies............................... -- --
Common stock to be repurchased (No shares of Class A common
stock at October 31, 1999 and 2,013,956 shares at 1998)... -- 6,300
Stockholders' equity:
Preferred stock, $0.01 par value, 30,000, 000 shares
authorized at October 31, 1999 and 5,900,000 at 1998
Series A, 346,663 shares designated, issued and
outstanding at October 31, 1998........................ -- 3
Series B, 2,358,490 shares designated; 2,127,251 shares
issued and outstanding at October 31, 1998............. -- 22
Series C, 2,830,188 shares designated, issued and
outstanding at October 31, 1998........................ -- 28
Common stock:
Class A, $0.01 par value, 100,000,000 shares authorized
at October 31, 1999 and 35,000,000 at 1998, 22,280,867
and 10,742,503 shares issued, 22,280,867 and 10,539,225
shares outstanding at October 31, 1999 and 1998,
respectively........................................... 223 107
Class B, $1.00 par value, 179 shares authorized, 117.7
shares issued and outstanding.......................... -- --
Capital in excess of par value............................ 282,054 197,495
Contributed capital....................................... 24,574 24,574
Notes receivable.......................................... (2,463) (2,291)
Treasury stock, at cost (No shares of Class A common stock
at October 31, 1999 and 203,278 shares at 1998)......... -- (1,583)
Accumulated deficit....................................... (250,351) (196,906)
--------- ---------
Total stockholders' equity......................... 54,037 21,449
--------- ---------
Total liabilities and stockholders' equity......... $ 66,230 $ 44,848
========= =========
</TABLE>
See accompanying notes.
F-3
<PAGE> 53
BIOPURE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
-----------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
In thousands, except share and per share data
Revenues:
Oxyglobin................................................. $ 2,749 $ 942 $ --
Other..................................................... 117 189 --
----------- ----------- -----------
Total revenues.............................................. 2,866 1,131 --
Cost of revenues............................................ 6,814 1,543 --
----------- ----------- -----------
Gross profit (loss)......................................... (3,948) (412) --
Operating expenses:
Research and development.................................. 24,166 22,950 23,494
Sales and marketing....................................... 2,922 2,444 694
General and administration................................ 5,266 4,660 2,920
----------- ----------- -----------
Total operating expenses.......................... 32,354 30,054 27,108
----------- ----------- -----------
Income (loss) from operations............................... (36,302) (30,466) (27,108)
Other income (expense):
Interest income........................................... 1,041 1,417 705
Interest expense.......................................... (469) (799) (1,015)
Other..................................................... 200 (199) --
----------- ----------- -----------
Total other income (expense)...................... 772 419 (310)
----------- ----------- -----------
Net income (loss)........................................... (35,530) (30,047) (27,418)
Stock dividends on preferred stock.......................... (17,915) -- --
----------- ----------- -----------
Net loss applicable to common stockholders.................. $ (53,445) $ (30,047) $ (27,418)
=========== =========== ===========
Historical:
Basic net income (loss) per common share.................. $ (3.61) $ (2.41) $ (2.23)
=========== =========== ===========
Weighted-average shares used in computing basic net income
(loss) per common share................................ 14,813,045 12,460,070 12,299,716
=========== =========== ===========
Pro forma (unaudited):
Pro forma basic net income (loss) per common share........ $ (2.62) $ (1.65)
=========== ===========
Weighted-average shares used in computing pro forma basic
net income (loss) per common share..................... 20,368,860 18,236,894
=========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 54
BIOPURE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
COMMON STOCK
---------------------------------------- CAPITAL IN
PREFERRED STOCK CLASS A CLASS B EXCESS
------------------- ---------------------- --------------- OF PAR CONTRIBUTED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT VALUE CAPITAL
---------- ------ ---------- ------ ------ ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
In thousands, except share
and per share data
Balance at October 31, 1996....... 346,663 $ 3 12,432,609 $ 124 114.5 $ -- $145,015 $ 24,245
Exercise of stock options....... 50,434 1 45
Sale of preferred stock......... 2,127,251 22 21,715
Sale of common stock............ 130,208 1 3.2 5,574
Common stock to be
repurchased................... (2,013,956) (20) (6,280)
Services contributed by
stockholder................... 329
Accrued interest................
Net loss........................
---------- ------ ---------- ------ ----- ------ -------- -----------
Balance at October 31, 1997....... 2,473,914 25 10,599,295 106 117.7 -- 166,069 24,574
Exercise of stock options....... 27,783 68
Sale of preferred stock......... 2,830,188 28 28,181
Sale of common stock............ 92,592 1 2,463
Common stock issued in exchange
for release of debt
obligation.................... 22,833 438
Equity compensation............. 276
Accrued interest................
Net loss........................
---------- ------ ---------- ------ ----- ------ -------- -----------
Balance at October 31, 1998....... 5,304,102 53 10,742,503 107 117.7 -- 197,495 24,574
Exercise of stock options....... 17,117 88
Sale of preferred stock......... 2,610,264 26 30,099
Sale of common stock............ 3,500,000 35 37,667
Conversion of preferred stock to
common stock.................. (7,914,366) (79) 8,224,525 82 17,912
Stock repurchase adjustment..... 300
Retirement of treasury stock.... (203,278) (1) (1,582)
Equity compensation............. 75
Accrued interest................
Net loss........................
---------- ------ ---------- ------ ----- ------ -------- -----------
Balance at October 31, 1999....... -- $ -- 22,280,867 $ 223 117.7 $ -- $282,054 $ 24,574
========== ====== ========== ====== ===== ====== ======== ===========
<CAPTION>
---------------------------------------------------
TOTAL
NOTES TREASURY ACCUMULATED STOCKHOLDERS'
RECEIVABLE STOCK DEFICIT EQUITY
---------- -------- ----------- -------------
<S> <C> <C> <C> <C>
In thousands, except share
and per share data
Balance at October 31, 1996....... $ (1,946) $(1,583) $(139,441) $ 26,417
Exercise of stock options....... 46
Sale of preferred stock......... 21,737
Sale of common stock............ 5,575
Common stock to be
repurchased................... (6,300)
Services contributed by
stockholder................... 329
Accrued interest................ (164) (164)
Net loss........................ (27,418) (27,418)
---------- ------- --------- -------------
Balance at October 31, 1997....... (2,110) (1,583) (166,859) 20,222
Exercise of stock options....... 68
Sale of preferred stock......... 28,209
Sale of common stock............ 2,464
Common stock issued in exchange
for release of debt
obligation.................... 438
Equity compensation............. 276
Accrued interest................ (181) (181)
Net loss........................ (30,047) (30,047)
---------- ------- --------- -------------
Balance at October 31, 1998....... (2,291) (1,583) (196,906) 21,449
Exercise of stock options....... 88
Sale of preferred stock......... 30,125
Sale of common stock............ 37,702
Conversion of preferred stock to
common stock.................. 17,915
Stock repurchase adjustment..... 300
Retirement of treasury stock.... 1,583 --
Equity compensation............. 75
Accrued interest................ (172) (172)
Net loss........................ (53,445) (53,445)
---------- ------- --------- -------------
Balance at October 31, 1999....... $ (2,463) $ -- $(250,351) $ 54,037
========== ======= ========= =============
</TABLE>
See accompanying notes.
F-5
<PAGE> 55
BIOPURE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
--------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
In thousands
OPERATING ACTIVITIES:
Net income (loss)........................................... $(35,530) $(30,047) $(27,418)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation.............................................. 3,931 3,262 3,090
Equity compensation....................................... 75 276 --
Deferred compensation..................................... (122) 231 192
Accrued interest on stockholders' notes receivable........ (172) (181) (164)
Equity in affiliate's operations.......................... 30 35 59
Services contributed by stockholder....................... -- -- 329
Changes in assets and liabilities:
Inventories............................................ (110) (3,072) --
Accounts receivable.................................... 25 (346) --
Other receivable (affiliate)........................... -- -- 654
Other current assets................................... 302 89 (65)
Accounts payable....................................... (782) 441 (769)
Accrued expenses....................................... 1,394 682 2,354
-------- -------- --------
Net cash used in operating activities................ (30,959) (28,630) (21,738)
INVESTING ACTIVITIES:
Purchase of property and equipment.......................... (1,772) (4,809) (1,350)
Other assets................................................ 1,531 (341) (78)
Restricted cash............................................. -- (2,425) (2,437)
-------- -------- --------
Net cash used in investing activities................ (241) (7,575) (3,865)
FINANCING ACTIVITIES:
Net proceeds from sale of common stock...................... 37,702 2,464 5,575
Net proceeds from sale of preferred stock................... 30,125 28,209 21,737
Payment of long-term debt................................... (6,000) (2,000) (1,000)
Repurchase of common stock.................................. (6,000) -- --
Proceeds from exercise of stock options..................... 88 68 46
-------- -------- --------
Net cash provided by financing activities............ 55,915 28,741 26,358
-------- -------- --------
Increase (decrease) in cash and cash equivalents............ 24,715 (7,464) 755
Cash and cash equivalents at beginning of period............ 6,063 13,527 12,772
-------- -------- --------
Cash and cash equivalents at end of period.................. $ 30,778 $ 6,063 $ 13,527
======== ======== ========
Interest paid............................................... $ 435 $ 693 $ 1,131
======== ======== ========
</TABLE>
See accompanying notes.
F-6
<PAGE> 56
BIOPURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND ORGANIZATION
Biopure Corporation (the Company) develops, manufactures and markets oxygen
therapeutics. Its products are Hemopure, for human use, and Oxyglobin, for
veterinary use. The Company is developing Hemopure as an alternative to red
blood cell transfusions as well as for use in the treatment of other critical
care conditions.
During 1998, the Company began selling Oxyglobin. Initially, sales were made on
a limited basis directly to emergency and specialty veterinary practices. In
October 1998, the Company began selling Oxyglobin nationwide through several
veterinary distributors, who purchase product for immediate and direct sale to
veterinary practices.
Costs of revenues include significant depreciation of production equipment and
other fixed and variable costs associated with the production of Oxyglobin. The
manufacturing process requires certain machinery to run on 24-hour cycles even
when production runs are not occurring. These costs are anticipated to be better
rationalized if demand and production increase.
Additionally, during 1999, the Company continued human clinical trials of its
Hemopure solution in the United States, Europe and South Africa. These clinical
trials are expensive and a significant cause of the Company's operating losses.
Although there cannot be any assurance that its Hemopure solution will be
approved by a country's regulatory authority, the trials to date have produced
satisfactory results, which have allowed the Company to continue clinical
progress.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements reflect the accounts of the Company and
its wholly-owned and majority-owned subsidiaries. All intercompany accounts and
transactions have been eliminated.
On June 24, 1999, the Board of Directors approved a two for three reverse stock
split of common shares which was effected in the form of a reverse stock
dividend on July 21, 1999. All common share and per common share amounts
included in the accompanying consolidated financial statements and notes thereto
have been retroactively restated to give effect to this reverse stock split.
The financial statements of the Company have been presented on the basis of a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. However, the Company may not be
able to continue its operations because it is experiencing operating losses,
which it expects to continue, and has limited sources of funding for continuing
operations. In order to continue as a going concern, the Company's plans at this
time are focused on obtaining new sources of equity financing, if possible, and
securing strategic alliance arrangements that will provide cash for operations.
However, there can be no assurance that any such additional financing will be
available to the Company on terms that it deems acceptable, if at all. The
financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern.
Risks and Uncertainties
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Some of the Company's key materials used in production are obtained from sole
source suppliers. Although such materials are available from other suppliers,
the Company must test materials not previously used in order to assure the
materials meet the Company's requirements.
Cash and Cash Equivalents
The Company considers all liquid securities with original maturities of three
months or less to be cash equivalents.
Inventories
Inventories are stated at the lower of cost (determined using the first-in,
first-out method) or market. Inventories are reviewed periodically during the
year for slow-moving, obsolete or off-grade status based on sales activity, both
projected and historical. Appropriate reserves are established for any inventory
that falls into these categories.
F-7
<PAGE> 57
BIOPURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Property and Equipment
Property and equipment are recorded at cost and depreciated over the estimated
useful lives of the assets using the straight-line method. The estimated useful
lives of these assets are as follows:
<TABLE>
<S> <C>
----------------
Leasehold improvements...................................... Life of the lease
Major equipment............................................. 12 years
Equipment................................................... 5-7 years
Furniture and fixtures...................................... 5 years
Computer equipment.......................................... 3 years
</TABLE>
Revenue Recognition
The Company recognizes revenue from product sales at the time of shipment. Other
revenues consist primarily of royalties from the sale of an enzyme material
previously licensed to a pharmaceutical company and a Small Business Innovative
Research grant offset by associated costs. The Company recognizes revenue from
royalties when earned upon sale of the licensed products.
Stock-Based Compensation
The Company grants stock options for a fixed number of shares, generally with an
exercise price equal to the market value of the shares at the date of grant, as
determined by the board of directors. The Company has elected to follow
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB 25), in accounting for its stock-based compensation plans, rather
than the alternative fair value accounting method provided for under Financial
Accounting Standards Board Statement No. 123, Accounting for Stock-Based
Compensation (Statement 123), as this alternative requires the use of option
valuation models that were not developed for use in valuing employee stock
options. Under APB 25, when the exercise price of options granted to employees
under these plans equals the market price of the underlying stock on the date of
grant, no compensation expense is required.
Net Income (Loss) Per Share
Historical basic net income (loss) per share is computed based on the
weighted-average number of common shares outstanding during the period. Diluted
net income (loss) per share is computed based upon the weighted-average number
of common shares outstanding during the year, adjusted for the dilutive effect
of shares issuable upon the conversion of preferred stock outstanding and the
exercise of common stock options and warrants determined based upon average
market price of common stock for the period. Diluted net income (loss) per share
are not presented in the accompanying consolidated financial statements because
the Company had losses for all periods presented.
Unaudited Pro Forma Net Income (Loss) Per Common Share
The unaudited pro forma basic net income (loss) per common share is computed
using the weighted-average number of outstanding common shares assuming
conversion of all convertible preferred shares into common shares (at date of
original issuance), which occurred upon completion of the initial public
offering.
F-8
<PAGE> 58
BIOPURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Calculation of Net Loss Per Share
<TABLE>
<CAPTION>
--------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------
In thousands, except share 1999 1998 1997
and per share data ------------ ------------ ------------
<S> <C> <C> <C>
Historical:
Net income (loss)......................................... $ (35,530) $ (30,047) $ (27,418)
Stock dividends on preferred stock........................ (17,915) -- --
------------ ------------ ------------
Net income (loss) applicable to common stockholders.... (53,445) (30,047) (27,418)
============ ============ ============
Weighted-average number of common shares outstanding...... 14,813,045 12,460,070 12,299,716
============ ============ ============
Basic net income (loss) per common share.................... $ (3.61) $ (2.41) $ (2.23)
============ ============ ============
Pro forma (unaudited):
Weighted-average number of common shares:
Historical outstanding................................. 14,813,045 12,460,070
Issued upon assumed conversion of preferred stock...... 5,555,815 5,776,824
------------ ------------
Total weighted-average number of common shares
used in computing basic pro forma net income
(loss) per common share......................... 20,368,860 18,236,894
============ ============
Basic pro forma net income (loss)per common share......... $ (2.62) $ (1.65)
============ ============
</TABLE>
Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board (FASB) issued Statement
No. 131, Disclosures About Segments of an Enterprise and Related Information
(Statement 131), which establishes standards for public companies to report
information about operating segments in financial statements. Statement 131
supersedes Statement No. 14, Financial Reporting for Segments of a Business
Enterprise; however, Statement 131 retains the requirements to report
information about major customers. The Company adopted this statement effective
November 1, 1998. The Company believes it currently operates in one segment, its
Oxyglobin veterinary product, and consequently, adoption of SFAS No. 131 did not
result in any significant change in the presentation of the Company's
disclosures. As the Company develops new products and expands its operations,
the Company will re-evaluate these disclosures.
In March 1998, the Accounting Standards Executive Committee (AcSEC) issued
Statement of Position (SOP) No. 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. The SOP provides guidance for
the capitalization of certain costs incurred to develop or obtain internal-use
software. SOP No. 98-1 is effective for the Company in fiscal 2000. The adoption
of this standard is not expected to have a material effect on the Company's
financial position or operating results.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which will be effective for the Company in
the first quarter of Fiscal 2001. The Company is currently evaluating the effect
that implementation of the new standard will have on its financial statements
but believes the effect will be immaterial.
3. TRANSACTIONS WITH RELATED PARTIES
At October 31, 1999, approximately 22% of the outstanding shares of Class A
Common Stock of Biopure were owned by two limited partnerships, Biopure
Associates Limited Partnership and Biopure Associates Limited Partnership II.
The primary purpose of these partnerships is to own shares of common stock of
the Company. The general partners of these partnerships are officers of the
Company, and the limited partners include certain employees, officers, directors
and consultants to the Company.
During 1999, 1998 and 1997, the Company made payments of approximately $270,000,
$344,000 and $301,000, respectively, to directors and consultants who have
ownership interests in the Company.
In August 1990, the Company made loans to certain directors and officers to
allow them to purchase Class A Common Stock. The principal and interest, for all
loans except the loan made to Mr. Rausch, is due on July 31, 2000. The principal
and
F-9
<PAGE> 59
BIOPURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
interest on Mr. Rausch's loan is due on July 31, 2003. The notes receivable, for
all loans except the loan made to Mr. Rausch, bear interest at the prime rate
(8.25% at October 31, 1999) and are included in stockholders' equity in the
accompanying consolidated financial statements. The loan for Mr. Rausch bears
interest at a fixed 4.71% rate.
4. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
----------------
OCTOBER 31,
----------------
1999 1998
In thousands ------ ------
<S> <C> <C>
Raw materials............................................... $ 690 $ 935
Work-in-process............................................. 134 542
Finished goods.............................................. 2,358 1,595
------ ------
$3,182 $3,072
====== ======
</TABLE>
5. INVESTMENTS
The Company accounts for its investments in affiliated companies under the
equity method of accounting. In July 1994, the Company acquired a 50% general
partnership interest in Eleven Hurley Street Associates (EHSA), a real estate
partnership which owns the Company's principal office and research and
development facilities. The Company's lease with EHSA requires annual rental
payments of $239,000 through 2002 and $262,000 from 2003 through 2007. The
partnership's income was not significant for any of the periods presented. At
October 31, 1999 and 1998, the Company's proportionate share of EHSA's net
equity was approximately $101,000 and $131,000, respectively.
6. ACCRUED EXPENSES
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
----------------
OCTOBER 31,
----------------
1999 1998
In thousands ------ ------
<S> <C> <C>
Settlement.................................................. $3,508 $3,508
Phase III clinical trial.................................... 2,925 1,039
Initial public offering..................................... 619 --
Other....................................................... 2,612 3,119
------ ------
$9,664 $7,666
====== ======
</TABLE>
7. LONG-TERM DEBT
Long-term debt consists of a loan from P&U in the original principal amount of
$9,000,000. Principal payments are made in equal quarterly installments of
$500,000 through October 1, 2001. Interest is paid quarterly on the unpaid
principal balance at the prime rate of interest. The prime rate at October 31,
1998 was 8.0%. The note is secured by a substantial portion of the Company's
assets and is required to be repaid on completion of a public offering of the
Company's equity securities or certain other financing events. As of October 31,
1999 the loan had been repaid in full from the proceeds of the initial public
offering.
8. DEFERRED COMPENSATION
The Company has a deferred compensation agreement with an officer/stockholder
requiring a base payment of $700,000 plus accrued interest of $716,000 at
October 31, 1999. In June 1999 the payment date was extended to July 31, 2003,
subject to certain conditions.
F-10
<PAGE> 60
BIOPURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has an Incentive Compensation Plan for all employees which provides
for discretionary deferred bonus awards annually. Commencing three years after
grant, awards are paid ratably over a five-year period. No grants were made in
1999. Plan expenses were $160,000 and $130,000 in 1998 and 1997, respectively.
9. STOCKHOLDERS' EQUITY
On August 4, 1999 the Company completed the initial public offering (IPO) of
3,500,000 shares of Class A Common Stock. The Company received proceeds of
$39,060,000 before expenses of $1,358,000 and recorded an increase in
stockholders' equity of $37,702,000.
Convertible Preferred Stock
The Series A Convertible Preferred Stock was convertible into Class A Common
Stock on a three and one-third for one basis, adjusted for certain events. The
Series A shares automatically converted at the time of the IPO.
The Series B Convertible Preferred Stock was convertible into Class A Common
Stock on a two-thirds for one basis, adjusted for certain events. The Series B
shares automatically converted at the time of the IPO.
The Series C Convertible Preferred Stock was convertible into Class A Common
Stock on a two-thirds for one basis, adjusted for certain events. The Series C
shares automatically converted at the time of the IPO.
On December 23, 1998, the Company sold 1,489,498 units at $12.00 per unit, each
consisting of one share of Series D Preferred Stock plus a warrant to purchase
1/15th of a share of Class A Common Stock. In connection with the issuance of
the Series D shares, warrants were issued to the placement agents to purchase
30,667 shares of Class A Common Stock and warrants were issued to the holders of
the Series B and Series C Convertible Preferred Stock to purchase 1/15th of a
share of Class A Common Stock for each share of Series B and Series C
Convertible Preferred Stock held by them. Warrants issued to the placement
agents and the preferred stockholders have an exercise price of $18.00 per
share. Warrants issued to the placement agents and the preferred stockholders
expire three years and four years, respectively, from the date of the IPO. Net
cash proceeds, after deducting approximately $930,000 in commissions and
expenses associated with the offering, were $16,946,000. Subsequent to May 1,
1999, an additional 397,250 units of Series D Convertible Preferred Stock were
sold with aggregate net proceeds of $4,700,000.
Each share of Series D Convertible Preferred Stock was convertible into
two-thirds of a share of Class A Common Stock or such greater ratio so that
conversion resulted in a 35% annualized rate of return on the Series D original
offering price of $12 per share.
Upon closing of the IPO (see above), all shares of preferred stock converted
into shares of Class A Common Stock and reflected the two-for-three stock split.
In accordance with the provisions of EITF 98-5, for those units sold after May
20, 1999, the Company treated any shares of Class A Common Stock issued upon
conversion in excess of two-thirds of one share of Class A Common Stock for each
share of Series D Convertible Preferred Stock as a dividend for accounting
purposes. The Company recorded a dividend of $155,000 in the third quarter of
1999 for the 12,936 additional shares of Class A Common Stock issued. The
holders of the Series B Convertible Preferred Stock received an additional
280,000 shares in the aggregate upon conversion and the holders of the Series C
Convertible Preferred Stock received an additional 1,200,000 shares in the
aggregate upon conversion. The fair market value of such additional shares was,
for accounting purposes, treated as a dividend on such convertible preferred
stock in the quarter in which the offering and conversion occurred. The Company
recorded a dividend of $17,760,000 in the third quarter of 1999.
Common Stock
The Class B Common Stock is authorized for issuance only to P&U. The holder of
Class B Common Stock is not entitled to vote or receive dividends. The Class B
Common Stock is convertible into shares of Class A Common Stock according to a
formula that is based upon a future fair market value of the Class A Common
Stock and is dependent upon the Company achieving U.S. FDA approval for its
Hemopure solution.
Consistent with the P&U agreement, the number of shares of Class A Common Stock
to be issued in exchange for the Class B Common Stock will be determined based
upon an independent valuation of the Company, after FDA approval of the
Company's human oxygen therapeutic product, which valuation cannot exceed $3
billion. This valuation is then divided by 13,635,525
F-11
<PAGE> 61
BIOPURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
shares to arrive at a fair value per share of Class A Common Stock. P&U's total
investment in the Company, $142.3 million, divided by such per share fair value
of Class A Common Stock, results in the number of shares of Class A Common Stock
P&U will receive, limited to a maximum of 1,272,119 shares.
Dividends
At this time, the Company does not intend to pay dividends.
Stock Accumulation Plan
In August 1990, the Company issued 1,606,000 shares of Class A Common Stock to
certain employees, officers, consultants and directors for $1.35 per share,
which was $4.05 per share less than the then fair market value, as determined by
the Company's Board of Directors, of $5.40 per share. This $4.05 per share
market value differential is associated with a permanent nonlapse restriction on
the value of the stock. Upon the repurchase by the Company or other investors,
the future value will be equal to the then-current fair market value less the
permanent discount of $4.05 per share, adjusted for an annual interest factor.
Contributed Capital
In accordance with the P&U strategic alliance discussed in Note 9 below, the
Company recorded as contributed capital $329,000 of research and development
costs incurred by P&U on behalf of the Company in 1997. These costs are included
in research and development expenses in the accompanying consolidated statements
of operations and were either incurred by Biopure and reimbursed by P&U, or
incurred directly by P&U. All such costs incurred were clinical development
costs specifically identified and contractually agreed to by both parties. Upon
conversion of the Class B Common Stock, the cumulative amount of contributed
capital will be treated as consideration for the Class A Common Stock issued in
the conversion.
Stock Options and Warrants
The Company has two active stock option plans under which key employees,
directors and consultants may be granted options to purchase Class A Common
Stock at a price determined by the Board of Directors at the date of grant.
Under these plans and a previous plan, substantially all options become
exercisable on a pro rata basis over a four-year period and expire ten years
from date of grant.
Presented below is a summary of transactions under the stock option plans during
1999, 1998 and 1997:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------------
1999 1998 1997
-------------------------- ------------------------ ------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
--------- -------------- ------- -------------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at beginning of
year................................. 546,634 $18.54 133,217 $14.94 243,650 $12.02
Granted................................ 1,558,687 12.00 456,133 18.68 6,667 22.50
Exercised.............................. (17,117) 5.19 (27,783) 2.42 (50,433) 1.02
Expired................................ -- -- -- -- (18,667) 4.43
Forfeited.............................. (143,043) 12.48 (14,933) 20.58 (48,000) 19.89
--------- ------- -------
Options outstanding at end of year..... 1,945,161 $13.84 546,634 $18.54 133,217 $14.94
========= ======= =======
Options exercisable.................... 192,680 89,350 83,383
========= ======= =======
</TABLE>
During 1998, the Company granted 20,000 options with an exercise price of $5.40
to certain consultants to replace options that had expired in March 1996. The
exercise price of the new options is the same as the exercise price of the
expired options, and the new options are fully vested. The Company used an
estimated fair market value of its stock as determined by its Board of Directors
in order to determine the related expense to be recorded as a result of issuing
options to nonemployees. The Company recorded expense and increased capital in
excess of par value by $276,000.
F-12
<PAGE> 62
BIOPURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about stock options outstanding at
October 31, 1999:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------- --------------------------
WEIGHTED-AVERAGE WEIGHTED- WEIGHTED-
REMAINING CONTRACTUAL AVERAGE EXERCISE AVERAGE EXERCISE
EXERCISE PRICE SHARES LIFE (YRS.) PRICE SHARES PRICE
- -------------- --------- --------------------- ---------------- ------- ----------------
<S> <C> <C> <C> <C> <C>
$ 4.50-$ 5.40 21,667 3.0 $ 5.33 21,667 $ 5.33
$ 7.50-$13.50 1,436,240 9.8 12.01 10,200 12.72
$18.00-$22.50 487,254 7.8 19.62 160,813 20.08
--------- -------
1,945,161 9.0 $13.84 192,680 $18.03
========= =======
</TABLE>
During 1998, the Company's 1988 stock option plan expired. In March 1998, the
Board of Directors approved the adoption of a 1998 stock option plan to provide
for the granting of options for up to 98,293 shares of Class A Common Stock, the
number of shares remaining in the expired 1988 plan. Options outstanding under
the Company's 1988 plan forfeited in future periods will be available for grant
under the new plan. At October 31, 1999, there were 76,690 shares available for
future grants under stock option plans.
In June 1999, the Company established the 1999 Omnibus Securities and Incentive
Plan (the 1999 Plan), which provides for the granting of incentive stock
options, non-qualified stock options, restricted stock awards, deferred stock
awards, unrestricted stock awards, performance share awards, distribution
equivalent rights, or any combination of the foregoing to key management,
employees and directors. The maximum number of shares of Class A Common Stock
reserved for issuance under the 1999 Plan is 1,866,666. Upon the Company's
initial public offering, the Board of Directors approved the granting of options
under the 1999 Plan to officers, directors and employees for an aggregate of
1,492,020 shares, with an exercise price of $12.00.
One of the Company's vendors holds an option to acquire 26,667 shares of Class A
Common Stock. The exercise price of $37.50 per share is payable by the
contribution of certain property, equipment and facilities rights. The option
expires in September 2000. The option agreement is being renegotiated. The
Company expects to increase the number of optioned shares and extend the terms
of the option.
In connection with the sale of Series C Convertible Preferred Stock in November
1997, the Company issued to the placement agent warrants to purchase 66,667
shares of Common Stock at a price per share equal to $12.00, adjusted for
certain events. The warrants expire three years from the date of the initial
public offering.
Statement 123 Disclosures
The Company has adopted the disclosure provisions only of Statement 123. The
fair value of options and warrants granted was estimated at the date of grant
using the Black-Scholes option pricing model for 1999 and the minimum value
method for 1998 and 1997 with the following assumptions: risk-free interest
rates ranging from 5.49% to 6.32%; dividend yield of 0% and an expected life of
either two years or seven years. For 1999 a volatility factor of the expected
market price of the Company's Common Stock of .80 was used. If the compensation
cost for options and warrants granted had been determined based on the fair
value of the options and warrants at the date of grant, the Statement 123 pro
forma net loss applicable to common stockholders for 1999, 1998 and 1997 would
have been $55,854,000, $30,712,000 and $27,538,000, respectively. The Statement
123 pro forma net loss per share for 1999, 1998 and 1997 would have been
$(3.77), $(2.46) and $(2.24), respectively. Compensation expense under Statement
123 for 1999, 1998 and 1997 is not representative of future expense, as it
includes three, two and one years of expense, respectively. In future years, the
effect of determining compensation cost using the fair value method will include
additional vesting and associated expense.
The weighted-average fair value per option and warrant of options and warrants
granted during 1999, 1998 and 1997 was $6.50, $6.11 and $8.04, respectively.
Reserved Shares
At October 31, 1999, there were 4,299,928 shares of Class A Common Stock
reserved for issuance under the stock option plans, stock option agreements and
warrants and upon conversion of Class B Common Stock.
F-13
<PAGE> 63
BIOPURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Rights Agreement
Effective September 24, 1999 each holder of Class A Common Stock received a
preferred stock purchase right for each share owned. The rights entitle the
holders to acquire preferred stock following an acquisition of more than 20% by
any person or group, if the board of directors does not redeem the rights. If
the rights are not redeemed, their exercise would cause substantial dilution to
the acquiring person or group.
10. CONTRACTS
The Company had a strategic alliance with P&U beginning in 1990. Under the
alliance agreement, P&U purchased $117,700,000 of Class B Common Stock in
increments based generally on the achievement of mutually agreed-upon progress
points or goals. Additionally, in exchange for the future issuance of Class A
Common Stock, as described in Note 8 above, P&U funded clinical development
undertaken by the Company and P&U for the Company's oxygen therapeutic products.
The Company's agreement with P&U was terminated in accordance with its terms in
July 1996. Final payments from P&U were realized in 1997.
11. EMPLOYEE BENEFIT PLAN
The Company has a defined contribution plan, the Biopure Corporation Capital
Accumulation Plan, qualified under the provisions of Internal Revenue Code
section 401(k). Employees are eligible for enrollment upon becoming employed and
for discretionary matching after one year of service. The Company's
discretionary contribution vests after a period of four years from the date of
employment. In 1999, 1998 and 1997, the Company contributed $211,000, $163,000
and $158,000, respectively, to the plan.
12. INCOME TAXES
At October 31, 1999, the Company had available for the reduction of future
years' federal taxable income and income taxes, net operating loss carryforwards
of approximately $161,000,000, expiring from the year ended October 31, 2004
through 2019, along with research and development and investment tax credits of
approximately $5,900,000, expiring from the year ended October 31, 2000 through
2014. Since the Company has incurred only losses since inception and due to the
degree of uncertainty with respect to future profitability, the Company believes
at this time that it is more likely than not that sufficient taxable income will
not be earned to allow for realization of the tax loss and credit carryforwards
and other deferred tax assets. Accordingly, the tax benefit of these items has
been fully reserved. Additionally, the future use of these carryforwards may be
subject to limitations pursuant to sections 382 and 383 of the Internal Revenue
Code.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities as of October 31, 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
----------------------
1999 1998
--------- ---------
<S> <C> <C>
In thousands
Deferred tax assets:
Net operating loss carryforward........................... $ 64,259 $ 56,138
Capitalized research and development...................... 23,508 17,287
Accruals and reserves..................................... 2,685 2,364
Tax credit carryforwards.................................. 5,897 3,388
--------- ---------
Total deferred tax assets................................... 96,349 79,177
Deferred tax liabilities:
Depreciation.............................................. 2,797 2,159
--------- ---------
Total deferred tax liabilities.............................. 2,797 2,159
--------- ---------
Net deferred tax assets..................................... 93,552 77,018
Valuation allowance for deferred tax assets................. (93,552) (77,018)
--------- ---------
Net deferred tax assets..................................... $ -- $ --
========= =========
</TABLE>
F-14
<PAGE> 64
BIOPURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In 1999, the valuation allowance increased by $16,534,000 due primarily to the
increase in net operating losses, capitalized research and development costs,
and research and development tax credits.
13. COMMITMENTS
In 1997, the Company entered into an agreement with B. Braun Melsungen A.G.
(Braun) to repurchase 2,013,956 shares of the Company's common stock for
$6,300,000. The agreement required the Company to place in escrow installment
payments of such purchase price equal to an annual amount of $1,000,000 plus
five percent of the Company's revenues from human product sales and license
fees, if any, in a certain European region. The Company received Braun's
agreement to delay the deposit of $1,000,000 due in August 1998 to February
1999. The aggregate repurchase amount of $6,300,000 (subsequently negotiated to
$6,000,000 as a result of accelerated repurchase) had to be funded by the year
2002. At any time, the stockholder could withdraw funds in escrow to complete
the repurchase in installments by simultaneous delivery out of escrow to the
Company of a pro rata portion of the stock. At October 31, 1998, the Company had
$1,046,000 in escrow in connection with this agreement and included the
restricted cash in other assets. The accompanying consolidated balance sheet has
reclassified the Class A Common Stock to be repurchased from Braun from
stockholders' equity to temporary equity and included the unpaid purchase price
and related shares in Common Stock to be Repurchased. In December 1998, Braun
withdrew all funds from escrow to complete the repurchase of 319,683 shares of
Class A Common Stock. On August 5, 1999 the Company paid $4,000,000 in addition
to the existing balance of $1,000,000 in escrow and Braun withdrew all funds
from escrow to complete the repurchase of 1,694,273 shares of Class A Common
Stock.
The agreement also requires the Company to pay Braun a royalty of two percent of
the Company's revenues from human product sales and license fees in a certain
European region. Payments must be made on a quarterly basis until such amounts
aggregate $7,500,000. In exchange for this royalty commitment, the rights to
manufacture and market specified products in Braun's territory were reacquired
by the Company.
Future minimum lease payments under operating leases for the Company's various
office, laboratory, warehouse and processing facilities, with terms of more than
one year at October 31, 1999 are as follows:
<TABLE>
<CAPTION>
----------
<S> <C>
2000........................................................ $ 991,000
2001........................................................ 681,000
2002........................................................ 259,000
2003........................................................ 279,000
2004........................................................ 283,000
Thereafter.................................................. 1,040,000
----------
$3,533,000
==========
</TABLE>
Rent expense was approximately $1,035,000, $803,000 and $643,000 in 1999, 1998
and 1997, respectively.
14. LITIGATION
The Company is a party to litigation initially filed in 1990 arising from
certain joint venture agreements for development and distribution of product in
Central and South America. Summary judgments were entered against the two
plaintiffs in 1994. The plaintiffs each appealed the judgments; one of the
appeals was voluntarily dismissed. The other appeal was denied in part and
remanded to the trial court for further findings based on lack of jurisdiction.
It is anticipated that the trial court will make the requisite findings in the
calendar year 2000. In connection with the summary judgments, the Company agreed
to a settlement with a third-party intervenor with claims against one of the
plaintiffs. Final payment of the settlement is subject to the outcome of the
pending appeal; however, the Company has provided for such settlement in the
accompanying financial statements. At October 31, 1999, the Company had
$3,508,000 in escrow in connection with this settlement and included this amount
in current portion of restricted cash. The settlement amount has been recorded
as a current obligation.
F-15
<PAGE> 65
[Biopure Logo]
<PAGE> 66
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth various expenses payable in connection with the
offering of the shares being registered hereby, other than underwriting
discounts and commissions. All the amounts shown are estimates, except the
Securities and Exchange Commission registration fee and the NASD filing fee. We
are paying all of the expenses incurred with the offering.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 18,501
NASD Filing Fee............................................. 10,832
Nasdaq National Market Listing Fee.......................... 17,500
Blue Sky fees and expenses.................................. 10,000
Legal fees and expenses..................................... 200,000
Accounting fees and expenses................................ 75,000
Transfer Agent fees and expenses............................ 3,500
Printing, engraving and postage expenses.................... 185,000
Miscellaneous............................................... 99,667
Total............................................. $620,000
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our Restated Certificate of Incorporation provides that each of our directors
and officers shall be indemnified and held harmless by Biopure, to the fullest
extent authorized by the Delaware General Corporation Law, against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid in settlement) reasonably incurred by reason
of the fact that he or she is a director or officer.
The Delaware General Corporation Law authorizes a corporation to indemnify its
directors and officers provided that the corporation shall not eliminate or
limit the liability of a director as follows:
- for any action brought by or in the right of a corporation where the
director or officer is adjudged to be liable to the corporation, except
where a court determines the director or officer is entitled to
indemnity,
- for acts or omissions not in good faith or which involve conduct that the
director or officer believes is not in the best interests of the
corporation,
- for knowing violations of the law
- for any transaction from which the directors derived an improper personal
benefit, and
- for payment of dividends or approval of stock repurchases or redemptions
leading to liability under Section 174 of the Delaware General
Corporation Law.
The Delaware General Corporation Law requires a corporation to indemnify a
director or officer to the extent that the director or officer has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding for which indemnification is lawful.
Our Restated Certificate of Incorporation also provides directors and officers
with the right to be paid by Biopure for expenses (including attorneys' fees)
incurred in defending any proceeding in advance of the proceeding's final
disposition. If a claim is not promptly paid in full by Biopure, as further
described in the Restated Certificate of Incorporation, the director or officer
who is entitled to indemnification may bring suit against Biopure to recover the
unpaid amount of the claim. These rights of indemnification and advancement of
expenses conferred in our Restated Certificate of Incorporation are not
exclusive of any other right which may be acquired under any statute, by-law,
agreement or otherwise.
II-1
<PAGE> 67
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Within the past three years, we have issued securities without registration
under the Securities Act as follows:
(a) Class A Common Stock
In June, July and August 1997, we issued 195,312 shares of class A common
stock to non-U.S. persons for an aggregate purchase price of $2,500,000. In
May and October 1998, we issued 138,888 shares of class A common stock to
non-U.S. persons for $2,500,000.
(b) Class B Common Stock
On January 22, 1997, we issued 3.2 shares of class B common stock pursuant
to an agreement with Pharmacia & Upjohn, Inc. for an aggregate purchase
price of $3,200,000.
(c) Series B Convertible Preferred Stock
Between June and October 1997, we issued 2,127,251 shares of series B
convertible preferred stock to "accredited investors" (as defined in
Regulation D of the Securities Act) for an aggregate purchase price of
$22,548,861.
(d) Series C Convertible Preferred Stock
On November 20, 1997, we issued 2,830,188 shares of series C convertible
preferred stock to "accredited investors" (as defined in Regulation D of
the Securities Act) for an aggregate purchase price of $30,000,000. In
connection with the issuance of the series C convertible preferred stock,
we issued compensatory warrants to purchase 100,000 class A common stock to
Shoreline Pacific Institutional Finance, which acted as placement agent in
connection with the offering.
(e) Series D Convertible Preferred Stock
Between December 23, 1998 and May 27, 1999, we issued a total of 2,610,264
shares of series D convertible preferred stock to "accredited investors"
(as defined in Regulation D of the Securities Act) for an aggregate
purchase price of $31,323,168. Each purchaser of series D convertible
preferred stock received warrants to purchase one share of class A common
stock for every ten shares of series D convertible preferred stock
purchased. In addition, all existing holders of series B and C convertible
preferred stock received warrants to purchase one share of class A common
stock for every ten shares of series B and C convertible preferred stock
held. We also issued compensatory warrants to purchase 50,220 shares of
class A common stock to Shoreline Pacific Institutional Finance and KBC
Securities, each of whom acted as a placement agent in connection with the
offering.
(f) Exercises of Stock Options
Since January 1, 1997, options to purchase 96,999 shares of class A common
stock were exercised at an aggregate purchase price of $208,940.
The securities issued in the transactions described in paragraphs (a)-(f)
above were issued in reliance on the exemption from registration under
Section 4(2) and/or Regulation D of the Securities Act as transactions not
involving a public offering. The recipients in each such case represented
their intentions to acquire the securities for investment purposes only and
not with a view for distribution thereof, and appropriate restrictive
legends were affixed to the securities issued in each transaction. All
recipients were furnished or had adequate access, through employment or
other relationships, to information about Biopure.
II-2
<PAGE> 68
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
+1.1 Form of Underwriting Agreement
+3(i).1 Restated Certificate of Incorporation of Biopure
*3(ii).1 By-laws of Biopure
4.1 See Exhibits 3(i).1 and 3(ii).1 for provisions of the
Restated Certificate of Incorporation of Biopure and By-laws
of Biopure, as amended, defining rights of security holders
of Biopure
+5.1 Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P., regarding
the validity of the class A common stock of Biopure being
registered
*10.1 Purchase Agreement between Biopure and INPACO Corporation,
dated August 28, 1997
*10.2 Agreement with Moyer Packing Company dated October 21, 1994
*10.3 Agency Agreement between Biopure and The Butler Company
dated March 29, 1999
*10.4 Promissory Note dated July 31, 1995, from Carl Rausch in
favor of Biopure in the amount of $1,009,772.01
*10.5 Promissory Note dated July 31, 1995, from Carl Rausch in
favor of Biopure in the amount of $216,033.05
*10.6 Promissory Note dated July 31, 1995, from Edward Jacobs, Jr.
in favor of Biopure in the amount of $262,120.10
*10.7 Promissory Note dated July 31, 1995, from Bing Wong in favor
of Biopure in the amount of $70,714.82
*10.8 Promissory Note dated July 31, 1995, from Maria Gawryl in
favor of Biopure in the amount of $12,601.93
*10.9 Promissory Note dated July 31, 1995, from James Weston in
favor of Biopure in the amount of $10,333.58
*10.10 Promissory Note dated July 31, 1995, from Geoffrey Filbey in
favor of Biopure in the amount of $47,707.30
*10.11 Lease Agreement dated October 12, 1990, between Biopure and
Tarvis Realty Trust
*10.12 Lease Agreement dated May 23, 1997, between Biopure and
Karpowicz Family Trust
*10.13 Lease Agreement dated March 31, 1995, between Biopure and
New England Innovations, Corp.
*10.14 Lease Agreement dated August 29, 1994, between Biopure and
Eleven Hurley Street Associates
*10.15 Lease Agreement dated May 10, 1994, between Biopure and
Tarvis Realty Trust
*10.16 Lease Agreement dated August 23, 1994, between Biopure and
Tarvis Realty Trust
*10.17 Lease Agreement dated October 21, 1994, between Biopure and
Moyer Packing Company
*10.18 Deferred Compensation Agreement with Carl Rausch dated
August 8, 1990, as amended December 12, 1995
*10.19 1993 Incentive Compensation Plan
*10.20 1998 Stock Option Plan
*10.21 1999 Omnibus Securities and Incentive Plan
*10.21 Employment Agreement between Biopure and Daniel R. Davis
dated December 3, 1998 and as amended and restated as of
June 24, 1999
*10.22 Employment Agreement between Biopure and Paul A. Looney
dated as of June 9, 1999
*10.23 Employment Agreement Concerning Protection of Company
Property and the Arbitration of Legal Disputes
*10.24 1990 Incentive Compensation and Company Stock Purchase
Agreement
***10.25 Rights Agreement between Biopure and American Stock Transfer
& Trust Company dated September 21, 1999
+10.26 Amended and Restated 1999 Omnibus Securities and Incentive
Plan dated as of February 14, 2000
+10.27 Consulting Agreement between Biopure and William D. Hoffman,
M.D. dated February 17, 2000
-23.1 Consent of Ernst & Young LLP
-24.1 Powers of Attorney (included in signature page)
**27.1 Financial Data Schedule
</TABLE>
- ---------------
+ Filed herewith.
- Previously filed.
* Previously filed as an exhibit to the Company's Registration Statement on
Form S-1 (File No. 333-78829) and incorporated herein by reference thereto.
** Previously filed as an exhibit to the Company's Annual Report on Form 10-K
filed on January 28, 2000 and incorporated herein by reference thereto.
*** Previously filed as an exhibit to the Company's Form 8-A Registration dated
November 4, 1999 and incorporated herein by reference thereto.
II-3
<PAGE> 69
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(b) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 70
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on February 22, 2000.
BIOPURE CORPORATION
By: /s/ FRANCIS H. MURPHY
---------------------------------------
FRANCIS H. MURPHY
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman, Chief Executive Officer and February 22, 2000
- --------------------------------------------------- President
Carl W. Rausch
* Vice Chairman February 22, 2000
- ---------------------------------------------------
David N. Judelson
* Director February 22, 2000
- ---------------------------------------------------
Daniel P. Harrington
* Director February 22, 2000
- ---------------------------------------------------
Stephen A. Kaplan
* Director February 22, 2000
- ---------------------------------------------------
C. Everett Koop, M.D.
* Director February 22, 2000
- ---------------------------------------------------
Charles A. Sanders, M.D.
* Director and President February 22, 2000
- ---------------------------------------------------
Paul A. Looney
* Chief Financial Officer February 22, 2000
- ---------------------------------------------------
Francis H. Murphy
*By /s/ FRANCIS H. MURPHY
----------------------------------------------
Francis H. Murphy
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 71
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
+1.1 Form of Underwriting Agreement
+3(i).1 Restated Certificate of Incorporation of Biopure
*3(ii).1 By-laws of Biopure
4.1 See Exhibits 3(i).1 and 3(ii).1 for provisions of the
Restated Certificate of Incorporation of Biopure and By-laws
of Biopure, as amended, defining rights of security holders
of Biopure
+5.1 Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P., regarding
the validity of the class A common stock of Biopure being
registered
*10.1 Purchase Agreement between Biopure and INPACO Corporation,
dated August 28, 1997
*10.2 Agreement with Moyer Packing Company dated October 21, 1994
*10.3 Agency Agreement between Biopure and The Butler Company
dated March 29, 1999
*10.4 Promissory Note dated July 31, 1995, from Carl Rausch in
favor of Biopure in the amount of $1,009,772.01
*10.5 Promissory Note dated July 31, 1995, from Carl Rausch in
favor of Biopure in the amount of $216,033.05
*10.6 Promissory Note dated July 31, 1995, from Edward Jacobs, Jr.
in favor of Biopure in the amount of $262,120.10
*10.7 Promissory Note dated July 31, 1995, from Bing Wong in favor
of Biopure in the amount of $70,714.82
*10.8 Promissory Note dated July 31, 1995, from Maria Gawryl in
favor of Biopure in the amount of $12,601.93
*10.9 Promissory Note dated July 31, 1995, from James Weston in
favor of Biopure in the amount of $10,333.58
*10.10 Promissory Note dated July 31, 1995, from Geoffrey Filbey in
favor of Biopure in the amount of $47,707.30
*10.11 Lease Agreement dated October 12, 1990, between Biopure and
Tarvis Realty Trust
*10.12 Lease Agreement dated May 23, 1997, between Biopure and
Karpowicz Family Trust
*10.13 Lease Agreement dated March 31, 1995, between Biopure and
New England Innovations, Corp.
*10.14 Lease Agreement dated August 29, 1994, between Biopure and
Eleven Hurley Street Associates
*10.15 Lease Agreement dated May 10, 1994, between Biopure and
Tarvis Realty Trust
*10.16 Lease Agreement dated August 23, 1994, between Biopure and
Tarvis Realty Trust
*10.17 Lease Agreement dated October 21, 1994, between Biopure and
Moyer Packing Company
*10.18 Deferred Compensation Agreement with Carl Rausch dated
August 8, 1990, as amended December 12, 1995
*10.19 1993 Incentive Compensation Plan
*10.20 1998 Stock Option Plan
*10.21 1999 Omnibus Securities and Incentive Plan
*10.21 Employment Agreement between Biopure and Daniel R. Davis
dated December 3, 1998 and as amended and restated as of
June 24, 1999
*10.22 Employment Agreement between Biopure and Paul A. Looney
dated as of June 9, 1999
*10.23 Employment Agreement Concerning Protection of Company
Property and the Arbitration of Legal Disputes
*10.24 1990 Incentive Compensation and Company Stock Purchase
Agreement
***10.25 Rights Agreement between Biopure and American Stock Transfer
& Trust Company dated September 21, 1999
+10.26 Amended and Restated 1999 Omnibus Securities and Incentive
Plan dated as of February 14, 2000
+10.27 Consulting Agreement between Biopure and William D. Hoffman,
M.D. dated February 17, 2000
-23.1 Consent of Ernst & Young LLP
-24.1 Powers of Attorney (included is signature page)
**27.1 Financial Data Schedule
</TABLE>
- ---------------
+ Filed herewith.
- Previously filed.
* Previously filed as an exhibit to the Company's Registration Statement on
Form S-1 (File No. 333-78829) and incorporated herein by reference thereto.
** Previously filed as an exhibit to the Company's Annual Report on Form 10-K
filed on January 28, 2000 and incorporated herein by reference thereto.
*** Previously filed as an exhibit to the Company's Form 8-A Registration dated
November 4, 1999 and incorporated herein by reference thereto.
<PAGE> 1
EXHIBIT 1.1
BIOPURE CORPORATION
2,500,000 Shares of Class A Common Stock
Underwriting Agreement
[ ], 2000
J.P. Morgan Securities Inc.
Salomon Smith Barney Inc.
Adams, Harkness & Hill, Inc.
Robert W. Baird & Co. Incorporated
As Representatives of the several Underwriters
listed in Schedule I hereto
c/o J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
Biopure Corporation, a Delaware corporation (the "Company"),
proposes to issue and sell to the several Underwriters listed in Schedule I
hereto (the "Underwriters"), for whom you are acting as representatives (the
"Representatives"), an aggregate of 2,500,000 shares of Class A Common Stock,
par value $0.01 per share, of the Company (the "Underwritten Shares") and, for
the sole purpose of covering over-allotments in connection with the sale of the
Underwritten Shares, at the option of the Underwriters, up to an additional
375,000 shares of Class A Common Stock of the Company (the "Option Shares"). The
Underwritten Shares and the Option Shares are herein referred to as the
"Shares." The shares of Class A Common Stock of the Company to be outstanding
after giving effect to the sale of the Shares are herein referred to as the
"Class A Common Stock."
The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission"), in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Securities Act"), a registration
statement, including a prospectus, relating to the Shares. The registration
statement as amended at the time when it became or shall become effective,
including information (if any) deemed to be part of the registration statement
at the time of effectiveness pursuant to Rule 430A under the Securities Act, is
referred to in this Agreement as the "Registration Statement," and the
prospectus in the form first used to confirm sales of Shares is referred to in
this Agreement as the "Prospectus." If the Company has filed an abbreviated
registration statement pursuant to Rule 462(b) under the Securities Act (the
"Rule
<PAGE> 2
462 Registration Statement"), then any reference herein to the term
"Registration Statement" shall be deemed to include such Rule 462 Registration
Statement.
The Company hereby agrees with the Underwriters as follows:
1. The Company agrees to issue and sell the Underwritten Shares to the several
Underwriters as hereinafter provided, and each Underwriter, upon the basis of
the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees to purchase, severally and not jointly,
from the Company the respective number of Underwritten Shares set forth opposite
such Underwriter's name in Schedule I hereto at a purchase price per share (the
"Purchase Price") of $[ ].
In addition, the Company agrees to issue and sell the Option
Shares to the several Underwriters as hereinafter provided, and the Underwriters
on the basis of the representations and warranties herein contained, but subject
to the conditions hereinafter stated, shall have the option to purchase,
severally and not jointly, from the Company up to an aggregate of 375,000 Option
Shares at the Purchase Price, for the sole purpose of covering over-allotments
(if any) in the sale of Underwritten Shares by the several Underwriters.
If any Option Shares are to be purchased, the number of Option
Shares to be purchased by each Underwriter shall be the number of Option Shares
which bears the same ratio to the aggregate number of Option Shares being
purchased as the number of Underwritten Shares set forth opposite the name of
such Underwriter in Schedule I hereto (or such number increased as set forth in
Section 9 hereof) bears to the aggregate number of Underwritten Shares being
purchased from the Company by the several Underwriters, subject, however, to
such adjustments to eliminate any fractional Shares as the Representatives in
their sole discretion shall make.
The Underwriters may exercise the option to purchase the
Option Shares at any time (but not more than once) on or before the thirtieth
day following the date of this Agreement, by written notice from the
Representatives to the Company. Such notice shall set forth the aggregate number
of Option Shares as to which the option is being exercised and the date and time
when the Option Shares are to be delivered and paid for, which may be the same
date and time as the Closing Date (as hereinafter defined) but shall not be
earlier than the Closing Date nor later than the tenth full Business Day (as
hereinafter defined) after the date of such notice (unless such time and date
are postponed in accordance with the provisions of Section 9 hereof). Any such
notice shall be given at least two Business Days prior to the date and time of
delivery specified therein.
2. The Company understands that the Underwriters intend (i) to
make a public offering of the Shares as soon after (A) the Registration
Statement has become effective (if it has not already become effective) and (B)
the parties hereto have executed and delivered
-2-
<PAGE> 3
this Agreement as in the judgment of the Representatives is advisable and (ii)
initially to offer the Shares upon the terms set forth in the Prospectus.
3. Payment for the Shares shall be made by wire transfer in
immediately available funds to the account specified by the Company to the
Representatives, in the case of the Underwritten Shares, on [ ], 2000, or at
such other time on the same or such other date, not later than the fifth
Business Day thereafter, as the Representatives and the Company may agree upon
in writing or, in the case of the Option Shares, on the date and time specified
by the Representatives in the written notice of the Underwriters' election to
purchase such Option Shares. The time and date of such payment for the
Underwritten Shares is referred to herein as the "Closing Date" and the time and
date for such payment for the Option Shares, if other than the Closing Date, is
herein referred to as the "Additional Closing Date." As used herein, the term
"Business Day" means any day other than a day on which banks are permitted or
required to be closed in New York City.
Payment for the Shares to be purchased on the Closing Date or
the Additional Closing Date, as the case may be, shall be made against delivery
to the Representatives for the respective accounts of the several Underwriters
of the Shares to be purchased on such date registered in such names and in such
denominations as the Representatives shall request in writing not later than two
full Business Days prior to the Closing Date or the Additional Closing Date, as
the case may be, with any transfer taxes payable in connection with the transfer
to the Underwriters of the Shares duly paid by the Company. The certificates for
the Shares will be made available for inspection and packaging by the
Representatives at the office of J.P. Morgan Securities Inc. set forth above not
later than 1:00 P.M., New York City time, on the Business Day prior to the
Closing Date or the Additional Closing Date, as the case may be.
4. The Company hereby represents and warrants to each of the
several Underwriters that:
(a) no order preventing or suspending the use of any
preliminary prospectus has been issued by the Commission, and each
preliminary prospectus filed as part of the Registration Statement as
originally filed or as part of any amendment thereto, or filed pursuant
to Rule 424 under the Securities Act, complied when so filed in all
material respects with the Securities Act, and did not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided that this representation and warranty shall
not apply to any statements or omissions made in reliance upon and in
conformity with information relating to any Underwriter furnished to
the Company in writing by such Underwriter through the Representatives
expressly for use therein;
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<PAGE> 4
(b) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that
purpose has been instituted or, to the knowledge of the Company,
threatened by the Commission; and the Registration Statement and
Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) comply, or will
comply, as the case may be, in all material respects with the
Securities Act and do not and will not, as of the applicable effective
date as to the Registration Statement and any amendment thereto and as
of the date of the Prospectus and any amendment or supplement thereto,
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 not misleading, and the Prospectus, as amended or
supplemented, if applicable, at the Closing Date or Additional Closing
Date, as the case may be, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; except that the foregoing representations
and warranties shall not apply to statements or omissions in the
Registration Statement or the Prospectus made in reliance upon and in
conformity with information relating to any Underwriter furnished to
the Company in writing by such Underwriter through the Representatives
expressly for use therein;
(c) the consolidated financial statements, and the related
notes thereto, included in the Registration Statement and the
Prospectus present fairly the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates indicated and
the results of their operations and changes in their consolidated cash
flows for the periods specified; said financial statements have been
prepared in conformity with generally accepted accounting principles
applied on a consistent basis, and the supporting schedules, if any,
included in the Registration Statement present fairly the information
required to be stated therein;
(d) since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not
been any change in the capital stock or long-term debt of the Company
or any of its subsidiaries, or any material adverse change, or any
development that could be reasonably expected to involve a prospective
material adverse change, in or affecting the business, prospects,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, taken as a whole (a
"Material Adverse Change"), other than as set forth or contemplated in
the Prospectus; and except as set forth or contemplated in the
Prospectus neither the Company nor any of its subsidiaries has entered
into any transaction or agreement (whether or not in the ordinary
course of business) material to the Company and its subsidiaries taken
as a whole;
(e) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with power and
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<PAGE> 5
authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus, and has been duly qualified as
a foreign corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business, so as to require such
qualification, other than where the failure to be so qualified or in
good standing would not have a material adverse effect on the Company
and its subsidiaries, taken as a whole;
(f) each of the Company's U.S. subsidiaries has been duly
incorporated and is validly existing as a corporation under the laws of
its jurisdiction of incorporation, with power and authority (corporate
and other) to own its properties and conduct its business as described
in the Prospectus, and has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under the laws
of each jurisdiction in which it owns or leases properties, or conducts
any business, so as to require such qualification, other than where the
failure to be so qualified or in good standing would not have a
material adverse effect on the business, prospects, management,
financial position, stockholders' equity or results of operations of
the Company and its subsidiaries, taken as a whole (a "Material Adverse
Effect"); and all the outstanding shares of capital stock of each
subsidiary of the Company have been duly authorized and validly issued,
are fully paid and non-assessable, and all of the outstanding shares of
capital stock of each subsidiary of the Company owned by the Company
are owned, directly or indirectly, free and clear of all liens,
encumbrances, security interests and claims;
(g) this Agreement has been duly authorized, executed and
delivered by the Company;
(h) the Company has an authorized capitalization as set forth
in the Prospectus and such authorized capital stock conforms as to
legal matters to the description thereof set forth in the Prospectus,
and all of the outstanding shares of capital stock of the Company have
been duly authorized and validly issued, are fully paid and
non-assessable and except as described in the Prospectus are not
subject to any pre-emptive rights; and, except as described in or
expressly contemplated by the Prospectus, there are no outstanding
rights (including, without limitation, pre-emptive rights), warrants or
options to acquire, or instruments convertible into or exchangeable
for, any shares of capital stock or other equity interest in the
Company or any of its subsidiaries, or any contract, commitment,
agreement, understanding or arrangement of any kind relating to the
issuance of any capital stock of the Company or any such subsidiary,
any such convertible or exchangeable securities or any such rights,
warrants or options;
(i) the Shares to be issued and sold by the Company hereunder
have been duly authorized and, when issued and delivered to and paid
for by the Underwriters in
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<PAGE> 6
accordance with the terms of this Agreement, will be duly issued and
will be fully paid and non-assessable and will conform to the
description thereof set forth in the Prospectus; and the issuance of
the Shares is not subject to any preemptive or similar rights;
(j) neither the Company nor any of its subsidiaries is, or
with the giving of notice or lapse of time or both would be, in
violation of or in default under its certificate of incorporation or
by-laws or any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which it or any of them or any of their
respective properties is bound, except for violations and defaults
which would not, individually or in the aggregate, have a Material
Adverse Effect; the issue and sale of the Shares and the performance by
the Company of its obligations hereunder and the consummation of the
transactions contemplated herein will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute
a default under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, nor will any such action
result in any violation of the provisions of the certificate of
incorporation or by-laws of the Company or any applicable law or
statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company, its subsidiaries
or any of their respective properties; and no consent, approval,
authorization, order, license, registration or qualification of or with
any such court or governmental agency or body is required for the issue
and sale of the Shares or the consummation by the Company of the
transactions contemplated herein, except such consents, approvals,
authorizations, orders, licenses, registrations or qualifications as
have been obtained or made under the Securities Act and as may be
required under state securities or Blue Sky laws in connection with the
purchase and distribution of the Shares by the Underwriters;
(k) other than as set forth or contemplated in the Prospectus,
there are no legal or governmental investigations, actions, suits or
proceedings pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its subsidiaries or any of
their respective properties or to which the Company or any of its
subsidiaries is or may be a party or to which any property of the
Company or any of its subsidiaries is or may be subject which, if
determined adversely to the Company or any of its subsidiaries, could,
individually or in the aggregate, reasonably be expected to have, a
Material Adverse Effect, and, to the knowledge of the Company, no such
proceedings are threatened or contemplated by governmental authorities
or threatened by others;
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<PAGE> 7
(l) there are no statutes, regulations, contracts or other
documents or legal or governmental investigations, actions, suits or
proceedings pending or, to the knowledge of the Company, threatened
that are required to be described in the Registration Statement or
Prospectus or to be filed as exhibits to the Registration Statement, as
the case may be, that are not described or filed as required;
(m) the Company and its subsidiaries have good and marketable
title in fee simple to all items of real property and good and
marketable title to all personal property owned by them, in each case
free and clear of all liens, encumbrances and defects except such as
are described or referred to in the Prospectus or such as do not
materially affect the value of such property and do not interfere with
the use made or proposed to be made of such property by the Company and
its subsidiaries; and any real property and buildings held under lease
by the Company and its subsidiaries are held by them under valid,
existing and enforceable leases with such exceptions as are not
material and do not interfere with the use made or proposed to be made
of such property and buildings by the Company and its subsidiaries;
(n) no relationship, direct or indirect, exists between or
among the Company or any of its subsidiaries on the one hand, and the
directors, officers, stockholders, customers or suppliers of the
Company or any of its subsidiaries on the other hand, which is required
by the Securities Act to be described in the Registration Statement and
the Prospectus which is not so described;
(o) no person has the right to require the Company to register
any securities for offering and sale under the Securities Act by reason
of the filing of the Registration Statement with the Commission or the
issue and sale of the Shares, except for rights which have been waived
or obviated by decision of the Representatives;
(p) the Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment company" or
an entity "controlled" by an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act");
(q) the Company has complied with all provisions of Section
517.075, Florida Statutes (Chapter 92-198, Laws of Florida) relating to
doing business with the Government of Cuba or with any person or
affiliate located in Cuba;
(r) Ernst & Young LLP, who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Securities Act;
(s) the Company and its subsidiaries have filed all federal,
state, local and foreign tax returns which have been required to be
filed and have paid all taxes shown
-7-
<PAGE> 8
thereon and all assessments received by them or any of them to the
extent that such taxes have become due and are not being contested in
good faith except where the failure to file or pay would not,
individually or in the aggregate, have a Material Adverse Effect; and
there is no tax deficiency which has been or might reasonably be
expected to be asserted or threatened against the Company or any
subsidiary except for such tax deficiencies as would not, individually
or in the aggregate, be expected to have a Material Adverse Effect;
(t) the Company has not taken nor will it take, directly or
indirectly, any action designed to, or that might be reasonably
expected to, cause or result in stabilization or manipulation of the
price of the Class A Common Stock;
(u) each of the Company and its subsidiaries owns, possesses
or has obtained all licenses, permits, certificates, consents, orders,
approvals and other authorizations from, and has made all declarations
and filings with, all federal, state, local and other governmental
authorities (including foreign regulatory agencies), all
self-regulatory organizations and all courts and other tribunals,
domestic or foreign, necessary to own or lease, as the case may be, and
to operate its properties and to carry on its business as conducted as
of the date hereof, except where the failure to own, possess, obtain or
make would not, individually or in the aggregate, have a Material
Adverse Effect, and neither the Company nor any such subsidiary has
received any actual notice of any proceeding relating to revocation or
modification of any such license, permit, certificate, consent, order,
approval or other authorization, except as described in the
Registration Statement and the Prospectus; each of the Company and its
subsidiaries is in compliance with all laws and regulations relating to
the conduct of its business as conducted as of the date hereof; and all
of the descriptions in the Registration Statement and the Prospectus of
the legal and governmental proceedings and procedures by or before the
United States Food and Drug Administration (the "FDA") or any foreign,
state or local governmental body exercising comparable authority are
true and complete in all material respects;
(v) there are no existing or, to the knowledge of the Company,
threatened labor disputes with the employees of the Company or any of
its subsidiaries which could reasonably be expected to have a Material
Adverse Effect;
(w) the Company and its subsidiaries (i) are in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are
in compliance with all terms and conditions of any such permit, license
or approval, except where such noncompli-
-8-
<PAGE> 9
ance with Environmental Laws, failure to have received required
permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals would not,
individually or in the aggregate, have a Material Adverse Effect;
(x) the Company has reasonably concluded that the costs and
liabilities associated with the effect of Environmental Laws on the
business, operations and properties of the Company and its subsidiaries
(including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to
third parties) would not, individually or in the aggregate, have a
Material Adverse Effect;
(y) each employee benefit plan, within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), that is maintained, administered or contributed to by the
Company or any of its affiliates for employees or former employees of
the Company and its affiliates has been maintained in compliance with
its terms and the requirements of any applicable statutes, orders,
rules and regulations, including but not limited to ERISA and the
Internal Revenue Code of 1986, as amended (the "Code"), except to the
extent that the failure to so comply would not, individually or in the
aggregate, have a Material Adverse Effect; to the knowledge of the
Company, no prohibited transaction, within the meaning of Section 406
of ERISA or Section 4975 of the Code, has occurred with respect to any
such plan excluding transactions effected pursuant to a statutory or
administrative exemption; and for each such plan which is subject to
the funding rules of Section 412 of the Code or Section 302 of ERISA,
no "accumulated funding deficiency" as defined in Section 412 of the
Code has been incurred, whether or not waived, and the fair market
value of the assets of each such plan (excluding for these purposes
accrued but unpaid contributions) exceeded the present value of all
benefits accrued under such plan determined using reasonable actuarial
assumptions;
(z) the statistical and market-related data included in the
Registration Statement and the Prospectus are based on or derived from
sources which are believed by the Company to be reliable;
(aa) to the knowledge of the Company, each of the Company and
its subsidiaries owns, is licensed to use or otherwise possesses
adequate rights to use the patents, patent rights, licenses,
inventions, trademarks, service marks, trade names, copyrights and
know-how, including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems,
processes or procedures (collectively, the "Intellectual Property"),
reasonably necessary to carry on the business conducted by it, except
to the extent that the failure to own, be licensed to use or otherwise
possess
-9-
<PAGE> 10
adequate rights to use such Intellectual Property would not have a
Material Adverse Effect; the Company has not received any notice of
infringement of or conflict with, and the Company has no knowledge of
any infringement of or conflict with, asserted rights of others with
respect to its Intellectual Property which could reasonably be expected
to result in a Material Adverse Effect; the discoveries, inventions,
products or processes of the Company referred to in the Registration
Statement and the Prospectus do not, to the knowledge of the Company,
infringe or conflict with any right or patent of any third party, or
any discovery, invention, product or process which is the subject of a
patent application filed by any third party; except as described in the
Prospectus, the Company is not obligated to pay a royalty, grant a
license or provide other consideration to any third party in connection
with its patents, patent rights, licenses, inventions, trademarks,
service marks, trade names, copyrights and know-how; and no third
party, including any academic or governmental organization, possesses
rights to the Intellectual Property which, if exercised, could enable
such third party to develop products competitive with those of the
Company or its subsidiaries or could reasonably be expected to have a
Material Adverse Effect;
(bb) since the respective dates as of which information is
given in the Registration Statement and the Prospectus, the studies,
tests and preclinical and clinical trials conducted by or on behalf of
the Company that are described in the Registration Statement and the
Prospectus were and, if still pending, are being conducted in
accordance with experimental protocols, procedures and controls
pursuant to, where applicable, accepted professional scientific
standards; the descriptions of the results of such studies, tests and
trials contained in the Registration Statement and the Prospectus are
accurate and complete in all material respects; and the Company has not
received any notices or correspondence from the FDA or any foreign,
state or local governmental body exercising comparable authority
requiring the termination, suspension or material modification of any
studies, tests or preclinical or clinical trials conducted by or on
behalf of the Company which termination, suspension or material
modification could reasonably be expected to have a Material Adverse
Effect; and
(cc) The Year 2000 Problem has not had, and the Company has no
reason to believe, and does not believe, that the Year 2000 Problem
will have, a Material Adverse Effect or result in any material loss or
interference with the Company's business or operations. The "Year 2000
Problem" as used herein means any significant risk that computer
hardware or software used in the receipt, transmission, processing,
manipulation, storage, retrieval, retransmission or other utilization
of data or in the operation of mechanical or electrical systems of any
kind will not, in the case of dates or time periods occurring after
December 31, 1999, function at least as effectively as in the case of
dates or time periods occurring prior to January 1, 2000.
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<PAGE> 11
5. The Company covenants and agrees with each of the several
Underwriters as follows:
(a) to use its best efforts to cause the Registration
Statement to become effective at the earliest possible time (if it has
not already become effective) and, if required, to file the final
Prospectus with the Commission within the time periods specified by
Rule 424(b) and Rule 430A under the Securities Act and to furnish
copies of the Prospectus to the Underwriters in New York City prior to
10:00 a.m., New York City time, on the Business Day next succeeding the
date of this Agreement in such quantities as the Representatives may
reasonably request;
(b) to deliver, at the expense of the Company, to the
Representatives four signed copies of the Registration Statement (as
originally filed) and each amendment thereto, in each case including
exhibits, and to each other Underwriter a conformed copy of the
Registration Statement (as originally filed) and each amendment
thereto, in each case without exhibits, and, during the period
mentioned in paragraph (e) below, to each of the Underwriters as many
copies of the Prospectus (including all amendments and supplements
thereto) as the Representatives may reasonably request;
(c) before filing any amendment or supplement to the
Registration Statement or the Prospectus, whether before or after the
time the Registration Statement becomes effective, to furnish to the
Representatives a copy of the proposed amendment or supplement for
review and not to file any such proposed amendment or supplement to
which the Representatives reasonably object;
(d) to advise the Representatives promptly, and to confirm
such advice in writing (i) when the Registration Statement has become
effective, (ii) when any amendment to the Registration Statement has
been filed or becomes effective, (iii) when any supplement to the
Prospectus or any amended Prospectus has been filed and to furnish the
Representatives with copies thereof, (iv) of any request by the
Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for any additional
information, (v) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of any
order preventing or suspending the use of any preliminary prospectus or
the Prospectus or the initiation or threatening of any proceeding for
that purpose, (vi) of the occurrence of any event, within the period
referenced in paragraph (e) below, as a result of which the Prospectus
as then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances when the
Prospectus is delivered to a purchaser, not misleading, and (vii) of
the receipt by the Company of any notification with respect to any
suspension of the qualification of the Shares for offer and sale in any
jurisdiction or the initiation or threatening of any proceeding for
such
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<PAGE> 12
purpose; and to use its best efforts to prevent the issuance of any
such stop order, or of any order preventing or suspending the use of
any preliminary prospectus or the Prospectus, or of any order
suspending any such qualification of the Shares, or notification of any
such order thereof and, if issued, to obtain as soon as possible the
withdrawal thereof;
(e) if, during such period of time after the first date of the
public offering of the Shares as in the opinion of counsel for the
Underwriters a prospectus relating to the Shares is required by law to
be delivered in connection with sales by the Underwriters or any
dealer, any event shall occur as a result of which it is necessary to
amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances when the Prospectus is
delivered to a purchaser, not misleading, or if it is necessary to
amend or supplement the Prospectus to comply with law, forthwith to
prepare and furnish upon request, at the expense of the Company, to the
Underwriters and to the dealers (whose names and addresses the
Representatives will furnish to the Company) to which Shares may have
been sold by the Representatives on behalf of the Underwriters and to
any other dealers, such amendments or supplements to the Prospectus as
may be necessary so that the statements in the Prospectus as so amended
or supplemented will not, in the light of the circumstances when the
Prospectus is delivered to a purchaser, be misleading or so that the
Prospectus will comply with law;
(f) to endeavor to qualify the Shares for offer and sale under
the securities or Blue Sky laws of such jurisdictions as the
Representatives shall reasonably request and to continue such
qualification in effect so long as reasonably required for distribution
of the Shares; provided that the Company shall not be required to file
a general consent to service of process in any such jurisdiction;
(g) to make generally available to its security holders and to
the Representatives as soon as practicable an earnings statement
covering a period of at least twelve months beginning with the first
fiscal quarter of the Company occurring after the effective date of the
Registration Statement, which shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 of the Commission promulgated
thereunder;
(h) for three years from the date of the Prospectus, to
furnish to the Representatives copies of all reports or other
communications (financial or other) furnished to holders of the Shares,
and copies of any reports and financial statements furnished to or
filed with the Commission or any national securities exchange;
(i) for a period of 90 days after the date of the Prospectus
not to (i) offer, pledge, announce the intention to sell, sell,
contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant
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<PAGE> 13
to purchase, or otherwise transfer or dispose of, directly or
indirectly, any shares of Class A Common Stock or any securities of the
Company which are substantially similar to the Class A Common Stock or
any securities convertible into or exercisable or exchangeable for
Class A Common Stock or (ii) enter into any swap, option, future,
forward or other agreement that transfers, in whole or in part, any of
the economic consequences of ownership of the Class A Common Stock or
any securities of the Company which are substantially similar to the
Class A Common Stock, including, but not limited to, any security
convertible into or exercisable or exchangeable for Class A Common
Stock, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of Class A Common Stock or such
other securities, in cash or otherwise, without the prior written
consent of J.P. Morgan Securities Inc., other than, in the case of
either clause (i) or (ii), the Shares to be sold by the Company
hereunder or Class A Common Stock or any securities of the Company
substantially similar to the Class A Common Stock issued pursuant to
(x) employee stock option and restricted stock plans existing on the
date of the Prospectus, (y) an employment agreement with any person who
is not currently an employee of the Company provided that any such
person delivers to the Underwriters an executed lock-up agreement
substantially in the form of Exhibit A hereto or (z) warrants to
purchase Class A Common Stock existing on the date of the Prospectus);
(j) to use its best efforts to list, subject to notice of
issuance, the Shares on the Nasdaq National Market (the "Nasdaq
National Market");
(k) to file with the Commission such reports as may be
required by Rule 463 under the Securities Act; and
(l) whether or not the transactions contemplated herein are
consummated or this Agreement is terminated, to pay or cause to be paid
all costs and expenses incident to the performance of its obligations
hereunder, including without limiting the generality of the foregoing,
all costs and expenses (i) incident to the preparation, issuance,
execution and delivery of the Shares, (ii) incident to the preparation,
printing and filing under the Securities Act of the Registration
Statement, the Prospectus and any preliminary prospectus (including in
each case all exhibits, amendments and supplements thereto), (iii)
incurred in connection with the registration or qualification of the
Shares under the laws of such jurisdictions as the Representatives may
designate (including fees of counsel for the Underwriters and its
disbursements), (iv) in connection with the listing of the Shares on
the Nasdaq National Market, (v) related to the filing with, and
clearance of the offering by, the National Association of Securities
Dealers, Inc., (vi) in connection with the furnishing to the
Underwriters and dealers of copies of the Registration Statement and
the Prospectus, including mailing and shipping, as herein provided,
(vii) any expenses incurred by the Company in connection with a
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<PAGE> 14
"road show" presentation to potential investors, (viii) the cost of
preparing stock certificates and (ix) the cost and charges of any
transfer agent and any registrar.
6. The several obligations of the Underwriters hereunder to
purchase the Shares on the Closing Date or the Additional Closing Date, as the
case may be, are subject to the performance by the Company of its obligations
hereunder and to the following additional conditions:
(a) the Registration Statement shall have become effective (or
if a post-effective amendment is required to be filed under the
Securities Act, such post-effective amendment shall have become
effective) not later than 5:00 P.M., New York City time, on the date
hereof; and no stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment shall be in
effect, and no proceedings for such purpose shall be pending before or
threatened by the Commission; the Prospectus shall have been filed with
the Commission pursuant to Rule 424(b) within the applicable time
period prescribed for such filing by the rules and regulations under
the Securities Act and in accordance with Section 5(a) hereof; and all
requests for additional information shall have been complied with to
the satisfaction of the Representatives;
(b) the representations and warranties of the Company
contained herein are true and correct on and as of the Closing Date or
the Additional Closing Date, as the case may be, as if made on and as
of the Closing Date or the Additional Closing Date, as the case may be,
and the Company shall have complied with all agreements and all
conditions on its part to be performed or satisfied hereunder at or
prior to the Closing Date or the Additional Closing Date, as the case
may be;
(c) subsequent to the execution and delivery of this Agreement
and prior to the Closing Date or the Additional Closing Date, as the
case may be, there shall not have occurred any downgrading, nor shall
any notice have been given of (i) any downgrading, (ii) any intended or
potential downgrading or (iii) any review or possible change that does
not indicate an improvement, in the rating accorded any securities of
or guaranteed by the Company by any "nationally recognized statistical
rating organization," as such term is defined for purposes of Rule
436(g)(2) under the Securities Act;
(d) since the respective dates as of which information is
given in the Prospectus there shall not have been any change in the
capital stock or long-term debt of the Company or any of its
subsidiaries or any Material Adverse Change otherwise than as set forth
or contemplated in the Prospectus, the effect of which in the judgment
of the Representatives makes it impracticable or inadvisable to proceed
with the public offering or the delivery of the Shares on the Closing
Date or the Additional Closing Date, as the case may be, on the terms
and in the manner contemplated in the Pro-
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<PAGE> 15
spectus; and neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included in the Prospectus any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus;
(e) the Representatives shall have received on and as of the
Closing Date or the Additional Closing Date, as the case may be, a
certificate of an executive officer of the Company, with specific
knowledge about the Company's financial matters, reasonably
satisfactory to the Representatives to the effect set forth in
subsections (a) through (d) (with respect to the respective
representations, warranties, agreements and conditions of the Company)
of this Section 6;
(f) LeBoeuf, Lamb, Greene & MacRae, L.L.P., counsel for the
Company, shall have furnished to the Representatives their written
opinion, dated the Closing Date or the Additional Closing Date, as the
case may be, in form and substance satisfactory to the Representatives,
to the effect that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of
the State of Delaware, with requisite corporate power to own
its properties and conduct its business as described in the
Prospectus;
(ii) the Company has been duly qualified as a foreign
corporation for the transaction of business and is in good
standing under the laws of Massachusetts, New Hampshire and
Pennsylvania;
(iii) this Agreement has been duly authorized, executed and
delivered by the Company;
(iv) the authorized capital stock of the Company conforms as
to legal matters to the description thereof contained in the
Prospectus;
(v) the shares of capital stock of the Company outstanding
prior to the issuance of the Shares to be sold by the Company
have been duly authorized and are validly issued, fully paid
and non-assessable;
(vi) the Shares to be issued and sold by the Company hereunder
have been duly authorized and, when delivered to and paid for
the Underwriters in accordance with the terms of this
Agreement, will be validly issued, fully paid and
non-assessable and except as described in the Prospectus the
issuance of the Shares is not subject to any preemptive
rights;
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<PAGE> 16
(vii) the statements in the Prospectus under "Management --
The 1998 Stock Option Plan," "Management -- 1999 Omnibus
Securities and Incentive Plan" and "Description of Capital
Stock," and in the Registration Statement in Items 14 and 15,
insofar as such statements constitute a summary of the terms
of the capital stock of the Company, legal matters, documents
or proceedings referred to therein, fairly present the
information called for with respect to such terms, legal
matters, documents or proceedings;
(viii) such counsel is of the opinion that the Registration
Statement and the Prospectus and any amendments and
supplements thereto (other than the financial statements and
related schedules and financial, accounting and statistical
data therein, as to which such counsel need express no
opinion) comply as to form in all material respects with the
requirements of the Securities Act and believes that (other
than the financial statements and related schedules and
financial, accounting and statistical data therein, as to
which such counsel need express no belief) the Registration
Statement and the Prospectus included therein at the time the
Registration Statement became effective did not contain any
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading, and that the
Prospectus, as amended or supplemented, if applicable, does
not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading;
(ix) the issue and sale of the Shares being delivered on the
Closing Date or the Additional Closing Date, as the case may
be, and the performance by the Company of its obligations
hereunder and the consummation of the transactions
contemplated herein will not conflict with or result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument
included as an exhibit to the Registration Statement to which
the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries is bound or to which
any of the property or assets of the Company or any of its
subsidiaries is subject, nor will any such action result in
any violation of the provisions of the certificate of
incorporation or by-laws of the Company or, assuming
compliance with state securities laws, any applicable law or
statute of the State of New York, any federal law of the
United States or the General Corporation Law of the State of
Delaware or any order, rule or regulation of any federal or
State of New York court or governmental agency or body;
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<PAGE> 17
(x) no consent, approval, authorization, order, license,
registration or qualification of or with any court or
governmental agency or body is required for the issue and sale
of the Shares in the United States, except such consents,
approvals, authorizations, orders, licenses, registrations or
qualifications as have been obtained or made under the
Securities Act and as may be required under state securities
or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters; and
(xi) the Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment
company" or entity "controlled" by an "investment company," as
such terms are defined in the Investment Company Act.
In rendering such opinions, such counsel may rely (A) as to
matters involving the application of laws other than the laws of the
United States and the States of New York and Delaware, to the extent
such counsel deems proper and to the extent specified in such opinion,
if at all, upon an opinion or opinions (in form and substance
reasonably satisfactory to the Underwriters' counsel) of other counsel
reasonably acceptable to the Underwriters' counsel, familiar with the
applicable laws and (B) as to matters of fact, to the extent such
counsel deems proper, on certificates of responsible officers of the
Company and certificates or other written statements of officials of
jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company. The opinion of such counsel
for the Company shall state that the opinion of any such other counsel
upon which they relied is in form satisfactory to such counsel and, in
such counsel's opinion, the Underwriters and they are justified in
relying thereon. With respect to the matters to be covered in
subparagraph (viii) above counsel may state their opinion and belief is
based upon their participation in the preparation of the Registration
Statement and the Prospectus and any amendment or supplement thereto
and review and discussion of the contents thereof but is without
independent check or verification except as specified.
The opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P.,
described above shall be rendered to the Underwriters at the request of
the Company and shall so state therein;
(g) Jane Kober, Esq., general counsel for the Company, shall
have furnished to the Representatives her written opinion, dated the
Closing Date or the Additional Closing Date, as the case may be, in
form and substance satisfactory to the Representatives, to the effect
that:
(i) each of the Company's U.S. subsidiaries has been duly
incorporated and is validly existing as a corporation under
the laws of its jurisdiction of
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<PAGE> 18
incorporation with power and authority (corporate and other)
to own its properties and conduct its business as described in
the Prospectus and has been duly qualified as a foreign
corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it
owns or leases properties, or conducts any business, so as to
require such qualification, other than where the failure to be
so qualified and in good standing would not have a Material
Adverse Effect; and all of the outstanding shares of capital
stock of each subsidiary have been duly and validly authorized
and issued, are fully paid and non-assessable, and all of the
outstanding shares of capital stock of each subsidiary of the
Company owned by the Company are owned, directly or
indirectly, free and clear of all liens, encumbrances,
security interests and claims;
(ii) other than as set forth or contemplated in the
Prospectus, there are no legal or governmental investigations,
actions, suits or proceedings pending or, to the knowledge of
such counsel, threatened against or affecting the Company or
any of its subsidiaries or any of their respective properties
or to which the Company or any of its subsidiaries is or may
be a party or to which any property of the Company or its
subsidiaries is or may be the subject which, if determined
adversely to the Company or any of its subsidiaries, could,
individually or in the aggregate, reasonably be expected to
have, a Material Adverse Effect; to the knowledge of such
counsel, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(iii) there are no statutes, regulations, contracts or other
documents or legal or governmental investigations, actions,
suits or proceedings pending or, to the knowledge of such
counsel, threatened that are required to be described in the
Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement, as the case may be,
that are not described or filed as required;
(iv) such counsel believes that (other than the financial
statements and related schedules and financial, accounting and
statistical data therein, as to which such counsel need
express no belief) the Registration Statement and the
Prospectus included therein at the time the Registration
Statement became effective did not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading, and that the Prospectus, as
amended or supplemented, if applicable, does not contain any
untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading;
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<PAGE> 19
(v) neither the Company nor any of its subsidiaries is, or
with the giving of notice or lapse of time or both would be,
in violation of or in default under its certificate of
incorporation or by-laws or any material indenture, mortgage,
deed of trust, loan agreement or other material agreement or
instrument known to such counsel to which the Company or any
of its subsidiaries is a party or by which it or any of them
or any of their respective properties is bound, except for
violations and defaults which would not, individually or in
the aggregate, have a Material Adverse Effect;
(vi) each of the Company and its subsidiaries owns, possesses
or has obtained all licenses, permits, certificates, consents,
orders, approvals and other authorizations from, and has made
all declarations and filings with, all federal, state, local
and other governmental authorities (including foreign
regulatory agencies), all self-regulatory organizations and
all courts and other tribunals, domestic or foreign, necessary
to own or lease, as the case may be, and to operate its
properties and to carry on its business as conducted as of the
date hereof except where the failure to own, possess, obtain
or make would not, individually or in the aggregate, have a
Material Adverse Effect, and neither the Company nor any such
subsidiary has received any actual notice of any proceeding
relating to revocation or modification of any such license,
permit, certificate, consent, order, approval or other
authorization, except as described in the Registration
Statement and the Prospectus; and each of the Company and its
subsidiaries is in compliance with all laws and regulations
relating to the conduct of its business as conducted as of the
date of the Prospectus;
(vii) to the knowledge of such counsel, each of the Company
and its subsidiaries owns, possesses or has the right to use
the Intellectual Property employed by it in connection with
the business conducted by it as of the date hereof;
(viii) to the knowledge of such counsel, each of the Company
and its subsidiaries is in compliance with all Environmental
Laws, except, in each case, where noncompliance would not,
individually or in the aggregate, have a Material Adverse
Effect; there are no legal or governmental proceedings pending
or, to the knowledge of such counsel, threatened against or
affecting the Company or any of its subsidiaries under any
Environmental Law which, individually or in the aggregate,
could reasonably be expected to have a Material Adverse
Effect; and
(ix) to the knowledge of such counsel, the Company has not
received any notices or correspondence from the FDA or any
foreign, state or local governmental body exercising
comparable authority requiring the termination, sus-
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<PAGE> 20
pension or material modification of any studies, tests or
preclinical or clinical trials conducted by or on behalf of
the Company which termination, suspension or material
modification could reasonably be expected to have a Material
Adverse Effect.
In rendering such opinions, such counsel may rely (A) as to
matters involving the application of laws other than the laws of the
United States and the States of New York and Delaware, to the extent
such counsel deems proper and to the extent specified in such opinion,
if at all, upon an opinion or opinions (in form and substance
reasonably satisfactory to the Underwriters' counsel) of other counsel
reasonably acceptable to the Underwriters' counsel, familiar with the
applicable laws and (B) as to matters of fact, to the extent such
counsel deems proper, on certificates of responsible officers of the
Company and certificates or other written statements of officials of
jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company. The opinion of such general
counsel for the Company shall state that the opinion of any such other
counsel upon which they relied is in form satisfactory to such counsel
and, in such counsel's opinion, the Underwriters and they are justified
in relying thereon. With respect to the matters to be covered in
subparagraph (iv) above counsel may state their opinion and belief is
based upon their participation in the preparation of the Registration
Statement and the Prospectus and any amendment or supplement thereto
and review and discussion of the contents thereof but is without
independent check or verification except as specified.
The opinion of Jane Kober, Esq., described above shall be
rendered to the Underwriters at the request of the Company and shall so
state therein;
(h) Hamilton, Brook, Smith & Reynolds, P.C., patent counsel
for the Company, shall have furnished to the Representatives their
written opinion, dated the Closing Date or the Additional Closing Date,
as the case may be, in form and substance satisfactory to the
Representatives, to the effect that:
(i) such counsel is of the opinion that the statements in the
Registration Statement and the Prospectus included therein at
the time the Registration Statement became effective set forth
under "Risk Factors- If We Are Not Able to Protect Our
Intellectual Property, Competition Could Force Us to Lower Our
Prices, Which Might Reduce Profitability" and "Business --
Intellectual Property," insofar as such statements concern
patents, patent applications and patent rights, did not
contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and
that the statements in the captions set forth above in the
Prospectus, as amended or supplemented, if applicable, did not
contain any untrue statement of a material fact or omit to
state a material
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<PAGE> 21
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading;
(ii) to the knowledge of such counsel, each of the Company and
its subsidiaries owns, is licensed to use or otherwise
possesses adequate rights to use the patents and patent rights
reasonably necessary to carry on the business conducted by it,
except to the extent that the failure to own, be licensed to
use or otherwise possess adequate rights to use such
Intellectual Property would not have a Material Adverse
Effect;
(iii) to the knowledge of such counsel, the Company has not
received any notice of infringement of or conflict with, and
such counsel has no knowledge of any infringement of or
conflict with, asserted rights of others with respect to its
patents or patent rights which could reasonably be expected to
result in a Material Adverse Effect;
(iv) the discoveries, inventions, products or processes of the
Company referred to in the Registration Statement and the
Prospectus do not, to the knowledge of such counsel, infringe
or conflict with any patents or patent rights of any third
party, or any discovery, invention, product or process which
is the subject of a patent application filed by any third
party; and
(v) to the knowledge of such counsel, no third party,
including any academic or governmental organization, possesses
rights to the Company's patents, patent applications or patent
rights which, if exercised, could enable such third party to
develop products competitive with those of the Company or its
subsidiaries or could reasonably be expected to have a
Material Adverse Effect.
In rendering such opinions, such counsel may rely (A) as to
matters involving the application of laws other than the laws of the
United States and the State of Massachusetts, to the extent such
counsel deems proper and to the extent specified in such opinion, if at
all, upon an opinion or opinions (in form and substance reasonably
satisfactory to the Underwriters' counsel) of other counsel reasonably
acceptable to the Underwriters' counsel, familiar with the applicable
laws and (B) as to matters of fact, to the extent such counsel deems
proper, on certificates of responsible officers of the Company. The
opinion of such patent counsel for the Company shall state that the
opinion of any such other counsel upon which they relied is in form
satisfactory to such counsel and, in such counsel's opinion, the
Underwriters and they are justified in relying thereon.
The opinion of Hamilton, Brook, Smith & Reynolds, P.C.,
described above shall be rendered to the Underwriters at the request of
the Company and shall so state therein;
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<PAGE> 22
(i) Hogan & Hartson L.L.P., regulatory counsel for the
Company, shall have furnished to the Representatives their written
opinion, dated the Closing Date or the Additional Closing Date, as the
case may be, in form and substance satisfactory to the Representatives,
to the effect that such counsel is of the opinion that the statements
in the Registration Statement and the Prospectus included therein at
the time the Registration Statement became effective set forth under
"Risk Factors -- If We Fail to Obtain FDA Approval, We Cannot Market
Hemopure in the United States," "--We Cannot Expand Indications for
Our Products Unless We Receive FDA Approval for each Proposed
Indication," "--Stringent, Ongoing Government Regulation and
Inspection of Our Products Could Lead to Delays in the Manufacture,
Marketing and Sale of Our Products," and "Business -- Government
Regulation," insofar as such statements summarize applicable provisions
of the Federal Food, Drug, and Cosmetic Act, as amended, Section 351 of
the Public Health Services Act, as amended, and the regulations
promulgated thereunder, are accurate summaries in all material respects
of the provisions purported to be summarized under such captions in the
Prospectus.
The opinion of Hogan & Hartson L.L.P. described above shall be
rendered to the Underwriters at the request of the Company and shall so
state therein;
(j) on the effective date of the Registration Statement and
the effective date of the most recently filed post-effective amendment
to the Registration Statement and also on the Closing Date or
Additional Closing Date, as the case may be, Ernst & Young LLP shall
have furnished to you letters, dated the respective dates of delivery
thereof, in form and substance satisfactory to you, containing
statements and information of the type customarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectus;
(k) the Representatives shall have received on and as of the
Closing Date or Additional Closing Date, as the case may be, an opinion
of Cahill Gordon & Reindel, counsel to the Underwriters, with respect
to the due authorization and valid issuance of the Shares, the
Registration Statement, the Prospectus and other related matters as the
Representatives may reasonably request, and such counsel shall have
received such papers and information as they may reasonably request to
enable them to pass upon such matters;
(l) the Shares to be delivered on the Closing Date or
Additional Closing Date, as the case may be, shall have been approved
for listing on the Nasdaq National Market, subject to official notice
of issuance;
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<PAGE> 23
(m) on or prior to the Closing Date or Additional Closing
Date, as the case may be, the Company shall have furnished to the
Representatives such further certificates and documents as the
Representatives shall reasonably request; and
(n) the "lock-up" agreements, each substantially in the form
of Exhibit A hereto, between you and certain stockholders of the
Company previously specified by the Representatives relating to sales
and certain other dispositions of shares of Class A Common Stock or
certain other securities, delivered to you on or before the date
hereof, shall be in full force and effect on the Closing Date or
Additional Closing Date, as the case may be.
7. The Company agrees to indemnify and hold harmless each
Underwriter, each affiliate of any Underwriter which assists such Underwriter in
the distribution of the Shares and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), from and against any and all losses, claims, damages and liabilities
(including, without limitation, reasonable legal fees and other expenses
incurred in connection with any suit, action or proceeding or any claim
asserted) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages or liabilities are caused by any untrue statement
or omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Underwriter furnished to the Company
in writing by such Underwriter through the Representatives expressly for use
therein; provided, however, that the foregoing indemnity with respect to any
preliminary prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any such losses, claims, damages or liabilities
purchased Shares, or any person controlling such Underwriter, if a copy of the
Prospectus (as then amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) was not sent or given by or on behalf of
such Underwriter to such person, if required by laws to have been delivered, at
or prior to the written confirmation of the sale of the Shares to such person,
and if the Prospectus (as so amended or supplemented) would have cured the
defect giving rise to such losses, claims, damages or liabilities.
Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement and each person who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Company to each Underwriter,
but only with reference to information relating to such Underwriter furnished to
the Company in writing by such Underwriter through the Representatives ex-
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<PAGE> 24
pressly for use in the Registration Statement, the Prospectus, any amendment or
supplement thereto, or any preliminary prospectus.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such person (the "Indemnified Person") shall promptly
notify the person against whom such indemnity may be sought (the "Indemnifying
Person") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may designate in such proceeding and shall pay the fees and
expenses of such counsel related to such proceeding. In any such proceeding, any
Indemnified Person shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Person
unless (i) the Indemnifying Person and the Indemnified Person shall have
mutually agreed to the contrary, (ii) the Indemnifying Person has failed within
a reasonable time to retain counsel reasonably satisfactory to the Indemnified
Person or (iii) the named parties in any such proceeding (including any
impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It is
understood that the Indemnifying Person shall not, in connection with any
proceeding or related proceeding in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to one local
counsel in any single jurisdiction) for all Indemnified Persons, and that all
such fees and expenses shall be reimbursed as they are incurred. Any such
separate firm for the Underwriters, each affiliate of any Underwriter which
assists such Underwriter in the distribution of the Shares and such control
persons of Underwriters shall be designated in writing by J.P. Morgan Securities
Inc. and any such separate firm for the Company, its directors, its officers who
sign the Registration Statement and such control persons of the Company shall be
designated in writing by the Company. The Indemnifying Person shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the Indemnifying Person agrees to indemnify any Indemnified
Person from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified
Person shall have requested an Indemnifying Person to reimburse the Indemnified
Person for reasonable fees and expenses of counsel as contemplated by the second
and third sentences of this paragraph, the Indemnifying Person agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such Indemnifying Person of the aforesaid request and (ii) such
Indemnifying Person shall not have reimbursed the Indemnified Person in
accordance with such request prior to the date of such settlement. No
Indemnifying Person shall, without the prior written consent of the Indemnified
Person, effect any settlement of any pending or threatened proceeding in respect
of which any Indemnified Person is or could have been a party and indemnity
could have been sought hereunder by such Indemnified Person, unless such
settlement includes an unconditional
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<PAGE> 25
release of such Indemnified Person from all liability on claims that are the
subject matter of such proceeding.
If the indemnification provided for in the first or second
paragraph of this Section 7 is unavailable to an Indemnified Person or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each Indemnifying Person under such paragraph, in lieu of
indemnifying such Indemnified Person thereunder, shall contribute to the amount
paid or payable by such Indemnified Person as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other hand from the offering of the Shares or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand and the Underwriters on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Underwriters on the other hand shall be
deemed to be in the same respective proportions as the net proceeds from the
offering (before deducting expenses) received by the Company and the total
underwriting discounts and the commissions received by the Underwriters, in each
case as set forth in the table on the cover of the Prospectus, bear to the
aggregate public offering price of the Shares. The relative fault of the Company
on the one hand and the Underwriters on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section 7 were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purposes) or by any other method of allocation that does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Person as a result of
the losses, claims, damages and liabilities referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any reasonable legal or other expenses incurred by such Indemnified
Person in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall an
Underwriter be required to contribute any amount in excess of the amount by
which the total price at which the Shares underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages that
such Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this
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<PAGE> 26
Section 7 are several in proportion to the respective number of Shares set forth
opposite their names in Schedule I hereto, and not joint.
The remedies provided for in this Section 7 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
The indemnity and contribution agreements contained in this
Section 7 and the representations and warranties of the Company set forth in
this Agreement shall remain operative and in full force and effect regardless of
(i) any termination of this Agreement, (ii) any investigation made by or on
behalf of any Underwriter or any person controlling any Underwriter or by or on
behalf of the Company, its officers or directors or any other person controlling
the Company and (iii) acceptance of and payment for any of the Shares.
8. Notwithstanding anything herein contained, this Agreement
(or the obligations of the several Underwriters with respect to the Option
Shares) may be terminated in the absolute discretion of the Representatives, by
notice given to the Company, if after the execution and delivery of this
Agreement and prior to the Closing Date (or, in the case of the Option Shares,
prior to the Additional Closing Date) (i) trading generally shall have been
suspended or materially limited on or by, as the case may be, any of the New
York Stock Exchange or the American Stock Exchange or the National Association
of Securities Dealers, Inc., (ii) trading of any securities of or guaranteed by
the Company shall have been suspended on any exchange or in any over-the-counter
market, (iii) a general moratorium on commercial banking activities in New York
shall have been declared by either Federal or New York State authorities or (iv)
there shall have occurred any outbreak or escalation of hostilities or any
change in financial markets or any calamity or crisis that, in the judgment of
the Representatives, is material and adverse and which, in the judgment of the
Representatives, makes it impracticable to market the Shares being delivered at
the Closing Date or the Additional Closing Date, as the case may be, on the
terms and in the manner contemplated in the Prospectus.
9. This Agreement shall become effective upon the later of (x)
execution and delivery hereof by the parties hereto and (y) release of
notification of the effectiveness of the Registration Statement by the
Commission.
If on the Closing Date or the Additional Closing Date, as the
case may be, any one or more of the Underwriters shall fail or refuse to
purchase Shares which it or they have agreed to purchase hereunder on such date,
and the aggregate number of Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than one-tenth
of the aggregate number of Shares to be purchased on such date, the other
Underwriters shall be obligated severally, in the proportions that the number of
Shares set forth opposite their respective names in Schedule I bears to the
aggregate number of Underwritten Shares set forth opposite the names of all such
non-defaulting Underwriters, or in such other
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<PAGE> 27
proportions as the Representatives may specify, to purchase the Shares which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase on such date; provided that in no event shall the number of Shares that
any Underwriter has agreed to purchase pursuant to Section 1 be increased
pursuant to this Section 9 by an amount in excess of one-ninth of such number of
Shares without the written consent of such Underwriter. If on the Closing Date
or the Additional Closing Date, as the case may be, any Underwriter or
Underwriters shall fail or refuse to purchase Shares which it or they have
agreed to purchase hereunder on such date, and the aggregate number of Shares
with respect to which such default occurs is more than one-tenth of the
aggregate number of Shares to be purchased on such date, and arrangements
satisfactory to the Representatives and the Company for the purchase of such
Shares are not made within 36 hours after such default, this Agreement (or the
obligations of the several Underwriters to purchase the Option Shares, as the
case may be) shall terminate without liability on the part of any non-defaulting
Underwriter or the Company. In the case of either the first sentence or the
second sentence of this paragraph, either you or the Company shall have the
right to postpone the Closing Date (or, in the case of the Option Shares, the
Additional Closing Date), but in no event for longer than seven days, in order
that the required changes, if any, in the Registration Statement and in the
Prospectus or in any other documents or arrangements may be effected. Any action
taken under this paragraph shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agreement.
10. If this Agreement shall be terminated by the Underwriters,
or any of them, because of any failure or refusal on the part of the Company to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason the Company shall be unable to perform its obligations under
this Agreement or any condition of the Underwriters' obligations cannot be
fulfilled, the Company agrees to reimburse the Underwriters or such Underwriters
as have so terminated this Agreement with respect to themselves, severally, for
all out-of-pocket expenses (including the reasonable fees and expenses of its
counsel) reasonably incurred by the Underwriter in connection with this
Agreement or the offering contemplated herein.
11. This Agreement shall inure to the benefit of and be
binding upon the Company, the Underwriters, each affiliate of any Underwriter
which assists such Underwriter in the distribution of the Shares, any
controlling persons referred to herein and their respective successors and
assigns. Nothing expressed or mentioned in this Agreement is intended or shall
be construed to give any other person, firm or corporation any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained. No purchaser of Shares from any Underwriter shall be
deemed to be a successor by reason merely of such purchase.
12. Any action by the Underwriters hereunder may be taken by
J.P. Morgan
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<PAGE> 28
Securities Inc. alone on behalf of the Underwriters, and any such action taken
by J.P. Morgan Securities Inc. alone shall be binding upon the Underwriters. All
notices and other communications hereunder shall be in writing and shall be
deemed to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be given to the
Representatives, c/o J.P. Morgan Securities Inc., 60 Wall Street, New York, New
York 10260 (telefax: 212-648-5705), Attention: Syndicate Department, with a copy
to Cahill Gordon & Reindel, 80 Pine Street, New York, New York 10005 (telefax:
212-269-5420), Attention: Gerald S. Tanenbaum, Esq. Notices to the Company shall
be given to it at its offices at 11 Hurley Street, Cambridge, Massachusetts
02141 (telefax: 617-234-6507), Attention: Jane Kober, Esq., with a copy to
LeBoeuf, Lamb, Greene & MacRae, L.L.P., 125 West 55th Street, New York, New York
10019 (telefax: 212-424-8500), Attention: Lars Bang-Jensen, Esq.
13. This Agreement may be signed in counterparts, each of
which shall be an original and all of which together shall constitute one and
the same instrument.
14. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAWS PROVISIONS THEREOF.
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<PAGE> 29
If the foregoing is in accordance with your understanding,
please sign and return four counterparts hereof.
Very truly yours,
BIOPURE CORPORATION
By: ______________________________________
Name: Jane Kober
Title: Senior Vice President, General
Counsel and Secretary
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<PAGE> 30
Accepted: [ ], 2000
J.P. MORGAN SECURITIES INC.
SALOMON SMITH BARNEY INC.
ADAMS, HARKNESS & HILL, INC.
ROBERT W. BAIRD & CO. INCORPORATED
Acting severally on behalf
of themselves and the
several Underwriters listed
in Schedule I hereto.
By: J.P. MORGAN SECURITIES INC.
Acting on behalf of itself and the
several Underwriters listed in
Schedule I hereto.
By: _______________________________
Name: Michael J. Tiedemann
Title: Vice President
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<PAGE> 31
SCHEDULE I
<TABLE>
<CAPTION>
Number of Shares To
Underwriter Be Purchased
- ----------- -----------------------
<S> <C>
J.P. Morgan Securities Inc..................................
Salomon Smith Barney Inc....................................
Adams, Harkness & Hill, Inc.................................
Robert W. Baird & Co. Incorporated..........................
-----------------------
=======================
Total.....................................
</TABLE>
<PAGE> 32
ANNEX A
[FORM OF LOCK-UP AGREEMENT]
<PAGE> 1
Exhibit 3(i).1
RESTATED CERTIFICATE OF INCORPORATION
OF BIOPURE CORPORATION
PURSUANT TO SECTION 245 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
Biopure Corporation, a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Biopure Corporation (the
"Corporation"). The Corporation was originally incorporated under the name
Biopure Fine Chemicals, Inc., which name was changed to "Biopure Corporation" on
October 31, 1985. The original Certificate of Incorporation was filed with the
Secretary of State of the State of Delaware on July 30, 1984, was restated on
December 22, 1998, and was subsequently amended.
2. This Restated Certificate of Incorporation restates the Restated
Certificate of Incorporation of the Corporation, as amended, and has been
adopted and approved in accordance with Section 245 of the General Corporation
Laws of the State of Delaware.
3. The text of the Restated Certificate of Incorporation as heretofore
amended is hereby restated to read in its entirety as follows:
A. FIRST: NAME. The name of the Corporation is:
Biopure Corporation
B. SECOND: REGISTERED AGENT. The registered office of the Corporation is
to be located at 1013 Centre Road, in the City of Wilmington, County of New
Castle, State of Delaware and the registered agent's name is the Corporation
Service Company.
C. THIRD: PURPOSE. The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
D. FOURTH: CAPITALIZATION. The total number of shares of capital stock
which the Corporation shall have authority to issue is 130,000,179 shares,
divided into two classes. The total authorized number of shares of common stock
is 100,000,179, consisting of 100,000,000 shares of Class A Common Stock, par
value $0.01 ("Common Stock"), and 179 shares of Class B Common Stock, par value
$1.00 ("Class B Common Stock"). The total authorized number of shares of
preferred stock ("Preferred Stock") is 30,000,000 shares, par value $.01 per
share.
Subject to any limitations prescribed by law, the Board of Directors is
authorized to provide for the issuance of shares of Preferred Stock in series,
and by filing a certificate pursuant
<PAGE> 2
to the applicable law of the State of Delaware (such certificate being
hereinafter referred to as a "Preferred Stock Designation"), to establish from
time to time the number of shares to be included in each such series, and to fix
the designation, powers, preferences, and rights of the shares of each such
series and any qualifications, limitations or restrictions thereof. The number
of authorized shares of Preferred Stock in any such series may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of holders of a majority of the voting power entitled to vote
generally in the election of directors, without a vote of the holders of
Preferred Stock of such series, unless a vote of any such holders is required
pursuant to the terms of any Preferred Stock Designation.
The powers, preferences and rights of the shares of the Common Stock and
the Class B Common Stock and the qualifications, limitations or restrictions
thereof, are as follows:
4.1. COMMON STOCK
4.1.1. Except as otherwise required by law and subject to the voting
rights of the holders of Preferred Stock, the holders of Common Stock are
entitled at all times to one vote per share on all matters to be voted on by the
Corporation's stockholders.
4.1.2. The holders of the Common Stock are entitled to receive
dividends when and as dividends on the Common Stock are declared by the Board of
Directors.
4.2. CLASS B COMMON STOCK
4.2.1. DIVIDENDS. The holders of the Class B Common Stock shall not be
entitled to receive dividends.
4.2.2. VOTING RIGHTS. The holders of the Class B Common Stock shall
have no right as such holders to vote at or participate in any meeting of
stockholders of the Corporation or to receive any notice of such meeting, except
as required by law.
4.2.3. DISTRIBUTION OF ASSETS. In the event of the voluntary or
involuntary liquidation, dissolution, or winding up of the Corporation, and
after all amounts to which the holders of Preferred Stock have been paid or set
aside in cash for payment, the holders of Class B Common Stock will be entitled
to receive on a PARI PASSU basis with the holders of Common Stock all of the
remaining assets of the Corporation available for distribution to holders of its
Common Stock. For purposes of determining the portion of such remaining assets
to be received by holders of the Class B Common Stock, shares of Class B Common
Stock shall be deemed to have been converted into a number of shares of Common
Stock to be determined by multiplying the Share Limit by the Class B Liquidation
Ratio.
-2-
<PAGE> 3
4.2.4. CONVERSION. All outstanding shares of Class B Common Stock
shall be automatically converted into shares of Common Stock at the time and on
the terms set forth below.
(a) Upon receipt by the Corporation of the Determination, all
shares of Class B Common Stock shall, subject to adjustment as provided in
subparagraph (b) below, be automatically converted into that number of shares of
Common Stock equal to the product of the Exchange Rate (based on the Fair Market
Value per share of Common Stock as set forth in the Determination) and the Class
B Conversion Value provided that the aggregate number of shares of Common Stock
issued pursuant to this provision shall not exceed an amount equal to the
product of the Class B Conversion Ratio and the Share Limit.
If each outstanding share of the Class B Common Stock is so
automatically converted, it shall be converted without any further action by the
holders of such shares and whether or not the certificates representing such
shares are surrendered to the Corporation or its transfer agent; provided,
however, that the Corporation shall not be obligated to issue certificates
evidencing the shares of the Common Stock issuable upon conversion of any shares
of the Class B Common Stock unless certificates evidencing such shares of the
Class B Common Stock are either delivered to the Corporation or any transfer
agent, as hereinafter provided, or the holder notifies the Corporation that such
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Corporation to indemnify the Corporation from any loss
incurred by it in connection therewith. Upon the occurrence of the automatic
conversion of the Class B Common Stock, the holders of the Class B Common Stock
shall surrender the certificates representing such shares at the office of the
Corporation or of any transfer agent for the Class B Common Stock or the Common
Stock. Thereupon, there shall be issued and delivered to such holder, promptly
at such office and in his name as shown on such surrendered certificate or
certificates, a certificate or certificates for the number of shares of Common
Stock into which the shares of the Class B Common Stock surrendered were
converted on the date on which the Determination was received by the
Corporation.
(b) Any conversion of Class B Common Stock under subparagraph
(a) shall be subject to adjustment as described below. In the event that the
Corporation shall (i) declare a dividend or make a distribution on Common Stock
payable in shares of its capital stock (whether shares of Common Stock or of
capital stock of any other class), (ii) subdivide outstanding shares of Common
Stock into a greater number of shares, (iii) combine outstanding shares of
Common Stock into a smaller number of shares, or (iv) issue any shares of its
capital stock by reclassification of Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Corporation is the continuing Corporation), then if the record date, in the case
of such a dividend or distribution, or the effective date, in the case of such a
subdivision, combination or reclassification, is after the 30th day after PLA
and ELA Approval, then the holder shall be entitled to receive upon conversion
of its shares of Class B Common Stock pursuant to paragraph (a) above the
aggregate number and kind of shares which, if such
-3-
<PAGE> 4
conversion had been made at the Exchange Rate and subject to the Share Limit in
effect immediately prior to such event, the holder would have owned upon such
conversion and been entitled to receive by virtue of such dividend,
distribution, subdivision, combination or reclassification.
(c) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of shares of the Class B Common Stock,
such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Class B Common
Stock; and if at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all then outstanding
shares of the Class B Common Stock, the Corporation will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of the Common Stock to such number of shares as
shall be sufficient for such purpose.
4.2.5. DEFINITIONS.
"Class B Conversion Ratio" means a fraction, the numerator of which
shall be 24.574 plus the number of shares of Class B Common Stock held by the
holders and the denominator of which shall be 225.
"Class B Conversion Value" means the multiplicative product of (x)
24.574 plus the number of outstanding shares of Class B Common Stock and (y) $1
million.
"Class B Liquidation Ratio" means a fraction, the numerator of which
shall be the number of shares of Class B Common Stock held by the holders and
the denominator of which shall be 225.
"Determination" means the determination by the Qualified Arbitrator of
the Fair Market Value of the Corporation as of the 30th day following PLA and
ELA Approval pursuant to a Determination Process which shall commence on the
30th day following PLA and ELA Approval.
"Determination Process" means the following process through which the
Determination shall be made:
(a) On or before the 40th day following PLA and ELA Approval, the
Corporation and the holder of the Class B Common Stock (the "Parties") shall
agree on the appointment of a Qualified Arbitrator and such Qualified Arbitrator
shall within 60 days further make the Determination, provided, however, that:
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<PAGE> 5
(i) if the Parties shall not agree on the appointment of a
Qualified Arbitrator as aforesaid, the Parties shall each appoint a
disinterested third party as its representative on or before such 40th day
following PLA and ELA Approval and the representatives thus appointed shall
appoint a Qualified Arbitrator, and such Qualified Arbitrator shall be
instructed to make the determination within 30 days;
(ii) if either Party shall have failed to appoint a
representative as aforesaid, the first representative appointed shall appoint
the Qualified Arbitrator;
(iii) if the two representatives appointed by the Parties
shall be unable to agree upon the appointment of the Qualified Arbitrator within
15 days of their appointment, they shall give notice of such failure to agree to
the Parties and, either of the Parties upon notice to the other Party may apply
for such appointment to the Chancery Court of Delaware; and
(iv) in the event of the failure, refusal or inability of
the Qualified Arbitrator to act, a new Qualified Arbitrator shall be appointed
in its stead, which appointment shall be made in the same manner as hereinbefore
provided for the appointment of the Qualified Arbitrator.
(b) The Qualified Arbitrator shall give notice to the Parties
stating its determination, and shall furnish to each a copy of such
determination signed by it. Such Determination, absent manifest error, shall be
binding.
"Exchange Rate" means at any time of determination the amount
determined in accordance with the following formula:
1
-------------------------------------------
Fair Market Value per Share of Common Stock
"Fair Market Value per Share of Common Stock" means the Determination
of the fair market value of the Company divided by 20,453,287 adjusted to the
same extent of any adjustments pursuant to the definition of "Share Limit,"
being the number of shares, as of January 20, 1997, of Common Stock on a fully
diluted basis that gives effect to any outstanding options, warrants, rights or
securities convertible into or exercisable for Common Stock, and agreements to
issue any such securities or rights, in each case, to the extent that such
issuance would have a dilutive effect on such fair market value after also
taking into account any exercise price payable in connection with the exercise
thereof; PROVIDED, that if the product of the "Fair Market Value per Share of
Common Stock" and the aggregate number of shares of Common Stock outstanding and
issuable pursuant to any options, warrants, rights and agreements described
above (the "Aggregate Biopure Common Equity Value") is more than $3,000,000,000,
-5-
<PAGE> 6
then the "Fair Market Value per Share of Common Stock" shall be deemed to be
such amount as would cause the Aggregate Biopure Common Equity Value to be
$3,000,000,000.
"Hemopure" means a bovine hemoglobin source Blood Product known as
Hemopure developed for clinical use by the Corporation which is the subject of
pending United States and foreign patent applications.
"PLA and ELA Approval" means receipt of all regulatory approvals
required for the development, production, use, lease, sale, license, sublicense
and other disposition of Hemopure for the sale and distribution of Hemopure for
in vivo use as an oxygen transport material in humans in the United States.
"Qualified Arbitrator" means an investment banking or appraisal firm
of nationally recognized standing having the knowledge and experience necessary
to make the Determination selected in accordance with the procedures set forth
in the definition of Determination Process above.
"Share Limit" means, at the time of the Determination, 3,017,700,
subject to adjustment as follows: In the event that the Corporation shall on or
after January 20, 1997 (i) declare a dividend or make a distribution on Common
Stock payable in shares of its capital stock (whether shares of Common Stock or
of capital stock of any other class) and set a record date for such dividend or
distribution as a date prior to the date on which the Corporation receives the
Determination, (ii) subdivide outstanding shares of Common Stock into a greater
number of shares, (iii) combine outstanding shares of Common Stock into a
smaller number of shares, or (iv) issue any shares of its capital stock by
reclassification of Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Corporation is the
continuing Corporation), then the Share Limit in effect immediately prior to
such event shall automatically be adjusted immediately after the record date, in
the case of such a dividend or distribution, or the effective date, in the case
of such a subdivision, combination or reclassification, to be such aggregate
number of shares of Common Stock that a holder of a number of shares of Common
Stock equal to the Share Limit in effect immediately prior to such event, would
have been entitled to receive by virtue of such dividend, distribution,
subdivision, combination or reclassification.
FIFTH: BY-LAWS. The board of directors of the Corporation is expressly
authorized to adopt, amend or repeal the by-laws of the Corporation, subject to
the vote of directors otherwise required herein.
-6-
<PAGE> 7
SIXTH: DIRECTORS; NO STOCKHOLDER ACTION BY WRITTEN CONSENT, ETC. The
following provisions are inserted for the management of the business and the
conduct of the affairs of the Corporation, and for further definition,
limitation and regulation of the powers of the Corporation and of its directors
and stockholders:
The business and affairs of the Corporation shall be managed by or
under the direction of the board of directors. In addition to the powers and
authority expressly conferred upon them by statute or by this Restated
Certificate of Incorporation or the by-laws of the Corporation, the directors
are hereby empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation.
The directors of the Corporation need not be elected by written ballot
unless the by-laws so provide.
Any action required or permitted to be taken by the stockholders of
the Corporation must be effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders.
Special meetings of stockholders of the Corporation may be called only
by the Chairman of the Board or the President or by the Board of Directors
acting pursuant to a resolution adopted by a majority of the Whole Board. For
purposes of this Restated Certificate of Incorporation, the term "Whole Board"
shall mean the total number of authorized directors whether or not there exist
any vacancies in previously authorized directorships.
SEVENTH: CLASSIFIED BOARD. Subject to the rights of the holders of any
series of Preferred Stock to elect additional directors under specified
circumstances, the number of directors shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the Whole Board. The directors, other than those who may be elected
by the holders of any series of Preferred Stock under specified circumstances,
shall be divided into three classes, with the term of office of the first class
to expire at the Corporation's first annual meeting of stockholders following
the effectiveness of this Article, the term of office of the second class to
expire at the Corporation's second annual meeting of stockholders following the
effectiveness of this Article and the term of office of the third class to
expire at the Corporation's third annual meeting of stockholders following the
effectiveness of this Article. At each annual meeting of stockholders, directors
elected to succeed those directors whose terms expire shall be elected for a
term of office to expire at the third succeeding annual meeting of stockholders
after their election.
Subject to the rights of the holders of any series of Preferred Stock
then outstanding, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the board of directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause shall, unless otherwise provided by law or by
-7-
<PAGE> 8
resolution of the Board of Directors, be filled only by a majority vote of the
directors then in office, though less than a quorum, and directors so chosen
shall hold office for a term expiring at the annual meeting of stockholders at
which the term of office of the class to which they have been chosen expires. No
decrease in the authorized number of directors shall shorten the term of any
incumbent director.
Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
by-laws of the Corporation.
Subject to the rights of the holders of any series of Preferred Stock
then outstanding, any directors, or the entire board of directors, may be
removed from office at any time, but only for cause and only by the affirmative
vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of
the voting power of all of the then-outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class.
EIGHTH: AMENDMENT TO BY-LAWS. The Board of Directors is expressly
empowered to adopt, amend or repeal the by-laws of the Corporation. Any
adoption, amendment or repeal of the by-laws of the Corporation by the Board of
Directors shall require the approval of a majority of the Whole Board. The
stockholders shall also have power to adopt, amend or repeal the by-laws of the
Corporation; provided, however, that, in addition to any vote of the holders of
any class or series of stock of the Corporation required by law or by this
Restated Certificate of Incorporation, the affirmative vote of the holders of at
least sixty-six and two-thirds percent (66 2/3%) of the voting power of all of
the then-outstanding shares of the capital stock of the Corporation entitled to
vote generally in the election of directors, voting together as a single class,
shall be required to adopt, amend or repeal any provision of the by-laws of the
Corporation.
NINTH: AMENDMENTS TO CERTIFICATE. The Corporation reserves the right
to amend, alter or repeal any provision contained in this Restated Certificate
of Incorporation in the manner prescribed by the laws of the State of Delaware
and all rights conferred upon stockholders are granted subject to this
reservation; provided, however, that, notwithstanding any other provision of
this Restated Certificate of Incorporation or any provision of law that might
otherwise permit a lesser vote or no vote, but in addition to any vote of the
holders of any class or series of the stock of this Corporation required by law
or by this Restated Certificate of Incorporation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting
power of all of the then-outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to amend or repeal this Article
NINTH, or Articles FIFTH, SIXTH, SEVENTH, EIGHTH, TENTH or ELEVENTH or to adopt
an agreement of merger or consolidation or to approve the sale, lease, exchange
or other disposition of all or substantially all of the Corporation's property
and assets; provided that on and after July 31, 2003, the affirmative vote
-8-
<PAGE> 9
of the holders of at least a majority of the voting power of all of the
then-outstanding shares of the capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required to adopt an agreement of merger or consolidation or to approve the
sale, lease, exchange or other disposition of all or substantially all of the
Corporation's property and assets.
TENTH: LIABILITY. No director shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that to the extent required by the
provisions of Section 102(b)(7) of the General Corporation Law of the State of
Delaware or any successor statute, as the same may be interpreted or amended
from time to time, or any other laws of the State of Delaware, this provision
shall not eliminate or limit the liability of a director (i) for any breach of
the director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the General Corporation Law
of the State of Delaware or (iv) for any transaction from which the director
derived an improper personal benefit. If the General Corporation Law of the
State of Delaware hereafter is amended to authorize the further elimination or
limitation on personal liability of directors, then the liability of a director
of the Corporation, in addition to the limitation on personal liability provided
herein, shall be limited to the fullest extent permitted by the amended General
Corporation Law of the State of Delaware. Any repeal or modification of this
Article TENTH by the stockholders of the Corporation shall be prospective only,
and shall not adversely affect any limitation on the personal liability of a
director of the Corporation existing at the time of such repeal or modification.
ELEVENTH: INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.
11.1 INDEMNIFICATION. Each person who was or is made a party or is
threatened to be made a party to or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she is or was a
director or an officer of the Corporation or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise, including service
with respect to an employee benefit plan (hereinafter an "indemnitee"), whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than such law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid in settlement) reasonably incurred or
suffered by such indemnities in connection therewith; provided, however, that,
except as provided in Section 11.3 of this Article
-9-
<PAGE> 10
ELEVENTH with respect to proceedings to enforce rights to indemnification, the
Corporation shall indemnify any such indemnities in connection with a proceeding
(or part thereof) initiated by such indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Corporation.
11.2 RIGHT TO ADVANCEMENT OF EXPENSES. The right to indemnification
conferred in Section 11.1 of this Article ELEVENTH shall include the right to be
paid by the Corporation the expenses (including attorneys' fees) incurred in
defending any such proceeding in advance of its final disposition (hereinafter
an "advancement of expenses"); provided, however, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an indemnitee
in his or her capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such indemnitee, including, without
limitation, service to an employee benefit plan) shall be made only upon
delivery to the Corporation of an undertaking (hereinafter an "undertaking"), by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under this
Section 11.2 or otherwise. The rights to indemnification and to the advancement
of expenses conferred in Sections 11.1 and 11.2 of this Article ELEVENTH shall
be contract rights and such rights shall continue as to an indemnitee who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
11.3 RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under Sections 11.1
or 11.2 of this Article ELEVENTH is not paid in full by the Corporation within
sixty (60) days after a written claim has been received by the Corporation,
except in the case of a claim for an advancement of expenses, in which case the
applicable period shall be twenty (20) days, the indemnitee may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim. If successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that, and (ii) in any suit brought by the Corporation to
recover an advancement of expenses pursuant to the terms of an undertaking, the
Corporation shall be entitled to recover such expenses upon a final adjudication
that, the indemnitee has not met any applicable standard for indemnification set
forth in the Delaware General Corporation Law. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of suit
that indemnification of the indemnitee is proper in the circumstances because
the indemnitee has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that
-10-
<PAGE> 11
the indemnitee has not met the applicable standard of conduct or, in the case of
such a suit brought by the indemnitee, be a defense to such suit. In any suit
brought by the indemnitee to enforce a right to indemnification or to an
advancement of expenses hereunder, or brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this Article ELEVENTH or otherwise shall be on
the Corporation.
11.4 NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification and to
the advancement of expenses conferred in this Article ELEVENTH shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, the Corporation's Certificate of Incorporation, by-laws,
agreement, vote of stockholders or disinterested directors or otherwise.
11.5 INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another Corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
11.6 INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement of expenses to
any employee or agent of the Corporation to the fullest extent of the provisions
of this Article with respect to the indemnification and advancement of expenses
of directors and officers of the Corporation.
IN WITNESS WHEREOF, the undersigned has caused this Restated
Certificate of Incorporation to be executed in its corporate name by its Senior
Vice President this 27th day of January, 2000.
/s/ Jane Kober
--------------------------------
Name: Jane Kober
Title: Senior Vice President,
General Counsel and
Secretary
-11-
<PAGE> 12
CERTIFICATE OF DESIGNATION
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
BIOPURE CORPORATION
-----------------------------------------------
(PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW)
------------------------------------------------
Biopure Corporation, a corporation organized and existing
under the General Corporation Law of the State of Delaware (hereinafter called
the "Corporation"), hereby certifies that the following resolution was adopted
by the Board of Directors of the Corporation as required by Section 151 of the
General Corporation Law at a meeting duly called and held on July 28, 1999:
RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of this Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Restated
Certificate of Incorporation of the Corporation (the "Restated Certificate of
Incorporation"), the Board of Directors hereby creates a series of Preferred
Stock, par value $0.01 per share (the "Preferred Stock"), of the Corporation and
hereby states the designation and number of shares, and fixes the relative
rights, preferences, and limitations thereof as follows:
SECTION 1. DESIGNATION AND AMOUNT. The shares of this series
shall be designated as "Series A Junior Participating Preferred Stock" (the
"Series A Preferred Stock") and the number of shares constituting the Series A
Preferred Stock shall be 75,000. Such number of shares may be increased or
decreased by resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Series A Preferred Stock to a number less
than the number of shares then outstanding plus the number of shares reserved
for issuance upon the exercise of outstanding options, rights or warrants or
upon the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the rights of the holders of any
shares of any series of Preferred Stock (or any other stock) ranking prior and
superior to the Series A Preferred Stock with
1
<PAGE> 13
respect to dividends, the holders of shares of Series A Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable in cash on
the last day of March, June, September and December in each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date"), commencing on
the first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Preferred Stock, in an amount (if any) per share
(rounded to the nearest cent), subject to the provision for adjustment
hereinafter set forth, equal to 1000 times the aggregate per share amount of all
cash dividends, and 1000 times the aggregate per share amount (payable in kind)
of all non-cash dividends or other distributions, other than a dividend payable
in shares of Common Stock, par value $0.01 per share (the "Common Stock"), of
the Corporation or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock. In the event the Corporation
shall at any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior to
such event under the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or
distribution on the Series A Preferred Stock as provided in paragraph (A) of
this Section immediately after it declares a dividend or distribution on the
Common Stock (other than a dividend payable in shares of Common Stock).
(C) Dividends due pursuant to paragraph (A) of this
Section shall begin to accrue and be cumulative on outstanding shares of Series
A Preferred Stock from the Quarterly Dividend Payment Date next preceding the
date of issue of such shares, unless the date of issue of such shares is prior
to the record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares of Series
A Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear
2
<PAGE> 14
interest. Dividends paid on the shares of Series A Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon, which record
date shall be not more than 60 days prior to the date fixed for the payment
thereof.
SECTION 3. VOTING RIGHTS. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment
hereinafter set forth, each share of Series A Preferred Stock shall entitle the
holder thereof to 1000 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the number of votes per share
to which holders of shares of Series A Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying such number by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided the Restated
Certificate of Incorporation, including any other Certificate of Designations
creating a series of Preferred Stock or any similar stock, or by law, the
holders of shares of Series A Preferred Stock and the holders of shares of
Common Stock and any other capital stock of the Corporation having general
voting rights shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise
required by law, holders of Series A Preferred Stock shall have no special
voting rights and their consent shall not be required (except to the extent they
are entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.
SECTION 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends
or distributions payable on the Series A Preferred Stock as provided in Section
2 are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:
3
<PAGE> 15
(i) declare or pay dividends, or make any
other distributions, on any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock;
(ii) declare or pay dividends, or make any
other distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A Preferred Stock
and all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares are then
entitled; or
(iii) redeem or purchase or otherwise
acquire for consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for shares of
any stock of the Corporation ranking junior (as to dividends and upon
dissolution, liquidation or winding up) to the Series A Preferred Stock.
(B) The Corporation shall not permit any subsidiary
of the Corporation to purchase or otherwise acquire for consideration any shares
of stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
SECTION 5. REACQUIRED SHARES. Any shares of Series A Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock subject to the conditions and restrictions on issuance set forth
herein or in the Restated Certificate of Incorporation, including any
Certificate of Designations creating a series of Preferred Stock or any similar
stock, or as otherwise required by law.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any
liquidation, dissolution or winding up of the Corporation the holders of shares
of Series A Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
1000 times the aggregate amount to be distributed per share to holders of shares
of Common Stock plus an amount equal to any accrued and unpaid dividends. In the
event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in
4
<PAGE> 16
each such case the aggregate amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
SECTION 7. CONSOLIDATION, MERGER, ETC. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case each share
of Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
SECTION 8. AMENDMENT. The Restated Certificate of
Incorporation shall not be amended in any manner, including in a merger or
consolidation, which would alter, change, or repeal the powers, preferences or
special rights of the Series A Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of at least two-thirds of the
outstanding shares of Series A Preferred Stock, voting together as a single
class.
SECTION 9. RANK. The Series A Preferred Stock shall rank, with
respect to the payment of dividends and upon liquidation, dissolution and
winding up, junior to all series of Preferred Stock.
5
<PAGE> 1
[LEBOEUF, LAMB, GREENE & MACRAE L.L.P. LETTERHEAD]
February 22, 2000
Biopure Corporation
11 Hurley Street
Cambridge, MA 02141
Re: Biopure Corporation Registration Statement on
Form S-1 (File No. 333-30382)
---------------------------------------------
Ladies and Gentlemen:
We are acting as counsel for Biopure Corporation, a Delaware
corporation (the "Company"), in connection with the registration by the Company
of up to 2,875,000 shares of Class A Common Stock, par value $.01 per share (the
"Shares"), on a Registration Statement on Form S-1 (No. 333-30382), as amended
(the "Registration Statement"), filed with the Securities and Exchange
Commission pursuant to the Securities Act of 1933 (the "Securities Act"). The
Shares are to be purchased from the Company by certain underwriters and offered
for sale to the public in the manner set forth in the Prospectus.
For the purpose of the opinion set forth below, we have examined
originals, or copies certified or otherwise identified to our satisfaction, of
such documents and corporate and public records as we have deemed necessary as a
basis for the opinions hereinafter expressed. In our examination, we have
assumed the genuineness of all signatures, the authenticity of all documents
presented to us as originals and the conformity to the originals of all
documents presented to us as copies. In rendering our opinions, we have relied
as to factual matters upon certificates and representations of officers of the
Company and certificates of public officials.
Based upon the foregoing, and subject to the completion of the
proceedings to be taken by the Company in connection with the sale of the Shares
and effectiveness of the
<PAGE> 2
Biopure Corporation
February 22, 2000
Page 2
Registration Statement under the Securities Act, we are of the opinion that the
Shares, when issued and sold as contemplated in the Registration Statement, will
be validly issued, fully paid and nonassessable.
We are do not express any opinion herein concerning any law other than the
Delaware General Corporation Law.
We hereby consent to the use of this opinion as Exhibit 5.1 to the
Registration Statement and to the use of our name under the caption "Legal
Matters" contained in the Prospectus. In giving this consent, we do not thereby
concede that we come within the category of persons whose consent is required by
the Securities Act or the General Rules and Regulations promulgated thereunder.
Very truly yours,
/s/ LeBoeuf, Lamb, Greene & MacRae, L.L.P.
------------------------------------------
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
<PAGE> 1
EXHIBIT 10.26
AMENDED AND RESTATED
BIOPURE CORPORATION
1999 OMNIBUS SECURITIES AND INCENTIVE PLAN
(AMENDMENT AND RESTATEMENT EFFECTIVE AS OF FEBRUARY 14, 2000)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I PURPOSE.................................................................................. 1
ARTICLE II DEFINITIONS.............................................................................. 1
ARTICLE III EFFECTIVE DATE OF PLAN................................................................... 5
ARTICLE IV ADMINISTRATION........................................................................... 6
Section 4.1 Composition of Committee................................................................. 6
Section 4.2 Powers................................................................................... 6
Section 4.3 Additional Powers........................................................................ 6
Section 4.4 Committee Action......................................................................... 6
ARTICLE V STOCK SUBJECT TO PLAN AND LIMITATIONS THEREON............................................ 6
Section 5.1 Stock Grant and Award Limits............................................................. 6
Section 5.2 Stock Offered............................................................................ 7
ARTICLE VI ELIGIBILITY FOR AWARDS; TERMINATION OF
EMPLOYMENT, DIRECTOR STATUS OR CONSULTANT
STATUS................................................................................... 7
Section 6.1 Eligibility.............................................................................. 7
Section 6.2 Termination of Employment or Director Status............................................. 7
Section 6.3 Termination of Consultant Status......................................................... 8
Section 6.4 Special Termination Rule................................................................. 9
ARTICLE VII OPTIONS.................................................................................. 10
Section 7.1 Option Period............................................................................ 10
Section 7.2 Limitations on Exercise of Option........................................................ 10
Section 7.3 Special Limitations on Incentive Stock Options........................................... 10
Section 7.4 Option Agreement......................................................................... 10
Section 7.5 Option Price and Payment................................................................. 11
Section 7.6 Shareholder Rights and Privileges........................................................ 11
Section 7.7 Options and Rights in Substitution for Stock Options Granted by Other
Corporations............................................................................. 11
ARTICLE VIII RESTRICTED STOCK AWARDS.................................................................. 11
Section 8.1 Restriction Period to be Established by Committee........................................ 11
Section 8.2 Other Terms and Conditions............................................................... 11
Section 8.3 Payment for Restricted Stock............................................................. 12
Section 8.4 Restricted Stock Award Agreements........................................................ 12
ARTICLE IX UNRESTRICTED STOCK AWARDS................................................................ 12
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE X PERFORMANCE UNIT AWARDS.................................................................. 13
Section 10.1 Terms and Conditions..................................................................... 13
Section 10.2 Payments................................................................................. 13
ARTICLE XI PERFORMANCE SHARE AWARDS................................................................. 13
Section 11.1 Terms and Conditions..................................................................... 13
Section 11.2 Shareholder Rights and Privileges........................................................ 13
ARTICLE XII DISTRIBUTION EQUIVALENT RIGHTS........................................................... 13
Section 12.1 Terms and Conditions..................................................................... 13
Section 12.2 Interest Equivalents..................................................................... 13
ARTICLE XIII RECAPITALIZATION OR REORGANIZATION....................................................... 14
Section 13.1 Adjustments to Common Stock.............................................................. 14
Section 13.2 Recapitalization......................................................................... 14
Section 13.3 Change of Control........................................................................ 14
Section 13.4 Other Events............................................................................. 15
Section 13.5 Powers Not Affected...................................................................... 15
Section 13.6 No Adjustment for Certain Awards......................................................... 15
ARTICLE XIV AMENDMENT AND TERMINATION OF PLAN........................................................ 15
ARTICLE XV MISCELLANEOUS............................................................................ 16
Section 15.1 No Right to Award........................................................................ 16
Section 15.2 No Rights Conferred...................................................................... 16
Section 15.3 Other Laws; Withholding.................................................................. 16
Section 15.4 No Restriction on Corporate Action....................................................... 17
Section 15.5 Restrictions on Transfer................................................................. 17
Section 15.6 Section 162(m)........................................................................... 17
Section 15.7 Other Plans.............................................................................. 17
Section 15.8 Limits of Liability...................................................................... 17
Section 15.9 Governing Law............................................................................ 18
Section 15.10 Severability of Provisions............................................................... 18
Section 15.11 No Funding............................................................................... 18
Section 15.12 Headings................................................................................. 18
</TABLE>
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<PAGE> 4
AMENDED AND RESTATED
BIOPURE CORPORATION
1999 OMNIBUS SECURITIES AND INCENTIVE PLAN
ARTICLE I
PURPOSE
The purpose of this Amended and Restated Biopure Corporation 1999
Omnibus Securities and Incentive Plan (the "Plan") is to benefit the
shareholders of Biopure Corporation, a Delaware corporation (the "Company"), by
assisting the Company to attract, retain and provide incentives to key
management employees and directors of, and non-employee consultants to, the
Company and its Affiliates, and to align the interests of such employees,
directors and non-employee consultants with those of the Company's shareholders.
Accordingly, the Plan provides for the granting of Incentive Stock Options,
Non-Qualified Stock Options, Restricted Stock Awards, Deferred Stock Awards,
Unrestricted Stock Awards, Performance Share Awards, Distribution Equivalent
Rights or any combination of the foregoing, as may be best suited to the
circumstances of the particular Employee, Director or Consultant as provided
herein.
ARTICLE II
DEFINITIONS
The following definitions shall be applicable throughout the Plan
unless the context otherwise requires:
"Affiliate" shall mean any person or entity which, at the time of
reference, directly, or indirectly through one or more intermediaries, controls,
is controlled by, or is under common control with, the Company.
"Award" shall mean, individually or collectively, any Option,
Restricted Stock Award, Deferred Stock Award, Unrestricted Stock Award,
Performance Share Award, Performance Unit Award or Distribution Equivalent Right
Award.
"Award Agreement" shall mean a written agreement between the Company
and the Holder with respect to an Award.
"Board" shall mean the Board of Directors of the Company.
"Cause" with reference to an Employee or a Director shall mean (a) an
act or acts of material personal dishonesty taken by, or committed at the
request of, an Employee or Director, intended to result in the personal
enrichment of the Employee or Director at the expense of the Company, or any of
its subsidiaries, (b) repeated willful violations by an Employee under the terms
of his or her employment or repeated willful failures by a Director to serve in
good faith as a Board member, in either case which have not been cured within
thirty (30) days after written
<PAGE> 5
notice has been given by the Board to the Employee or Director, or (c) the
conviction of an Employee or Director of a felony.
"Change of Control" shall mean (i) the consummation of (x) any
consolidation, reorganization, merger or share exchange of the Company in which
the Company is not the continuing or surviving corporation or pursuant to which
shares of the Company's Common Stock would be converted into cash, securities or
other property, other than a merger or share exchange of the Company in which
the holders of the Company's Common Stock immediately prior to the merger have
the same proportionate ownership of common stock of the surviving corporation
immediately after the merger or share exchange, or (y) any sale, lease, exchange
or other transfer (in one transaction or a series of related transactions) of
all, or substantially all, of the assets of the Company, or (ii) the
shareholders of the Company shall approve any plan or proposal for liquidation
or dissolution of the Company, or (iii) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Exchange Act, including any "group" (as
defined in Section 13(d)(3) of the Exchange Act) (other than the Holder or any
group controlled by the Holder)) shall become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of fifty percent (50%) or more of
the Company's outstanding Common Stock (other than pursuant to a plan or
arrangement entered into by such person and the Company and such person
discloses its intent to effect a change of the control or ownership of the
Company in any filing with the Securities and Exchange Commission), or (iv)
within any twenty-four (24) month period beginning on or after the Effective
Date, the persons who were directors of the Company immediately before the
beginning of such period (the "Incumbent Directors") shall cease (for any reason
other than death, disability or retirement) to constitute at least a majority of
the Board or the board of directors of any successor to the Company, provided
that, any director who was not a director as of the Effective Date shall be
deemed to be an Incumbent Director if such director was elected to the Board by,
or on the recommendation of or with the approval of, at least two-thirds of the
directors who then qualified as Incumbent Directors either actually or by prior
operation of this definition unless such election, recommendation or approval
was the result of any actual or threatened election contest of the type
contemplated by Regulation 14a-11 promulgated under the Exchange Act or any
successor provision.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Reference in the Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to any section and any regulation under such
section.
"Committee" shall mean (i) prior to the effective date of an initial
public offering of shares of Common Stock, the full Board, and (ii) on and after
the effective date of an initial public offering of shares of Common Stock, not
less than three (3) members of the Board who are selected by the Board as
provided in Section 4.1.
"Common Stock" shall mean the Class A Common Stock, par value $0.01 per
share, of the Company.
"Company" shall mean Biopure Corporation, a Delaware corporation, and
any successor thereto.
-2-
<PAGE> 6
"Consultant" shall mean any individual who is neither an Employee nor a
Director who is engaged by the Company or an Affiliate to perform consulting
services therefor.
"Director" shall mean a member of the Board or a member of the Board of
Directors of an Affiliate, in either case, who is not an Employee.
"Distribution Equivalent Right" shall mean an Award granted under
Article XII of the Plan which entitles the Holder to receive bookkeeping
credits, cash payments and/or Common Stock distributions equal in amount to the
distributions that would have been made to the Holder had the Holder held a
specified number of shares of Common Stock during the period that the Holder
held the Distribution Equivalent Right.
"Distribution Equivalent Right Award Agreement" shall mean a written
agreement between the Company and a Holder with respect to a Distribution
Equivalent Right Award.
"Effective Date" shall mean June 24, 1999. The effective date of this
amendment and restatement of the Plan shall be January 1, 2000.
"Employee" shall mean any person employed by the Company or an
Affiliate.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" shall mean, as of any specified date, the mean of
the reported high and low sales prices of the Common Stock on the stock exchange
composite tape on that date, or if no prices are reported on that date, on the
last preceding date on which such prices of the Common Stock are so reported. If
the Common Stock is traded over-the-counter at the time a determination of its
fair market value is required to be made hereunder, its fair market value shall
be deemed to be equal to the average between the reported high and low or
closing bid and asked prices of Common Stock on the most recent date on which
Common Stock was publicly traded. In the event Common Stock is not publicly
traded at the time a determination of this value is required to be made
hereunder, the determination of its fair market value shall be made by the
Committee in such manner as it deems appropriate.
"Family Member" shall mean any child, stepchild, grandchild, parent,
spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including
adoptive relationships, any person sharing the Holder's household (other than a
tenant or the Holder), a trust in which such persons have more than fifty
percent (50%) of the beneficial interest, a foundation in which such persons (or
the Holder) control the management of assets, and any other entity in which such
persons (or the Holder) own more than fifty percent (50%) of the voting
interests.
"Good Reason" shall mean: (a) the reduction of an Employee's Base
Salary, (b) the changing, without his or her consent, of an Employee's title,
authority, duties or responsibilities from those immediately prior to the Change
of Control, or (c) the material breach by the
-3-
<PAGE> 7
Company of any material terms of the Employee's employment which has not been
cured within thirty (30) days after a notice has been given by the Employee to
the Company.
"Holder" shall mean an Employee, Director or Consultant who has been
granted an Award.
"Incentive Stock Option" shall mean an Option which is an "incentive
stock option" within the meaning of Section 422 of the Code.
"Non-Qualified Stock Option" shall mean an Option which is not an
Incentive Stock Option.
"Option" shall mean an Award granted under Article VII of the Plan of
an option to purchase shares of Common Stock and includes both Incentive Stock
Options and Non-Qualified Stock Options.
"Option Agreement" shall mean a written agreement between the Company
and a Holder with respect to an Option.
"Performance Share Award" shall mean an Award granted under Article XI
of the Plan under which, upon the satisfaction of predetermined individual or
Company performance goals and/or objectives, shares of Common Stock are paid to
the Holder.
"Performance Share Award Agreement" shall mean a written agreement
between the Company and a Holder with respect to a Performance Share Award.
"Performance Unit" shall mean a Unit awarded to a Holder pursuant to a
Performance Unit Award.
"Performance Unit Award" shall mean an Award granted under Article X of
the Plan under which, upon the satisfaction of predetermined individual or
Company performance goals and/or objectives, a cash payment shall be paid to the
Holder, based on the number of Units awarded to the Holder.
"Performance Unit Award Agreement" shall mean a written agreement
between the Company and a Holder with respect to a Performance Unit Award.
"Plan" shall mean this Biopure Corporation 1999 Omnibus Securities and
Incentive Plan, as amended from time to time.
"Restricted Stock Award" shall mean an Award granted under Article VIII
of the Plan of shares of Common Stock, the transferability of which by the
Holder shall be subject to Transfer Restrictions.
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"Restricted Stock Award Agreement" shall mean a written agreement
between the Company and a Holder with respect to a Restricted Stock Award.
"Restriction Period" shall mean the period of time for which shares of
Common Stock subject to a Restricted Stock Award shall be subject to Transfer
Restrictions, as set forth in the applicable Restricted Stock Award Agreement.
"Ten Percent Shareholder" shall mean an Employee who, at the time an
Option is granted to him or her, owns more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of any parent
corporation or subsidiary corporation thereof (both as defined in Section 424 of
the Code), within the meaning of Section 422(b)(6) of the Code.
"Total and Permanent Disability" shall mean the inability of an
individual to provide meaningful service for the Company due to a medically
determinable physical or mental impairment, which service is reasonably
consistent with the individual's past service for the Company, training and
experience. Such determination of total and permanent disability shall be made
by the Committee. Notwithstanding the foregoing, if an individual qualifies for
Federal Social Security disability benefits or for payments under a long-term
disability income Plan of the Company or the Affiliate which employs such
individual, based upon his physical or mental condition, such individual shall
be deemed to suffer from a Total and Permanent Disability hereunder.
"Transfer Restrictions" shall mean restrictions on the transferability
of shares of Common Stock awarded to an Employee, Director or Consultant under
the Plan pursuant to a Restricted Stock Award Agreement.
"Units" shall mean bookkeeping units, each of which represents such
monetary amount as shall be designated by the Committee in each Performance Unit
Award Agreement.
"Unrestricted Stock Award" shall mean an Award granted under Article IX
of the Plan of shares of Common Stock which are not subject to Transfer
Restrictions.
"Unrestricted Stock Award Agreement" shall mean a written agreement
between the Company and a Holder with respect to an Unrestricted Stock Award.
ARTICLE III
EFFECTIVE DATE OF PLAN
The Plan shall be effective as of the Effective Date, provided that the
Plan is approved by the shareholders of the Company within twelve (12) months of
such date.
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ARTICLE IV
ADMINISTRATION
Section 4.1 Composition of Committee. The Plan shall be administered by
the Committee, which shall be (i) appointed by the Board, and (ii) constituted
so as to permit applicable Awards under the Plan to constitute
"performance-based compensation" for purposes of Section 162(m) of the Code and
applicable interpretive authority thereunder. If a member of the Committee shall
be eligible to receive an Award under the Plan, such Committee member shall have
no authority hereunder with respect to his or her own Award.
Section 4.2 Powers. Subject to the provisions of the Plan, the
Committee shall have the sole authority, in its discretion, to determine which
individuals shall receive an Award, the time or times when such Award shall be
made, what type of Award shall be granted and the number of shares of Common
Stock which may be issued under such Award, as applicable. In making such
determinations the Committee may take into account the nature of the services
rendered by the respective individuals, their present and potential contribution
to the Company's (or the Affiliate's) success and such other factors as the
Committee in its discretion shall deem relevant.
Section 4.3 Additional Powers. The Committee shall have such additional
powers as are delegated to it under the other provisions of the Plan. Subject to
the express provisions of the Plan, the Committee is authorized to construe the
Plan and the respective Award Agreements executed hereunder, to prescribe such
rules and regulations relating to the Plan as it may deem advisable to carry out
the intent of the Plan, and to determine the terms, restrictions and provisions
of each Award, including such terms, restrictions and provisions as shall be
requisite in the judgment of the Committee to cause designated Options to
qualify as Incentive Stock Options, and to make all other determinations
necessary or advisable for administering the Plan. The Committee may correct any
defect or supply any omission or reconcile any inconsistency in any Award
Agreement in the manner and to the extent it shall deem expedient to carry it
into effect. The determinations of the Committee on the matters referred to in
this Article IV shall be conclusive.
Section 4.4 Committee Action. In the absence of specific rules to the
contrary, action by the Committee shall require the consent of a majority of the
members of the Committee, expressed either orally at a meeting of the Committee
or in writing in the absence of a meeting.
ARTICLE V
STOCK SUBJECT TO PLAN AND LIMITATIONS THEREON
Section 5.1 Stock Grant and Award Limits. The Committee may from time
to time grant Awards to one or more Employees, Directors and/or Consultants
determined by it to be eligible for participation in the Plan in accordance with
the provisions of Article VI. Subject to Article XV, (i) the aggregate number of
shares of Common Stock that may be issued under the Plan shall not exceed two
million eight hundred thousand (2,800,000) shares, and (ii) the aggregate number
of shares of Common Stock that may be issued under the Plan as Incentive Stock
Options, shall not exceed two million eight hundred thousand (2,800,000) shares.
Shares shall be deemed to
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have been issued under the Plan solely to the extent actually issued and
delivered pursuant to an Award. To the extent that an Award lapses or the rights
of its Holder terminate, any shares of Common Stock subject to such Award shall
again be available for the grant of a new Award. Notwithstanding any provision
in the Plan to the contrary, the maximum number of shares of Common Stock that
may be subject to Awards of Options under Article VII granted to any one
Employee during any calendar year shall be one hundred thousand (100,000) shares
(subject to adjustment in the same manner as provided in Article XIII with
respect to shares of Common Stock subject to Awards then outstanding). The
limitation set forth in the preceding sentence shall be applied in a manner
which shall permit compensation generated in connection with the exercise of
Options to constitute "performance-based" compensation for purposes of Section
162(m) of the Code, including, but not limited to, counting against such maximum
number of shares, to the extent required under Section 162(m) of the Code and
applicable interpretive authority thereunder, any shares subject to Options that
are canceled or repriced.
Section 5.2 Stock Offered. The stock to be offered pursuant to the
grant of an Award may be authorized but unissued Common Stock, Common Stock
purchased on the open market or Common Stock previously issued and outstanding
and reacquired by the Company.
ARTICLE VI
ELIGIBILITY FOR AWARDS; TERMINATION OF
EMPLOYMENT, DIRECTOR STATUS OR CONSULTANT STATUS
Section 6.1 Eligibility. Awards made under the Plan may be granted
solely to persons who, at the time of grant, are Employees, Directors or
Consultants. An Award may be granted on more than one occasion to the same
Employee, Director or Consultant, and, subject to the limitations set forth in
the Plan, such Award may include, a Non-Qualified Stock Option, a Restricted
Stock Award, a Deferred Stock Award, an Unrestricted Stock Award, a Distribution
Equivalent Right Award, any combination thereof or, solely for Employees, an
Incentive Stock Option.
Section 6.2 Termination of Employment or Director Status. Except to the
extent inconsistent with the terms of the applicable Award Agreement and/or the
provisions of Section 6.4, the following terms and conditions shall apply with
respect to the termination of a Holder's employment with, or status as a
Director of, the Company or an Affiliate, as applicable, for any reason,
including, without limitation, retirement upon or after attaining age sixty-five
(65), Total and Permanent Disability or death:
(a) The Holder's rights, if any, to exercise any then
exercisable Non-Qualified Stock Options shall terminate:
(1) If such termination is for a reason other than
the Holder's retirement upon or after attaining age sixty-five
(65), Total and Permanent Disability or death, not more than
ninety (90) days after the date of such termination of
employment or six (6) months after the date of such
termination Director status;
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(2) If such termination is on account of the Holder's
retirement upon or after attaining age sixty-five (65) or on
account of the Holder's Total and Permanent Disability, one
(1) year after the date of such termination of employment or
Director status; or
(3) If such termination is on account of the Holder's
death, one (1) year after the date of the Holder's death.
Upon such applicable date the Holder (and such Holder's estate,
designated beneficiary or other legal representative) shall forfeit any
rights or interests in or with respect to any such Non-Qualified Stock
Options.
(b) The Holder's rights, if any, to exercise any then
exercisable Incentive Stock Option shall terminate:
(1) If such termination is for a reason other than
the Holder's Total and Permanent Disability or death, not more
than ninety (90) days after the date of such termination of
employment;
(2) If such termination is on account of the Holder's
Total and Permanent Disability, one (1) year after the date of
such termination of employment; or
(3) If such termination is on account of the Holder's
death, one (1) year after the date of the Holder's death.
Upon such applicable date the Holder (and such Holder's estate,
designated beneficiary or other legal representative) shall forfeit any
rights or interests in or with respect to any such Incentive Stock
Options.
(c) If a Holder's employment with, or status as a Director of,
the Company or an Affiliate, as applicable, terminates for any reason prior to
the actual or deemed satisfaction and/or lapse of the restrictions, terms and
conditions applicable to an Award of Restricted Stock and/or Deferred Stock,
such Restricted Stock and/or Deferred Stock shall immediately be canceled, and
the Holder (and such Holder's estate, designated beneficiary or other legal
representative) shall forfeit any rights or interests in and with respect to any
such Restricted Stock and/or Deferred Stock. The immediately preceding sentence
to the contrary notwithstanding, the Committee, in its sole discretion, may
determine, prior to or within thirty (30) days after the date of such
termination of employment or Director status, that all or a portion of any such
Holder's Restricted Stock and/or Deferred Stock shall not be so canceled and
forfeited.
Section 6.3 Termination of Consultant Status. Except to the extent
inconsistent with the terms of the applicable Award Agreement and/or the
provisions of Section 6.4(d), the
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following terms and conditions shall apply with respect to the termination of a
Holder's status as a Consultant, for any reason:
(a) The Holder's rights, if any, to exercise any then
exercisable Non-Qualified Stock Options shall terminate:
(1) If such termination is for a reason other than
the Holder's death, not more than ninety (90) days after the
date of such termination; or
(2) If such termination is on account of the Holder's
death, one (1) year after the date of the Holder's death.
(b) If the status of a Holder as a Consultant terminates for
any reason prior to the actual or deemed satisfaction and/or lapse of the
restrictions, terms and conditions applicable to an Award of Restricted Stock
and/or Deferred Stock, such Restricted Stock and/or Deferred Stock shall
immediately be canceled, and the Holder (and such Holder's estate, designated
beneficiary or other legal representative) shall forfeit any rights or interests
in and with respect to any such Restricted Stock and/or Deferred Stock. The
immediately preceding sentence to the contrary notwithstanding, the Committee,
in its sole discretion, may determine, prior to or within thirty (30) days after
the date of such termination of such a Holder's status as a Consultant, that all
or a portion of any such Holder's Restricted Stock and/or Deferred Stock shall
not be so canceled and forfeited.
Section 6.4 Special Termination Rule. Except to the extent inconsistent
with the terms of the applicable Award Agreement, and notwithstanding anything
to the contrary contained in this Article VI, if a Holder's employment with, or
status as a Director of, the Company or an Affiliate shall terminate, if, within
ninety (90) days of such termination, such Holder shall become a Consultant,
such Holder's rights with respect to any Award or portion thereof granted
thereto prior to the date of such termination may be preserved if and to the
extent determined by the Committee in its sole discretion as if such Holder had
been a Consultant for the entire period during which such Award or portion
thereof had been outstanding and, should the Committee effect such determination
with respect to such Holder, for all purposes of the Plan, such Holder shall not
be treated as if his or her employment or Director status had terminated until
such time as his or her Consultant status shall terminate, in which case his or
her Award, as it may have been reduced in connection with the Holder's becoming
a Consultant, shall be treated pursuant to the provisions of Section 6.3. Should
a Holder's status as a Consultant terminate, if, within ninety (90) days of such
termination, such Holder shall become an Employee or a Director, such Holder's
rights with respect to any Award or portion thereof granted thereto prior to the
date of such termination may be preserved if and to the extent determined by the
Committee in its sole discretion as if such Holder had been an Employee or a
Director, as applicable, for the entire period during which such Award or
portion thereof had been outstanding, and, should the Committee effect such
determination with respect to such Holder, for all purposes of the Plan, such
Holder shall not be treated as if his or her Consultant status had terminated
until such time as his or her employment with the
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Company or an Affiliate, or his or her Director status, as applicable, shall
terminate, in which case his or her Award shall be treated pursuant to the
provisions of Section 6.2.
ARTICLE VII
OPTIONS
Section 7.1 Option Period. The term of each Option shall be as
specified in the Option Agreement.
Section 7.2 Limitations on Exercise of Option. An Option shall be
exercisable in whole or in such installments and at such times as specified in
the Option Agreement.
Section 7.3 Special Limitations on Incentive Stock Options. To the
extent that the aggregate Fair Market Value (determined at the time the
respective Incentive Stock Option is granted) of Common Stock with respect to
which Incentive Stock Options are exercisable for the first time by an
individual during any calendar year under all plans of the Company and any
parent corporation or subsidiary corporation thereof (both as defined in Section
424 of the Code) which provide for the grant of Incentive Stock Options exceeds
One Hundred Thousand Dollars ($100,000)(or such other individual limit as may be
in effect under the Code on the date of grant), such Incentive Stock Options
shall be treated as Non-Qualified Stock Options. The Committee shall determine,
in accordance with applicable provisions of the Code, Treasury Regulations and
other administrative pronouncements, which of a Holder's Options, which were
intended by the Committee to be Incentive Stock Options when granted to the
Holder, will not constitute Incentive Stock Options because of such limitation
and shall notify the Holder of such determination as soon as practicable after
such determination. No Incentive Stock Option shall be granted to an Employee
if, at the time the Option is granted, such Employee is a Ten Percent
Shareholder, unless (i) at the time such Incentive Stock Option is granted the
Option price is at least one hundred ten percent (110%) of the Fair Market Value
of the Common Stock subject to the Option, and (ii) such Incentive Stock Option
by its terms is not exercisable after the expiration of five (5) years from the
date of grant.
Section 7.4 Option Agreement. Each Option shall be evidenced by an
Option Agreement in such form and containing such provisions not inconsistent
with the provisions of the Plan as the Committee from time to time shall
approve, including, but not limited to, provisions to qualify an Option as an
Incentive Stock Option. An Option Agreement may provide for the payment of the
Option price, in whole or in part, by the delivery of a number of shares of
Common Stock (plus cash if necessary) having a Fair Market Value equal to such
Option price. Each Option Agreement shall, solely to the extent inconsistent
with the provisions of Section 6.2, specify the effect of termination of
employment, Director status or Consultant status on the exercisability of the
Option. Moreover, an Option Agreement may provide for a "cashless exercise" of
the Option by establishing procedures whereby the Holder, by a properly-executed
written notice, directs (i) an immediate market sale or margin loan respecting
all or a part of the shares of Common Stock to which he is entitled upon
exercise pursuant to an extension of credit by the Company to the Holder of the
Option price, (ii) the delivery of the shares of Common Stock from the Company
directly to a brokerage firm and
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(iii) the delivery of the Option price from sale or margin loan proceeds from
the brokerage firm directly to the Company. An Option Agreement may also include
provisions relating to (i) subject to the provisions hereof, accelerated vesting
of Options, (ii) tax matters (including provisions covering any applicable
Employee wage withholding requirements and requiring additional "gross-up"
payments to Holders to meet any excise taxes or other additional income tax
liability imposed as a result of a payment upon a Change of Control resulting
from the operation of the Plan or of such Option Agreement) and (iii) any other
matters not inconsistent with the terms and provisions of the Plan that the
Committee shall in its sole discretion determine. The terms and conditions of
the respective Option Agreements need not be identical.
Section 7.5 Option Price and Payment. The price at which a share of
Common Stock may be purchased upon exercise of an Option shall be determined by
the Committee, but such Option price (i) in the case of an Option that is an
Incentive Stock Option, shall not be less than the Fair Market Value of a share
of Common Stock on the date such Option is granted, and (ii) shall be subject to
adjustment as provided in Article XIII. The Option or portion thereof may be
exercised by delivery of an irrevocable notice of exercise to the Company. The
Option price for the Option or portion thereof shall be paid in full in the
manner prescribed by the Committee. Separate stock certificates shall be issued
by the Company for those shares of Common Stock acquired pursuant to the
exercise of an Incentive Stock Option and for those shares of Common Stock
acquired pursuant to the exercise of a Non-Qualified Stock Option.
Section 7.6 Shareholder Rights and Privileges. The Holder of an Option
shall be entitled to all the privileges and rights of a shareholder of the
Company solely with respect to such shares of Common Stock as have been
purchased under the Option and for which certificates of stock have been
registered in the Holder's name.
Section 7.7 Options and Rights in Substitution for Stock Options
Granted by Other Corporations. Options may be granted under the Plan from time
to time in substitution for stock options held by individuals employed by
entities who become Employees as a result of a merger or consolidation of the
employing entity with the Company or any Affiliate, or the acquisition by the
Company or an Affiliate of the assets of the employing entity, or the
acquisition by the Company or an Affiliate of stock of the employing entity with
the result that such employing entity becomes an Affiliate.
ARTICLE VIII
RESTRICTED STOCK AWARDS
Section 8.1 Restriction Period to be Established by Committee. At the
time a Restricted Stock Award is made, the Committee shall establish the
Restriction Period applicable to such Award. Each Restricted Stock Award may
have a different Restriction Period, in the discretion of the Committee. The
Restriction Period applicable to a particular Restricted Stock Award shall not
be changed except as permitted by Section 8.2 or Article XIV.
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Section 8.2 Other Terms and Conditions. Common Stock awarded pursuant
to a Restricted Stock Award shall be represented by a stock certificate
registered in the name of the Holder of such Restricted Stock Award. If provided
for under the Restricted Stock Award Agreement, the Holder shall have the right
to vote Common Stock subject thereto and to enjoy all other shareholder rights,
except that (i) the Holder shall not be entitled to delivery of the stock
certificate until the Restriction Period shall have expired, (ii) the Company
shall retain custody of the stock during the Restriction Period, (iii) the
Holder may not sell, transfer, pledge, exchange, hypothecate or otherwise
dispose of the stock during the Restriction Period, (iv) the Holder shall be
entitled to receive dividends on the Common Stock during the Restriction Period
and (v) a breach of the terms and conditions established by the Committee
pursuant to the Restricted Stock Award Agreement shall cause a forfeiture of the
Restricted Stock Award. At the time of such Award, the Committee may, in its
sole discretion, prescribe additional terms and conditions or restrictions
relating to Restricted Stock Awards, including, but not limited to, rules
pertaining to the effect of termination of employment, Director status or
Consultant status prior to expiration of the Restriction Period, solely to the
extent inconsistent with the provisions of Section 6.2. Such additional terms,
conditions or restrictions shall, to the extent inconsistent with the provisions
of Section 6.2, be set forth in a Restricted Stock Award Agreement made in
conjunction with the Award. Such Restricted Stock Award Agreement may also
include provisions relating to (i) subject to the provisions hereof, accelerated
vesting of Awards, including but not limited to accelerated vesting upon the
occurrence of a Change of Control, (ii) tax matters (including provisions
covering any applicable Employee wage withholding requirements and requiring
additional "gross-up" payments to Holders to meet any excise taxes or other
additional income tax liability imposed as a result of a Change of Control
payment resulting from the operation of the Plan or of such Restricted Stock
Award Agreement) and (iii) any other matters not inconsistent with the terms and
provisions of the Plan that the Committee shall in its sole discretion
determine. The terms and conditions of the respective Restricted Stock
Agreements need not be identical.
Section 8.3 Payment for Restricted Stock. The Committee shall determine
the amount and form of any payment for Common Stock received pursuant to a
Restricted Stock Award, provided that in the absence of such a determination, a
Holder shall not be required to make any payment for Common Stock received
pursuant to a Restricted Stock Award, except to the extent otherwise required by
law.
Section 8.4 Restricted Stock Award Agreements. At the time any Award is
made under this Article VIII, the Company and the Holder shall enter into a
Restricted Stock Award Agreement setting forth each of the matters contemplated
hereby and such other matters as the Committee may determine to be appropriate.
ARTICLE IX
UNRESTRICTED STOCK AWARDS
Pursuant to the terms of the applicable Unrestricted Stock Award
Agreement, a Holder may be awarded (or sold at a discount) shares of Common
Stock which are not subject to
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Transfer Restrictions, in consideration for past services rendered thereby to
the Company or an Affiliate or for other valid consideration.
ARTICLE X
PERFORMANCE UNIT AWARDS
Section 10.1 Terms and Conditions. The Committee shall set forth in the
applicable Performance Unit Award Agreement the performance goals and objectives
(and the period of time to which such goals and objectives shall apply) which
the Holder and/or the Company would be required to satisfy before becoming
entitled to payment pursuant to Section 10.2, the number of Units awarded to the
Holder and the dollar value assigned to each such Unit.
Section 10.2 Payments. The Holder of a Performance Unit shall be
entitled to receive a cash payment equal to the dollar value assigned to such
Unit under the applicable Performance Unit Award Agreement if the Holder and/or
the Company satisfy (or partially satisfy, if applicable under the applicable
Performance Unit Award Agreement) the performance goals and objectives set forth
in such Performance Unit Award Agreement.
ARTICLE XI
PERFORMANCE SHARE AWARDS
Section 11.1 Terms and Conditions. The Committee shall set forth in the
applicable Performance Share Award Agreement the performance goals and
objectives (and the period of time to which such goals and objectives shall
apply) which the Holder and/or the Company would be required to satisfy before
becoming entitled to the receipt of shares of Common Stock pursuant to such
Holder's Performance Share Award and the number of shares of Common Stock
subject to such Performance Share Award.
Section 11.2 Shareholder Rights and Privileges. The Holder of a
Performance Share Award shall have no rights as a shareholder of the Company
until such time, if any, as the Holder actually receives shares of Common Stock
pursuant to the Performance Share Award.
ARTICLE XII
DISTRIBUTION EQUIVALENT RIGHTS
Section 12.1 Terms and Conditions. The Committee shall set forth in the
applicable Distribution Equivalent Rights Award Agreement the terms and
conditions, if any, including whether the Holder is to receive credits currently
in cash, is to have such credits reinvested (at Fair Market Value determined as
of the date of reinvestment) in additional shares of Common Stock or is to be
entitled to choose among such alternatives. Distribution Equivalent Rights
Awards may be settled in cash or in shares of Common Stock, as set forth in the
Applicable Distribution Equivalent Rights Award Agreement. A Distribution
Equivalent Rights Award may, but need not be, awarded as a component of another
Award, where, if so awarded, such Distribution Equivalent Rights Award shall
expire or be forfeited by the Holder under the same conditions as under such
other Award.
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Section 12.2 Interest Equivalents. The Distribution Equivalent Rights
Award Agreement for a Distribution Equivalent Rights Award may provide for the
crediting of interest on a Distribution Rights Award to be settled in cash at a
future date, at a rate set forth in the applicable Distribution Equivalent
Rights Award Agreement, on the amount of cash payable thereunder.
ARTICLE XIII
RECAPITALIZATION OR REORGANIZATION
Section 13.1 Adjustments to Common Stock. The shares with respect to
which Awards may be granted are shares of Common Stock as presently constituted;
provided, however, that if, and whenever, prior to the expiration or
distribution to the Holder of an Award theretofore granted, the Company shall
effect a subdivision or consolidation of shares of Common Stock or the payment
of a stock dividend on Common Stock without receipt of consideration by the
Company, the number of shares of Common Stock with respect to which such Award
may thereafter be exercised or satisfied, as applicable, (i) in the event of an
increase in the number of outstanding shares, shall be proportionately
increased, and the purchase price per share shall be proportionately reduced,
and (ii) in the event of a reduction in the number of outstanding shares, shall
be proportionately reduced, and the purchase price per share shall be
proportionately increased.
Section 13.2 Recapitalization. If the Company recapitalizes or
otherwise changes its capital structure, thereafter upon any exercise or
satisfaction, as applicable, of a previously granted Award, the Holder shall be
entitled to receive (or entitled to purchase, if applicable) under such Award,
in lieu of the number of shares of Common Stock then covered by such Award, the
number and class of shares of stock and securities to which the Holder would
have been entitled pursuant to the terms of the recapitalization if, immediately
prior to such recapitalization, the Holder had been the holder of record of the
number of shares of Common Stock then covered by such Award.
Section 13.3 Change of Control. Except to the extent otherwise provided
in the applicable Award Agreement, in the event of the occurrence of a Change of
Control, and within one year following the change in control (a) an Employee's
employment is terminated by the Company without Cause or by the Employee with
Good Reason or (b) a Director is removed from the Board without the approving
vote of a majority of the directors in office immediately prior to the Change of
Control, outstanding Awards of the Employee or Director, as the case may be,
shall immediately vest and become exercisable and/or required employment or
Board membership periods with the Company or an Affiliate and/or performance
goals and/or objectives shall be deemed to have been fully satisfied, as
applicable. The Committee, in its discretion by unanimous action, may determine
that upon the occurrence of a Change of Control, each Award outstanding
hereunder shall terminate within a specified number of days after notice to the
Holder, and such Holder shall receive, (i) with respect to Awards which are
Performance Units or Distribution Equivalent Rights (which Distribution
Equivalent Rights, pursuant to the applicable Distribution Equivalent Rights
Award Agreement, are to be settled in cash), cash in an amount equal to the
amount of
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cash that would otherwise have been payable thereunder assuming that all of the
applicable performance goals and objectives set forth in the applicable
Performance Units Award Agreement had been fully satisfied, and (ii) with
respect to each share of Common Stock subject to such Award, cash in an amount
equal to the excess of (A) the greater of (I) the Fair Market Value of such
share of Common Stock immediately prior to the occurrence of such Change of
Control or (II) the value of the consideration to be received in connection with
such Change of Control for one share of Common Stock, over (B) the exercise
price per share, if applicable, of one share of Common Stock. If the
consideration offered to shareholders of the Company in any transaction
described in this Section 13.3 consists of anything other than cash, the
Committee shall determine the fair cash equivalent of the portion of the
non-cash consideration offered. The provisions contained in this Section 13.3
shall not terminate any rights of the Holder to further payments pursuant to any
other agreement with the Company following the occurrence of a Change of
Control.
Section 13.4 Other Events. In the event of changes to the outstanding
Common Stock by reason of recapitalization, reorganization, mergers,
consolidations, combinations, exchanges or other relevant changes in
capitalization occurring after the date of the grant of any Award and not
otherwise provided for under this Article XIII, any outstanding Awards and any
Award Agreements evidencing such Awards shall be subject to adjustment by the
Committee in its discretion as to the number and price of shares of Common Stock
or other consideration subject to such Awards. In the event of any such change
to the outstanding Common Stock, the aggregate number of shares available under
the Plan may be appropriately adjusted by the Committee, the determination of
which shall be conclusive.
Section 13.5 Powers Not Affected. The existence of the Plan and the
Awards granted hereunder shall not affect in any way the right or power of the
Board or of the shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change of the Company's capital
structure or business, any merger or consolidation of the Company, any issue of
debt or equity securities ahead of or affecting Common Stock or the rights
thereof, the dissolution or liquidation of the Company or any sale, lease,
exchange or other disposition of all or any part of its assets or business or
any other corporate act or proceeding.
Section 13.6 No Adjustment for Certain Awards. Except as hereinabove
expressly provided, the issuance by the Company of shares of stock of any class
or securities convertible into shares of stock of any class, for cash, property,
labor or services, upon direct sale, upon the exercise of rights or warrants to
subscribe therefor or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, and in any case whether or not
for fair value, shall not affect previously granted Awards, and no adjustment by
reason thereof shall be made with respect to the number of shares of Common
Stock subject to Awards theretofore granted or the purchase price per share, if
applicable.
ARTICLE XIV
AMENDMENT AND TERMINATION OF PLAN
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<PAGE> 19
The Board in its discretion may terminate the Plan at any time with
respect to any shares for which Awards have not theretofore been granted. The
Board shall have the right to alter or amend the Plan or any part hereof from
time to time; provided, however, that no change in any Award theretofore granted
may be made which would materially and adversely impair the rights of a Holder
without the consent of the Holder (unless such change is required in order to
cause the benefits under the Plan to qualify as performance-based compensation
within the meaning of Section 162(m) of the Code and applicable interpretive
authority thereunder).
ARTICLE XV
MISCELLANEOUS
Section 15.1 No Right to Award. Neither the adoption of the Plan by the
Company nor any action of the Board or the Committee shall be deemed to give an
Employee, Director or Consultant any right to an Award except as may be
evidenced by an Award Agreement duly executed on behalf of the Company, and then
solely to the extent and on the terms and conditions expressly set forth
therein.
Section 15.2 No Rights Conferred. Nothing contained in the Plan shall
(i) confer upon any Employee any right with respect to continuation of
employment with the Company or any Affiliate, (ii) interfere in any way with the
right of the Company or any Affiliate to terminate the employment of an Employee
at any time, (iii) confer upon any Director any right with respect to
continuation of such Director's membership on the Board, (iv) interfere in any
way with the right of the Company or an Affiliate to terminate a Director's
membership on the Board at any time, (v) confer upon any Consultant any right
with respect to continuation of his or her consulting engagement with the
Company or any Affiliate, or (vi) interfere in any way with the right of the
Company or an Affiliate to terminate a Consultant's consulting engagement with
the Company or an Affiliate at any time.
Section 15.3 Other Laws; Withholding. The Company shall not be
obligated to issue any Common Stock pursuant to any Award granted under the Plan
at any time when the shares covered by such Award have not been registered under
the Securities Act of 1933 and such other state and federal laws, rules or
regulations as the Company or the Committee deems applicable and, in the opinion
of legal counsel of the Company, there is no exemption from the registration
requirements of such laws, rules or regulations available for the issuance and
sale of such shares. No fractional shares of Common Stock shall be delivered,
nor shall any cash in lieu of fractional shares be paid. The Company shall have
the right to deduct in cash (whether under this Plan or otherwise) in connection
with all Awards any taxes required by law to be withheld and to require any
payments required to enable it to satisfy its withholding obligations. In the
case of any Award satisfied in the form of shares of Common Stock, no shares
shall be issued unless and until arrangements satisfactory to the Company shall
have been made to satisfy any tax withholding obligations applicable with
respect to such Award. Subject to such terms and conditions as the Committee may
impose, the Company shall have the right to retain, or the Committee may,
subject to such terms and conditions as it may establish from time to time,
permit Holders to elect to tender Common Stock (including
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<PAGE> 20
Common Stock issuable in respect of an Award) to satisfy, in whole or in part,
the amount required to be withheld.
Section 15.4 No Restriction on Corporate Action. Nothing contained in
the Plan shall be construed to prevent the Company or any Affiliate from taking
any corporate action which is deemed by the Company or such Affiliate to be
appropriate or in its best interest, whether or not such action would have an
adverse effect on the Plan or any Award made under the Plan. No Employee,
Director, Consultant, beneficiary or other person shall have any claim against
the Company or any Affiliate as a result of any such action.
Section 15.5 Restrictions on Transfer. No Award under the Plan or any
Award Agreement and no rights or interests herein or therein, shall or may be
assigned, transferred, sold, exchanged, encumbered, pledged or otherwise
hypothecated or disposed of by a Holder except (i) by will or by the laws of
descent and distribution, or (ii) except for an Incentive Stock Option, by gift
to any Family Member of the Holder. An award may be exercisable during the
lifetime of the Holder only by such Holder or by the Holder's guardian or legal
representative unless it has been transferred by gift to a Family Member of the
Holder, in which case it shall be exercisable solely by such transferee.
Notwithstanding any such transfer, the Holder shall continue to be subject to
the withholding requirements provided for under Section 15.3 hereof.
Section 15.6 Section 162(m). It is intended that the Plan shall comply
fully with and meet all the requirements of Section 162(m) of the Code so that
Awards hereunder which are made to Holders who are "covered employees" (as
defined in Section 162(m) of the Code) shall constitute "performance-based"
compensation within the meaning of Section 162(m) of the Code. The performance
criteria to be utilized under the Plan for such purposes shall consist of
objective tests based on one or more of the following: earnings or earnings per
share, cash flow, customer satisfaction, revenues, financial return ratios (such
as return on equity and/or return on assets), market performance, shareholder
return and/or value, operating profits, EBITDA, net profits, profit returns and
margins, stock price, credit quality, sales growth, market share, comparisons to
peer companies (on a company-wide or divisional basis), working capital and/or
individual or aggregate employee performance. If any provision of the Plan would
disqualify the Plan or would not otherwise permit the Plan to comply with
Section 162(m) as so intended, such provision shall be construed or deemed
amended to conform to the requirements or provisions of Section 162(m);
provided, however, that no such construction or amendment shall have an adverse
effect on the economic value to a Holder of any Award previously granted
hereunder.
Section 15.7 Other Plans. No Award, payment or amount received
hereunder shall be taken into account in computing an Employee's salary or
compensation for the purposes of determining any benefits under any pension,
retirement, life insurance or other benefit plan of the Company or any
Affiliate, unless such other plan specifically provides for the inclusion of
such Award, payment or amount received.
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<PAGE> 21
Section 15.8 Limits of Liability. Any liability of the Company with
respect to an Award shall be based solely upon the contractual obligations
created under the Plan and the Award Agreement. Neither the Company nor any
member of the Committee shall have any liability to any party for any action
taken or not taken, in good faith, in connection with or under the Plan.
Section 15.9 Governing Law. Except as otherwise provided herein, the
Plan shall be construed in accordance with the laws of the State of Delaware.
Section 15.10 Severability of Provisions. If any provision of the Plan
is held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of the Plan, and the Plan shall be construed and
enforced as if such invalid or unenforceable provision had not been included in
the Plan.
Section 15.11 No Funding. The Plan shall be unfunded. The Company shall
not be required to establish any special or separate fund or to make any other
segregation of funds or assets to ensure the payment of any Award.
Section 15.12 Headings. Headings used throughout the Plan are for
convenience only and shall not be given legal significance.
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<PAGE> 1
EXHIBIT 10.27
February 17, 2000
William D. Hoffman, M.D.
407 Autumn Lane
Carlisle, MA 01741
Dear Bill:
In light of the fact that you are taking a new position as Director of Cardiac
Surgical Critical Care at MGH and have chosen to resign your position at
Biopure, as we discussed, you are entitled to 4,000 shares of your January 19,
1998 options at $12.80 pre-split, which are vested, provided you exercise within
three months of termination. You will forfeit the option for the remaining 4,000
shares and your option for 68,000 shares granted on August 4, 1999, because they
have not vested.
However, if you agree to the Ongoing Responsibilities list attached and remain
as a consultant to Biopure then we are pleased to keep in effect your
non-qualified stock option granted August 4, 1999 for 24,800 shares at $12.00
per share. Your option will be amended, if necessary, to reflect your status as
a consultant and to provide a vesting schedule to be:
<TABLE>
<S> <C>
First year 6,200
Second year 6,200
Third year 6,200
Fourth year 6,200
</TABLE>
I look forward to working with you and wish you the very best in your new
position.
Yours truly,
/s/ Paul A. Looney
------------------
Paul A. Looney
President, COO
ACCEPTED:
/s/ William D. Hoffman, M.D.
- ----------------------------
William D. Hoffman, M.D.
<PAGE> 2
ONGOING RESPONSIBILITIES
- - Becomes a member of our newly formed Medical Advisory Board
- - Remains full time until May 15, 2000 (May 1, 2000 is earliest date of
resignation.) Enrollment of 115 should be finished.
- - Be available on an as needed basis for medical advice and possible
presentations.
- - Any issues with 114 and 115 trials, such as SAE or AE, IDMC or consults
with the FDA until after approval.
- - If needed for travel to South Africa or FDA for critical reviews he
would be available.
- - Consultant / Future clinical trial protocols
- - Input and review of educational programs for use of Hemopure
- - Available evenings if necessary to review trials 114 and 115
