<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 1996
or
( ) Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the Transition Period From _____________ To ________
Commission File Number: 0-20032
PerSeptive Biosystems, Inc.
---------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2987616
-------- ----------
(State or other jurisdiction of (IRS Employer ID No.)
incorporation or organization)
500 Old Connecticut Path, Framingham, MA 01701
- - ---------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(508) 383-7700
--------------
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock 17,326,799 Shares
- - ------------ -----------------
(Class) (Outstanding at May 8, 1996)
Page 1 of 22
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PerSeptive Biosystems, Inc.
Quarterly Report on Form 10-Q
March 31, 1996
Table of Contents
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
a) Consolidated Balance Sheets at
March 31, 1996 (unaudited) and September 30, 1995 3
b) Consolidated Statements of Operations
for the three and six-month periods ended
March 31, 1996 and 1995 (unaudited) 4
c) Consolidated Statements of Cash Flows
for the six-month periods ended
March 31, 1996 and 1995 (unaudited) 5
d) Notes to the Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 6. Exhibits and Reports on Form 8-K 21
SIGNATURES 22
</TABLE>
Page 2 of 22
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
PerSeptive Biosystems, Inc.
Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
--------------- ---------------
Assets: (unaudited)
Current assets:
<S> <C> <C>
Cash and cash equivalents $10,938 $12,215
Short-term investments 13,006 11,601
Accounts receivable, net 18,590 17,865
Inventories, net 21,475 22,911
Other current assets 2,384 1,913
------------- -------------
Total current assets 66,393 66,505
Fixed assets, net 36,231 35,584
Patent and license costs, net 6,233 6,681
Purchase options, net - 1,959
Goodwill, net 24,504 25,144
Deferred financing costs, net 993 1,294
Other long-term assets 403 1,042
------------- -------------
Total assets $134,757 $138,209
============= =============
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable $9,863 $9,351
Accrued expenses 21,426 16,154
Advances from PerSeptive Technologies II Corporation - 1,779
Current portion of deferred revenue 1,171 2,485
Short-term borrowing 5,122 3,943
Accrued purchase cost - 3,423
Current portion of long term obligations and other current liabilities 2,497 2,274
------------- -------------
Total current liabilities 40,079 39,409
Long-term liabilities:
Convertible subordinated notes 27,230 27,230
Long-term debt 5,755 3,170
Long-term portion of obligations under capital leases 1,509 2,159
Deferred revenue and other long-term liabilities 1,102 1,134
------------- -------------
Total long-term liabilities 35,596 33,693
Stockholders' equity:
Redeemable convertible preferred stock 27,023 25,992
Common stock 170 140
Additional paid-in capital 130,475 111,372
Accumulated deficit (97,636) (72,566)
------------- -------------
60,032 64,938
Cumulative translation adjustment (958) 225
Unrealized loss on investments 8 -
Deferred compensation - (56)
------------- -------------
Total stockholders' equity 59,082 65,107
------------- -------------
Total liabilities and stockholders' equity $134,757 $138,209
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3 of 22
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PerSeptive Biosystems, Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three months ended, Six months ended,
March 31, 1996 March 31, 1996
---------------------------- ----------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue:
Product revenue $19,367 $17,330 $38,431 32,484
Contract revenue 5,034 5,000 10,101 $9,994
------------- ------------- ------------- -------------
24,401 22,330 48,532 42,478
------------- ------------- ------------- -------------
Cost of Goods Sold:
Cost of product revenue 9,677 8,083 18,700 15,666
Cost of contract revenue 4,267 4,239 8,571 8,476
Other charges 4,837 - 4,837 -
------------- ------------- ------------- -------------
18,781 12,322 32,108 24,142
------------- ------------- ------------- -------------
Gross Profit 5,620 10,008 16,424 18,336
Operating Expenses:
Research and development 1,701 1,591 3,270 3,810
Selling, general and administrative 11,015 8,025 20,647 15,975
Other Charges 13,496 - 13,496 -
Amortization 794 754 1,518 1,588
------------- ------------- ------------- -------------
27,006 10,370 38,931 21,373
------------- ------------- ------------- -------------
Loss from operations (21,386) (362) (22,507) (3,037)
------------- ------------- ------------- -------------
Other income (expense):
Interest expense, net (719) (561) (1,422) (772)
Other income (expense), net 41 (104) (11) (37)
------------- ------------- ------------- -------------
Loss before provision for income taxes (22,064) (1,027) (23,940) (3,846)
Provision for income taxes - - 100 -
------------- ------------- ------------- -------------
Net loss (22,064) (1,027) (24,040) (3,846)
============= ============= ============= =============
Net loss per common share ($1.48) ($0.14) ($1.72) ($0.42)
============= ============= ============= =============
Weighted average common shares outstanding 15,243 12,236 14,609 12,182
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 4 of 22
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PerSeptive Biosystems, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six months ended
March 31,
------------------------------
1996 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($24,040) ($3,846)
Adjustments to reconcile net loss to net cash
used in operating activities, net of acquired amounts:
Depreciation and amortization 5,593 4,662
Non-cash portion of other charges 17,261 -
Changes in assets and liabilities:
Increase in accounts receivable (1,315) (4,662)
(Increase) decrease in inventories (2,467) 244
Increase in other current assets (103) (137)
Increase in other assets (245) -
Increase (decrease) in accounts payable 512 (2,736)
Increase (decrease) in accrued expenses (118) 15
Increase (decrease) in other liabilities (2,426) 1,014
------------- -------------
Net cash used in operating activities (7,348) (5,446)
------------- -------------
Cash flows from investing activities:
Purchase of fixed assets (7,188) (12,689)
Cash and investments acquired from PTC II 11,851 -
Purchase of securities available for sale (3,978) -
Proceeds from sale and maturities of securities available for sale 2,556 14,120
Increase in patents and licenses 187 (704)
------------- -------------
Net cash (used in) provided by investing activities 3,428 727
------------- -------------
Cash flows from financing activities:
Proceeds from capital lease financing 306 5,000
Principal payments under capital lease obligations (733) (380)
Proceeds from facility financing 2,585 -
Net proceeds from short-term borrowing 1,179 4,350
Proceeds from issuance of common stock (6) 222
------------- -------------
Net cash provided by (used in) financing activities 3,331 9,192
------------- -------------
Effect of exchange rate changes on cash and cash equivalents (688)
------------- -------------
Net (decrease) increase in cash and cash equivalents (1,277) 4,473
Cash and cash equivalents, beginning of period 12,215 6,600
------------- -------------
Cash and cash equivalents, end of period $10,938 $11,073
============= =============
Supplemental disclosure of cash flow information:
Interest paid $1,666 $1,078
Supplemental disclosure of non-cash investing activities:
Accretion of Series A Preferred Stock 1,031 1,326
Stock and warrants issued in connection with acquisition of PTC II, net of warrants exchanged 15,592 -
Stock issued to AMI in connection with the acquisition 3,423 -
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 5 of 22
<PAGE>
Notes to the Consolidated Financial Statements (Unaudited)
(1) Interim Consolidated Financial Statements
The accompanying consolidated balance sheet at March 31, 1996, and the
consolidated statements of operations for the three and six-month periods ended
March 31, 1996 and 1995, and the consolidated statements of cash flows for the
six-month periods ended March 31, 1996 and 1995 are unaudited. In the opinion
of management, however, these statements reflect all adjustments (which include
only normal recurring adjustments) necessary to present fairly the financial
position and results of operations of the Company and its subsidiaries as of and
for the three and six-month periods ended March 31, 1996 and 1995. The results
of operations for the three and six-month periods ended March 31, 1996 are not
necessarily indicative of the results expected for the full year.
These consolidated financial statements do not include all disclosures
associated with annual consolidated financial statements. Accordingly, these
statements should be read in conjunction with the Company's consolidated
financial statements and notes thereto contained in the Company's Annual Report
on Form 10-K, as amended, for the year ended September 30, 1995.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
(2) Inventories
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, 1996 September 30, 1995
-------------- ------------------
<S> <C> <C>
Raw material $11,006 $10,838
Work in process 2,708 2,495
Finished goods 7,761 9,578
------- -------
Total inventories $21,475 $22,911
======= =======
- - -------------------------------------------------------
</TABLE>
Page 6 of 22
<PAGE>
(3) Net Loss Per Share
Net loss per share is determined by dividing net loss, including accretion on
preferred stock by the weighted average common shares outstanding during the
period. Accretion on preferred stock was $515,000 and $1,031,000 for the three
and six-months ended March 31, 1996 and $663,000 and $1,326,000 for the three
and six-months ended March 31, 1995, respectively. All common stock equivalents
consisting of options, warrants, contingently issuable shares and shares held in
escrow, have been excluded from the calculation of weighted average common
shares outstanding, since their inclusion would be anti-dilutive.
(4) Acquisition of PerSeptive Technologies II Corporation
On November 1, 1995, the Company, PerSeptive Acquisition Corporation ("PAC"), a
wholly owned subsidiary of the Company, and PerSeptive Technologies II
Corporation ("PTC II") entered into a definitive agreement pursuant to which the
Company agreed to an exchange offer for all of the 2,645,000 outstanding units
of PTC II followed by a merger of PTC II with PAC. Each PTC II unit consisted
of one share of callable common stock of PTC II and one Class E Warrant of
PerSeptive Biosystems exercisable at $33.00 until December 1998. Effective
March 8, 1996, the Company acquired 2,603,125 units of PTC II that were validly
tendered and not withdrawn in the exchange offer. The PTC II shareholders, who
participated in the exchange offer, exchanged their units for 2,603,125 shares
of PerSeptive's common stock and 2,603,125 new Class I Warrants to purchase
PerSeptive Biosystems common stock exercisable until August 8, 1997 at an
exercise price per share of $13.50. On March 13, 1996, PTC II merged with PAC
and became a wholly owned subsidiary of the Company. Each of the remaining
41,875 shares of callable common stock of PTC II not exchanged in the exchange
offer were automatically converted into a right to receive one share of the
Company's common stock upon the merger of PTC II with PAC. The total value of
the common stock issued in the exchange offer was approximately $16 million
based on the market value of the Company's common stock on March 8, 1996. The
transaction has been accounted for as a purchase and the Company has recorded an
in-process research and development charge of approximately $6.8 million which
represents the value of acquired technologies which have not reached
commercialization. During the three-month period ended March 31, 1996, the
Company recognized research and development revenue from PTC II totaling
approximately $5 million.
Page 7 of 22
<PAGE>
The following is a summary of the purchase price and the allocation of the
purchase price to the net assets acquired, calculated using the closing price of
PerSeptive's common stock of $5.875 on March 8, 1996:
<TABLE>
<CAPTION>
Purchase Price: 000's
- - --------------- -----
<S> <C> <C>
Shares of Common Stock Issued 2,603,125 at $5.875 $15,294
Shares of Common Stock to be Issued 41,875 at $5.875 246
Warrants Issued 2,603,125 at $0.90 2,343
Warrants Returned 2,603,125 at $0.88 (2,291)
Estimated Tax Obligation on Interest 1,000
Income
Write off of Purchase Option Cost 1,082
Estimated transaction costs (i) 1,620
-------
Total purchase price $19,294
=======
</TABLE>
(i) Amount represents the estimated acquisition costs associated with the
Transaction which include professional fees, printing costs and regulatory
filing fees.
<TABLE>
<CAPTION>
March 8,
1996
Allocation of the Purchase Price: 000's
- - --------------------------------- -------
Net asset values:
<S> <C>
Cash and investments $11,851
Other current assets 693
Accrued expenses (35)
In-process research and development 6,785
-------
Allocation of consideration $19,294
=======
</TABLE>
The pro forma results of operations for the three and six month periods ended
March 31, 1996 and 1995 reflecting the acquisition of PTC II as if the companies
had been combined as of September 30, 1995 and 1994, respectively, are as
follows (amounts in thousands, except per share data):
<TABLE>
<CAPTION>
March 31, 1996 March 31, 1995
---------------- ------------------
Three months Six months Three months Six months
ended ended ended ended
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenue $ 19,367 $ 38,431 $17,330 $ 32,484
Net loss (12,219) (18,619) (4,895) (11,886)
Net loss per share $ (0.74) $ (1.16) $ (0.37) $ (0.89)
- - ------------------------------------------------------------------------------------------
</TABLE>
Page 8 of 22
<PAGE>
The pro forma condensed combined statement of income does not reflect the
estimated charge of $10.1 million for the acquired in-process research and
development, the write-down of long-term assets used in discontinued research
and development programs related to PTC II, and severance costs consisting
principally of wages and benefits for terminated employees, as the amount is not
expected to have a continuing impact on the results of operations of the
combined companies.
(5) Other Charges
During the three-month period ended March 31, 1996, the Company announced the
introduction of several new product offerings, completed the acquisition of PTC
II, and took certain actions to identify the research and development programs,
previously funded by PTC II, which would be discontinued. As a result of these
actions the Company recorded other charges totaling $18.3 million. The
components of these other charges include $10.1 million related to the
acquisition of PTC II which includes $6.8 million for in-process research and
development, $2.2 million related to the write-down of long-term assets used in
discontinued research and development programs related to PTC II, and $1.1
million of severance costs principally resulting from wages and benefits for
employees terminated as a result of the acquisition and related management
actions. Other charges also include reserves for inventory and other assets of
$4.8 million recorded in cost of revenue. This represents provisions to reserve
for inventory associated with discontinued product lines as well as the
repositioning of certain products within the purification, analysis, and
chemical product lines. The remaining $3.4 million of other charges represent
accrued legal costs primarily related to the Company's ongoing legal defense of
its patents and certain other miscellaneous charges.
(6) Litigation and Other Matters
On December 26, 1994, the Company announced a restatement of its financial
results for its fiscal year ended September 30, 1993 and for the first three
quarters of its 1994 fiscal year. Shortly thereafter, a number of class action
lawsuits were filed in the U.S. District Court for the District of Massachusetts
against the Company and certain of its officers. These lawsuits were
consolidated in an amended complaint filed on March 8, 1995. The complaint
asserted, on behalf of the class of all purchasers of the Company's Common Stock
from February 2, 1993 through December 26, 1994, violations of federal
securities laws and common law consisting of the issuing of allegedly materially
false and misleading financial results with respect to the Company's quarterly
and year-end fiscal 1993 financial statements and the Company's quarterly
financial statements for the first, second and third quarters of fiscal 1994.
The complaint sought unspecified damages, interest, costs and fees. On May 8,
1995, the Company filed its answer which denied all of plaintiffs' material
allegations and raised several affirmative defenses. On June 14, 1995, the
Court entered a preliminary order of approval of a stipulation of compromise and
settlement (the "Stipulation") between the defendants in this action and the
plaintiff class. On August 11, 1995, the court approved the Stipulation.
Pursuant to the terms of the Stipulation, the purchasers of (a) the Company's
Class E Warrants, which were originally issued as part of units with the common
stock of PerSeptive Technologies II Corporation, and (b) its 8 1/4% Convertible
Subordinated Notes due 2001, are included in the plaintiff class in addition to
the
Page 9 of 22
<PAGE>
purchasers of the Company's Common Stock. In exchange for releases of the
defendants, the plaintiff class is entitled to receive: $5,000,000 in cash, a
portion of which is paid by third parties; $5,000,000 in shares of the Company's
Common Stock; and $2,000,000 in warrants to purchase shares of the Company's
Common Stock. In August of 1995, the Company issued 493,827 shares of common
stock with an aggregate market value of $5,000,000. The final cash payment of
$1,500,000 due under a promissory note issued pursuant to the Stipulation,
together with interest thereon, was made on April 1, 1996. The Company issued
the Class G Warrants to purchase up to 279,330 shares of the Company's common
stock for $12.66 per share. The warrants became exercisable at any time on or
after March 11, 1996 and will expire September 11, 2003. The costs of the
settlement, including professional fees associated with the settlement, were
recorded as a charge during the quarter ended June 30, 1995.
The Company was successor to a lawsuit brought by Millipore against ChemGenes
Corporation. This lawsuit was filed in May 1993 to seek injunctive relief and
monetary damages for the infringement of a patent relating to the preparation of
oligonucleotides. The patent and all of Millipore's rights in this lawsuit
have been assigned to the Company. After a re-examination of the patent by the
U.S. Patent and Trademark Office, the patent was reissued to the Company in
February 1996. Subsequently, the action was concluded with ChemGenes agreeing
to a consent judgment acknowledging the validity and enforceability of the
patent. ChemGenes also agreed to pay infringement penalty royalties and
damages, including legal fees.
Since November 1994, the Company has been responding to informal requests for
information from the Securities and Exchange Commission (the "Commission")
relating to certain of the Company's financial matters. In May 1995, the
Company was advised by the Commission that it had obtained such formal order of
investigation so that, among other matters, it may utilize subpoena powers to
obtain information relevant to its inquiry. The Commission has and may in the
future utilize its subpoena powers to obtain information from various officers,
directors and employees of the Company and from persons not presently associated
with the Company. If, after completion of its investigation, the Commission
finds that violations of the federal securities laws have occurred, the
Commission has the authority to order persons to cease and desist from
committing or causing such violations and any future violations. The Commission
may also seek administrative, civil and criminal fines and penalties and
injunctive relief. The Department of Justice has the authority in respect of
criminal matters. The Company has been cooperating fully with this
investigation. There can be no assurance as to the timeliness of the completion
of this investigation or as to the final result thereof, and no assurance can be
given that the final result of the investigation will not have a material
adverse effect on the Company.
On October 14, 1993, the Company filed suit in the United States District Court
for the District of Massachusetts against Pharmacia Biotech, Inc. together with
certain of its affiliates (collectively, "Pharmacia"), its parent Procordia AB,
and Sepracor Inc., ("Sepracor"), for willful infringement of certain PerSeptive
patents (collectively, the "Patents") covering the process of Perfusion
Chromatography(registered trademark) and the manufacture, sale and use of
chromatography particles that enable Perfusion Chromatography. This lawsuit
seeks to enjoin the defendants from infringing the Patents and asks for treble
damages. On October 15, 1993, the Company filed a related action against
Sepracor in which the Company claims that Sepracor made false and misleading
Page 10 of 22
<PAGE>
representations of fact with respect to the Company's products. On October 12,
1993, Pharmacia filed a suit against the Company seeking a declaratory judgment:
(i) that Pharmacia's products do not infringe the Patents; and (ii) that the
Patents are invalid and unenforceable. The Company believes that this suit lacks
merit. This action has been consolidated with PerSeptive's actions in the United
States District Court for the District of Massachusetts.
On May 19, 1994, the Company joined BioSepra Inc. ("BioSepra"), which is
partially owned by Sepracor, as a party to this suit and amended the pleadings
to assert claims against BioSepra for willful infringement of the Patents and
for false and misleading advertising. The Company's claims against BioSepra are
consolidated with claims against Sepracor and Pharmacia for pretrial
proceedings. Discovery in these matters is substantially completed.
Pharmacia, Sepracor and BioSepra each have asserted counterclaims against the
Company. On February 10, 1995, Sepracor and BioSepra filed a counterclaim
against the Company alleging that its allegations that Sepracor and BioSepra
have infringed the Patents and alleged statements concerning the litigation made
to customers constitute unfair competition, commercial disparagement, unfair
trade practices, tortious interference with customer relationships and violation
of the Lanham Act. On March 6, 1995, Pharmacia filed a counterclaim alleging
that the Company's allegations that Pharmacia has infringed the Patents and
alleged statements concerning the litigation made to customers constitute unfair
competition, commercial disparagement, unfair trade practices and violation of
the Lanham Act. The Company has denied any liability on the counterclaims.
On January 9, 1996, the Court entered an order denying the Company's motion for
partial summary judgment relating to the inventorship of the three Perfusion
Chromatography patents, and granting the Defendants' motions for partial summary
judgment that inventorship of those patents is improper for failure to name two
or more persons as joint inventors. The Court, however, affirmed the Company's
inventorship. On March 19, 1996, PerSeptive filed a Motion to Vacate the
January 9 order and requested the Court to conduct an evidentiary hearing
pursuant to 35 U.S.C. (S) 256 to determine whether the patents can and should be
corrected by adding additional alleged inventors and, among other issues, if the
patents can be corrected, whether the alleged additional inventors should be
estopped from asserting any rights on account of their never having claimed to
have been inventors, among other factors. On April 29, 1996, the Court denied
the Motion to Vacate and scheduled an evidentiary hearing on the inventorship
issue to commence on May 20, 1996. The Company has preserved its rights of
appeal on a number of issues, including the Court's January 9, 1996 order that
inventorship of the patents was improper for failure to name additional persons
as joint inventors. The Company intends to vigorously pursue the litigation.
(7) Acquisition of Advanced Magnetics, Inc. - In Vitro Diagnostics Division
At September 30, 1995, the Company had a liability of approximately $3.4 million
for the final settlement of the Company's acquisition of the In Vitro
Diagnostics Division of Advanced Magnetics, Inc ("AMI"). In December 1995, the
Company issued 373,678 shares of common stock with a value of $3.4 million, to
satisfy this obligation.
Page 11 of 22
<PAGE>
(8) Subsequent Event
On May 7, 1996 the Company executed a Master Agreement (the "Agreement") with
Myco Pharmaceuticals Inc., a Delaware corporation located in Cambridge,
Massachusetts doing business as ChemGenics Pharmaceuticals ("ChemGenics").
Pursuant to the terms of the Agreement, the Company has agreed to transfer
certain assets and employees of the Company's drug discovery program and to
enter into a non-exclusive license, licensing the Company's technology in the
field of drug discovery to ChemGenics in exchange for shares of ChemGenics
Common Stock equal to 40% of the fully diluted capital stock of ChemGenics as of
the date of the Agreement plus warrants to purchase, for a period of four years,
additional shares of Common Stock at $5.00 per share equal to 10% of such fully
diluted amount. The transaction will combine the Company's proprietary
technology in the field of drug discovery with ChemGenics' gene technologies.
Additional terms have not been disclosed. The closing of the transaction is
subject to customary closing conditions, as well as the expiration or early
termination of, or an exemption from, the waiting period under the Hart-Scott-
Rodino Antitrust Improvement Act of 1976.
Page 12 of 22
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that may cause
such a difference include, but are not limited to, those discussed below under
the caption "Certain Factors That May Affect Future Results," as well as
elsewhere in this Management's Discussion and Analysis of Financial Condition
and Results of Operations, and those discussed in the Company's other filings
with the Securities and Exchange Commission.
Results of Operations
Three-months ended March 31, 1996 and 1995
Revenue for the three-months ended March 31, 1996 was $24,401,000 compared with
$22,330,000 for the comparable 1995 period. Product revenue totaled $19,367,000
and $17,330,000 for the three-months ended March 31, 1996 and 1995,
respectively. The growth in product revenue is attributable to continued strong
sales growth in the analysis product line on top of relatively stable to
expanding revenues from the purification product line and further expansion of
the Company's products into the European and Japanese market place.
Gross profit from product and related revenue for the three months ended March
31, 1996 and 1995 was $9,690,000 and $9,247,000, respectively. Gross margin
from product and related revenue was 50% during the three months ended March 31,
1996 as compared to 53% during the same period in the prior year. This decrease
in gross margin on product and related revenues is primarily attributable to
unfavorable overhead absorption resulting from efforts to control the level of
product inventory on hand and the existence of excess manufacturing capacity
established to support future revenue growth.
Included in cost of goods sold for the three months ended March 31, 1996 are
other charges totaling $4.8 million. These charges represent provisions to
write-off inventory and other assets associated with discontinued product lines
as well as the repositioning of certain products within the purification,
analysis, and chemical product lines.
Research and development expenses were relatively constant at $1,701,000 for
the three-months ended March 31, 1996 as compared with $1,591,000 for the
comparable period in the prior year. As a percent of product and related
revenue, research and development expenses have remained constant at 9% for the
three months ended March 31, 1996 and 1995, respectively. Following the
acquisition of PTC II, management anticipates that the level of research and
development expenses will increase significantly due to the elimination of
funding previously provided by PTC II. Actions have been taken to control the
level of research and development expense actually incurred following the
acquisition. This has been accomplished, in part, through the recently
announced restructuring program (discussed further below) that resulted in the
elimination of a significant portion of the Company's research and development
staffing and related variable support costs. Management intends to pursue
commercialization opportunities and alliances in
Page 13 of 22
<PAGE>
order to obtain value from the acquired technology. Management continues to
evaluate the scope and direction of the various programs, however there is no
assurance that funding sources and/or third party arrangements will be obtained
or established to defray the cost of research and development or that any of
these acquired technologies will ultimately be successfully commercialized.
Selling, general and administrative expenses were $11,015,000 in the three-month
period ended March 31, 1996, as compared with $8,025,000 in the comparable
period in the prior year. Selling, general and administrative expenses as a
percentage of product and related revenue have increased from 46% for the three
months ended March 31, 1995 to 57% for the comparable period in the current
fiscal year. The increase in the aggregate spending level in the three month
period ending March 31, 1996 as compared to the comparable prior year period is
attributable to continued investment in the sales and marketing organizations
and marketing and promotional activities to support the Company's new product
offerings.
During the three-month period ended March 31, 1996, the Company recorded other
charges of $13.5 million. The Company completed the acquisition of PTC II and
took certain actions to identify the research and development programs,
previously funded by PTC II, which would be discontinued. As a result of these
actions the Company recorded other charges totaling $10.1 million. The PTC II
charge includes $6.8 million for in-process research and development, $2.2
million related to the write-down of fixed assets previously used to support the
contract research and development activities related to PTC II and $1.1 million
of severance costs, principally wages and benefits for terminated employees,
resulting from the discontinuation of certain research programs and other
headquarters support functions. The remaining $3.4 million of other charges
represent accrued legal costs primarily related to the Company's ongoing legal
enforcement of its patents and certain other miscellaneous charges.
Net interest expense was $720,000 in the three-month period ended March 31,
1996, as compared with $561,000 in the comparable period in the prior year.
This increase is primarily attributable to higher interest expense incurred
during the period ended March 31, 1996 as a result of current year short-term
and long-term borrowings and capital lease agreements as well as lower interest
income due to a lower average cash and investments balance during the three-
months ended March 31, 1996 as compared to the comparable period in the prior
year.
Six Months Ended March 31, 1996 and 1995
Revenue for the six-months ended March 31, 1996 was $48,533,000, as compared
with $42,478,000 for the comparable period in the prior year. Product revenue
totaled $38,431,000 and $32,484,000 for the 1996 and 1995 periods, respectively.
The growth in product revenue is attributable to continued sales growth in both
the purification and analysis product lines and the further expansion of the
Company's products into the European and Japanese market place. The increase in
contract research revenue is attributable to additional revenue derived from
contract research activities undertaken pursuant to the Development Agreement
between PTC II and the Company, prior to its acquisition (see Note 4 to the
Consolidated Financial Statements).
Page 14 of 22
<PAGE>
Gross margin from product and related revenue for the six-months ended March 31,
1996 and 1995 was $19,731,000 and $16,818,000, respectively. Gross margin from
product and related revenue was 51% during the six-months ended March 31, 1996
as compared to 52% during the same period in the prior year. This decrease in
gross margin on product and related revenues is primarily attributable to
changes in product mix and unfavorable overhead absorption resulting from
efforts to control the level of product inventory on hand and the existence of
excess manufacturing capacity established to support future revenue growth.
Research and development expenses were $3,720,000 in the 1996 period as compared
with $3,810,000 in the comparable 1995 period. As a percent of product and
related revenue, research and development expenses have declined from 12% to 9%
for the six-month periods ended March 31, 1996 and 1995, respectively. The
decrease in research and development expense is attributable, in part, to the
subsequent elimination of and/or reduction in certain common research and
development activities following the acquisition of the synthesis product
business.
Selling, general and administrative expenses were $20,647,000 in the six-month
period ended March 31, 1996, as compared with $15,975,000 in the comparable
period in the prior year. The increase in the aggregate spending level in the
six-month period ending March 31, 1996 as compared to the comparable prior year
period is attributable to continued investment in the sales and marketing
organizations and marketing and promotional activities to support the Company's
new product offerings.
Net interest expense was $1,422,000 in the six-month period ended March 31,
1996, as compared with $772,000 in the comparable period in the prior year.
This increase is primarily attributable to higher interest expense incurred
during the period ended March 31, 1996 as a result of current year short-term
and long-term borrowings and capital lease agreements as well as lower interest
income due to a lower average cash and investments balance during the six-months
ended March 31, 1996 as compared to the comparable period in the prior year.
Liquidity and Capital Resources
Cash and investments at March 31, 1996 were $23,944,000 as compared to
$23,816,000 at September 30, 1995. Expenditures of cash and investments during
the six-month period ended March 31, 1996 primarily related to the funding of
capital programs for $7.2 million and operational requirements for $7.4 million.
These expenditures were offset by the receipt of cash and investments of $11.9
million from PTC II as a result of the acquisition. Cash expenditures for
capital programs, primarily related to the construction of the Company's new
manufacturing facility in Hamburg, Germany, were partially funded by $2.6
million from various financing facilities obtained by the Company during the
prior fiscal year. In addition, additional short-term borrowings were used to
fund operational needs. Total proceeds from short-term financing during the
six-month period ending March 31, 1996 were $1.2 million. Management
anticipates additional cash usage relating to various factors including, but not
limited to a semi-annual interest payment due on the 8 1/4% convertible
subordinated notes, final shareholder settlement payment due on April 1, 1996,
and cash requirements associated with capital expenditures, patent enforcement
actions, working capital and operational needs.
Page 15 of 22
<PAGE>
The Company believes that its capital resources will be sufficient to fund its
planned operations through the end of fiscal 1996. The Company believes that
additional financing will be required for the development of some of its future
planned product introductions and to support the Company's future operations and
revenue growth. The Company's future working capital and capital requirements
will in general depend on numerous factors, including the progress of the
Company's research and development of new products, the level of resources that
the Company devotes to the development of manufacturing and marketing
capabilities, the consistency of cash collections, the success of cost
containment initiatives, the competitive environment and the growth in the
Company's business, which may cause the Company's actual future capital
resources to differ materially, notwithstanding the forward-looking statement in
the first sentence of this paragraph. The Company believes that the level of
financial resources available to it is an important competitive factor. The
Company is actively seeking to raise additional capital through equity or debt
financing in the future or to enter into corporate partnering arrangements.
However, there can be no assurance that the Company will be able to successfully
raise additional capital at acceptable terms, and any failure to do so could
have adverse consequences on planned future product introductions and the
Company's growth and operations.
Subsequent Events
On May 7, 1996 the Company executed a Master Agreement ("the Agreement") with
Myco Pharmaceuticals Inc., a Delaware corporation located in Cambridge,
Massachusetts doing business as ChemGenics Pharmaceuticals ("ChemGenics").
Pursuant to the terms of the Agreement, the Company has agreed to transfer
certain assets and employees of the Company's drug discovery program and to
enter into a non-exclusive license, licensing the Company's technology in the
field of drug discovery to ChemGenics in exchange for shares of ChemGenics
Common Stock equal to 40% of the fully diluted capital stock of ChemGenics as of
the date of the Agreement plus warrants to purchase, for a period of four years,
additional shares of Common Stock at $5.00 per share equal to 10% of such fully
diluted amount. The transaction will combine the Company's proprietary
technology in the field of drug discovery with ChemGenics' gene technologies.
Additional terms have not been disclosed. The closing of the transaction is
subject to customary closing conditions, as well as the expiration or early
termination of, or an exemption from, the waiting period under the Hart-Scott-
Rodino Antitrust Improvement Act of 1976.
Certain Factors That May Affect Future Results
Fluctuations in Timing and Amount of Revenues. The Company's operating results
may vary significantly from quarter to quarter or year to year, depending on
factors such as the timing of biopharmaceutical development and
commercialization programs of the Company's customers, the timing of increased
research and development and sales and marketing expenses, the timing and size
of orders and the introduction of new products by the Company. The Company's
current and planned expense levels are based in part on its expectations as to
future revenue. Consequently, results may vary significantly from quarter to
quarter or year to year based on timing of revenue, and revenue or profits in
any period will not necessarily be indicative of results
Page 16 of 22
<PAGE>
in subsequent periods.
No Assurance of Profitability. The Company expects to continue to improve
operating results in future periods; however, there can be no assurance that the
Company will achieve or maintain profitability or that its revenue growth can be
sustained in the future.
The Company's success in the market for biopharmaceutical purification, analysis
and synthesis products will depend, in part, on attracting and maintaining key
employees, continued development of foreign sales operations, successful
integration of recent acquisitions, continued support from current customers,
development of new customers and successful enforcement of the Company's patent
rights (see "Legal Proceedings").
Access To Capital. The Company is considering various financing alternatives,
is seeking to raise additional capital through equity or debt financing or to
enter into corporate partnering arrangements; however, there can be no
assurances that this funding will be made available or that acceptable terms
will be reached (see related discussion in Liquidity and Capital Resources
section above).
Patent and License Uncertainties. Proprietary rights relating to the Company's
products will be protected from unauthorized use by third parties only to the
extent that they are covered by valid and enforceable patents or are maintained
in confidence as trade secrets. There can be no assurance that any pending
patent applications filed by the Company will result in patents being issued or
that any patents now or hereafter owned by the Company will afford protection
against competitors. In the absence of patent protection, the Company's
business may be adversely affected by competitors that independently develop
functionally equivalent technology. The Company has established a policy of
vigorously enforcing its patent rights (see "Legal Proceedings").
Pending Governmental Investigation. Since November 1994, the Securities and
Exchange Commission (the "SEC") has been conducting an investigation into
certain financial matters of the Company. If, after completion of its
investigation, the SEC finds that violations of the federal securities laws have
occurred, the SEC has the authority to order persons to cease and desist from
committing or causing such violations and any future violations. The SEC may
also seek administrative, civil and criminal fines and penalties and injunctive
relief. The Department of Justice has the authority in respect of criminal
matters. The Company has been cooperating fully with this investigation. There
can be no assurance as to the timeliness of the completion of this investigation
or as to the final result thereof, and no assurance can be given that the final
result of the investigation will not have a material adverse effect on the
Company (see "Legal Proceedings").
Intense Competition and Risk of Technological Obsolescence. The Company
encounters, and expects to continue to encounter, intense competition in the
sale of its current and future products. There can be no assurance that
developments by others will not render the Company's products or technologies
obsolete or non-competitive.
Page 17 of 22
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
1. The Company was a successor to a lawsuit brought by Millipore against
ChemGenes Corporation in the United States District Court for the District of
Massachusetts. This lawsuit was filed in May 1993 to seek injunctive relief and
monetary damages for the infringement of U.S. Patent No. RE34,069 relating to
the preparation of oligonucleotides (the "RE34,069 Patent"). The RE34,069
Patent and all of Millipore's rights in this lawsuit have been assigned to the
Company. In February 1996, the U.S. Patent and Trademark Office issued a
reexamination certificate confirming patentability of the claims of RE34,069.
Subsequently, the action was concluded with Chemgenes agreeing to a consent
judgment acknowledging the validity and enforceability of the patent. ChemGenes
also agreed to pay infringement penalty royalties and damages, including legal
fees.
2. Since November 1994, the Company has been responding to informal requests
for information from the Securities and Exchange Commission (the "Commission")
relating to certain of the Company's financial matters. In May 1995, the
Company was advised by the Commission that it had obtained a formal order of
investigation so that, among other matters, it could utilize subpoena powers to
obtain information relevant to its inquiry. The Commission has and may in the
future utilize its subpoena powers to obtain information variously from
officers, directors and employees of the Company and from persons not presently
associated with the Company. If, after completion of its investigation, the
Commission finds that violations of the federal securities laws have occurred,
the Commission has the authority to order persons to cease and desist from
committing or causing such violations and any future violations. The Commission
may also seek administrative, civil and criminal fines and penalties and
injunctive relief. The Department of Justice has the authority in respect of
criminal matters. There can be no assurance as to the timeliness of the
completion of this investigation, or as to the final result thereof, and no
assurance can be given that the final result of the investigation will not have
a material adverse effect on the Company. The Company has responded and will
continue to respond to requests for information in connection with this
investigation.
3. On October 14, 1993, the Company filed suit against Pharmacia Biotech, Inc.,
a New Jersey corporation, together with certain of its affiliates (collectively,
"Pharmacia"), and their parent Pharmacia AB, a Swedish corporation, and Sepracor
Inc., a Delaware corporation ("Sepracor"), in the United States District Court
for the District of Massachusetts (Civil Action No. 93-12237-PBS) for willful
infringement of the Company's US Patents Nos. 5,019,270 and 5,228,989
(collectively, the "Patents") covering the process of Perfusion Chromatography
and the manufacture, sale and use of chromatography particles that enable
Perfusion Chromatography. This lawsuit seeks to enjoin the defendants from
infringing the Patents and asks for treble damages. On October 15, 1993, the
Company filed a related action against Sepracor in the United States District
Court for the District of Massachusetts (Civil Action No. 93-12249-PBS) in which
the Company claims that Sepracor has made false and misleading representations
of fact with respect to the Company's products in violation of applicable state
and federal law. On October 12, 1993, as a result of prior correspondence with
the Company, Pharmacia filed a suit against the
Page 18 of 22
<PAGE>
Company in the United States District Court for the District of New Jersey
(Civil Action No. 93-4450 (HAA)) seeking a declaratory judgment: (i) that
Pharmacia's products do not infringe the Patents and (ii) that the Patents are
invalid and unenforceable.
On January 18, 1994, the United States District Court for the District of New
Jersey allowed the Company's motion to transfer all proceedings in Pharmacia's
action to the United States District Court for the District of Massachusetts. By
orders dated December 3, 1993 and March 29, 1994, the United States District
Court for the District of Massachusetts has consolidated all three actions
identified above for pretrial proceedings.
On May 19, 1994, the United States District Court for the District of
Massachusetts allowed the Company's motion to join BioSepra Inc., which is
partially owned by Sepracor ("BioSepra"), as a party and to amend the pleadings
to assert claims against BioSepra for willful infringement of the Patents and
for false and misleading advertising. The Company's claims against BioSepra are
consolidated with claims against Sepracor and Pharmacia for pretrial
proceedings.
On October 5, 1994, the Court allowed the Company's motion to amend its
pleadings to allege claims against Sepracor and BioSepra for infringement of
United States Patent No. 5,030,352 (the "'352 Patent"), covering novel coatings
for chromatography media, which is assigned to the Purdue Research Foundation
and exclusively licensed to the Company.
On January 24, 1995, the US Patent and Trademark Office issued a third patent
assigned to the Company, US Patent No. 5,384,042 (the "'042 Patent"), covering
the manufacture, sale and use of matrices that enable Perfusion Chromatography.
On January 25, 1995, the Company filed a complaint in the United States District
Court for the District of Massachusetts against Pharmacia, Sepracor and BioSepra
alleging willful infringement of the '042 Patent. On February 14, 1995, the
Court allowed an assented-to motion to consolidate that action, designated Civil
Action No. 95-10157-PBS, with the pending actions described above.
Pharmacia, Sepracor and BioSepra each have asserted counterclaims against the
Company. On February 10, 1995, Sepracor and BioSepra filed a counterclaim
against the Company alleging that its allegations that Sepracor and BioSepra
have infringed the Patents and alleged statements concerning the litigation made
to customers constitute unfair competition, commercial disparagement, unfair
trade practices pursuant to Mass. Gen. Laws ch. 93A, tortious interference with
customer relationships and violation of the Lanham Act. Sepracor requested
relief in the form of an unspecified amount of damages, double or treble damages
to the extent permitted by Mass. Gen. Laws ch. 93A, dismissal of all claims
asserted by PerSeptive, and Sepracor's costs and attorney's fees. On March 6,
1995, Pharmacia filed a counterclaim alleging that the Company's allegations
that Pharmacia has infringed the Patents and alleged statements concerning the
litigation made to customers constitute unfair competition, commercial
disparagement, unfair trade practices pursuant to Mass. Gen. Laws ch. 93A, and
violation of the Lanham Act. Pharmacia requested relief in the form of an
unspecified amount of damages, double or treble damages to the extent permitted
by Mass. Gen. Laws ch. 93A, dismissal of all claims asserted by PerSeptive, and
Pharmacia's costs and attorney's fees. Since the Court has bifurcated discovery
on damages issues, Sepracor and Pharmacia have not quantified the amount of
damages sought in
Page 19 of 22
<PAGE>
their respective counterclaims. The Company has denied any liability on the
counterclaims.
On January 9, 1996, the Court entered an order denying the Company's motion for
partial summary judgment relating to the inventorship of the three Perfusion
Chromatography patents, and granting the Defendants' motions for partial summary
judgment that inventorship of those patents is improper for failure to name two
or more persons as joint inventors. The Court, however, affirmed the Company's
inventorship. On March 19, 1996, PerSeptive filed a Motion to Vacate the January
9 order and requested the Court to conduct an evidentiary hearing pursuant to 35
U.S.C. (S) 256 to determine whether the patents can and should be corrected by
adding additional alleged inventors and, among other issues, if the patents can
be corrected, whether the alleged additional inventors should be estopped from
asserting any rights on account of their never having claimed to have been
inventors, among other factors. On April 29, 1996, the Court denied the Motion
to Vacate and scheduled an evidentiary hearing on the inventorship issue to
commence on May 20, 1996. The Company has preserved its rights of appeal on a
number of issues, including the Court's January 9, 1996 order that inventorship
of the patents was improper for failure to name additional persons as joint
inventors.
The Company may incur substantial additional expenses relating to these
lawsuits. There can be no assurance that the outcome of the litigation will not
have a material adverse effect on the Company. The Company intends to continue
vigorously pursuing this litigation.
Page 20 of 22
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.1 1992 Stock Plan of the Company, as amended on February 8, 1996.
4.2 1992 Non-Employee Director Stock Option Plan of the Company, as
amended on March 11, 1996.
(b) Reports on Form 8-K
Current Report on Form 8-K dated January 9, 1996 relating to the Company's
pending lawsuit against Pharmacia Biotech, Inc., Sepracor Inc. and
BioSepra Inc.
Current Report on Form 8-K dated February 8, 1996 relating to the
commencement of the Company's exchange offer for all of the outstanding
units of PerSeptive Technologies II Corporation.
Current Report on Form 8-K dated February 29, 1996 relating to a special
meeting of the Company's stockholders at which the issuance of
securities to acquire PerSeptive Technologies II Corporation was
approved.
Current Report on Form 8-K dated March 8, 1996 relating to the acceptance
by the Company of all outstanding units of PerSeptive Technologies II
Corporation ("PTC-II") validly tendered and not withdrawn in the
Company's exchange offer to the stockholders of PTC-II.
[The remainder of this page is intentionally left blank.]
Page 21 of 22
<PAGE>
SIGNATURES
- - ----------
Pursuant to requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
PERSEPTIVE BIOSYSTEMS, INC.
Date: May 15, 1996 By:/s/ Noubar B. Afeyan
--------------------
Noubar B. Afeyan, President
and Chief Executive Officer
(Principal Executive Officer)
By:/s/ Thomas G. Ruane
-------------------
Thomas G. Ruane, Senior Vice
President and Chief Financial Officer
(Principal Financial and Accounting
Officer)
Page 22 of 22
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
4.1 1992 Stock Plan of the Company, as amended
on February 8, 1996.
4.2 1992 Non-Employee Director Stock Option Plan
of the Company, as amended on March 11, 1996.
27 Financial Data Schedule
<PAGE>
EXHIBIT 4.1
(As Amended, February 8, 1996)
PERSEPTIVE BIOSYSTEMS, INC.
1992 STOCK PLAN
1. Purpose. This 1992 Stock Plan (the "Plan") is intended to
provide incentives: (a) to the officers and other employees of PerSeptive
Biosystems, Inc. (the "Company"), its parent (if any) and any present or future
subsidiaries of the Company (collectively, "Related Corporations") by providing
them with opportunities to purchase stock in the Company pursuant to options
granted hereunder which qualify as "incentive stock options" under Section
422(b) of the Internal Revenue Code of 1986, as amended (the "Code") ("ISO" or
"ISOs"); (b) to directors, officers, employees and consultants of the Company
and Related Corporations by providing them with opportunities to purchase stock
in the Company pursuant to options granted hereunder which do not qualify as
ISOs ("Non-Qualified Option" or "Non-Qualified Options"); (c) to directors,
officers, employees and consultants of the Company and Related Corporations by
providing them with awards of stock in the Company ("Awards"); and (d) to
directors, officers, employees and consultants of the Company and Related
Corporations by providing them with opportunities to make direct purchases of
stock in the Company ("Purchases"). Both ISOs and Non-Qualified Options are
referred to hereafter individually as an "Option" and collectively as "Options".
Options, Awards and authorizations to make Purchases are referred to hereafter
collectively as "Stock Rights". As used herein, the terms "parent" and
"subsidiary" mean "parent corporation" and "subsidiary corporation",
respectively, as those terms are defined in Section 424 of the Code.
2. Administration of the Plan.
A. Board or Committee Administration. The Plan shall be
administered by the Board of Directors of the Company (the "Board") or by a
committee appointed by the Board (the "Committee"); provided, that, to the
extent required by Rule 16b-3, or any successor provision ("Rule 16b-3"), of the
Securities Exchange Act of 1934, with respect to specific grants of Stock
Rights, the Plan shall be administered by a disinterested administrator or
administrators within the meaning of Rule 16b-3. Hereinafter, all references in
this Plan to the "Committee" shall mean the Board if no Committee has been
appointed. Subject to ratification of the grant or authorization of each Stock
Right by the Board (if so required by applicable state law), and subject to the
terms of the Plan, the Committee shall have the authority to (i) determine the
employees of the Company and Related Corporations (from among the class of
employees eligible under paragraph 3 to receive ISOs) to whom ISOs may be
granted, and to determine (from among the class of individuals and entities
eligible under paragraph 3 to receive Non-Qualified Options and Awards and to
make Purchases) to whom Non-Qualified Options, Awards and authorizations to make
Purchases may be granted; (ii) determine the time or times at which Options or
Awards may be granted or Purchases made; (iii) determine the option price of
shares subject to each Option, which price shall not be less than the minimum
price specified in
<PAGE>
-2-
paragraph 6, and the purchase price of shares subject to each Purchase; (iv)
determine whether each Option granted shall be an ISO or a Non-Qualified
Option; (v) determine (subject to paragraph 7) the time or times when each
Option shall become exercisable and the duration of the exercise period; (vi)
determine whether restrictions such as repurchase options are to be imposed on
shares subject to Options, Awards and Purchases and the nature of such
restrictions, if any, and (vii) interpret the Plan and prescribe and rescind
rules and regulations relating to it. If the Committee determines to issue a
Non-Qualified Option, it shall take whatever actions it deems necessary, under
Section 422 of the Code and the regulations promulgated thereunder, to ensure
that such Option is not treated as an ISO. The interpretation and construction
by the Committee of any provisions of the Plan or of any Stock Right granted
under it shall be final unless otherwise determined by the Board. The
Committee may from time to time adopt such rules and regulations for carrying
out the Plan as it may deem best. No member of the Board or the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan or any Stock Right granted under it.
B. Committee Actions. The Committee may select one of its members
as its chairman, and shall hold meetings at such times and places as it may
determine. Acts by a majority of the Committee, or acts reduced to or approved
in writing by a majority of the members of the Committee (if consistent with
applicable state law), shall be the valid acts of the Committee. From time to
time the Board may increase the size of the Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new members
in substitution therefor, fill vacancies however caused, or remove all members
of the Committee and thereafter directly administer the Plan.
C. Grant of Stock Rights to Board Members. Stock Rights may be
granted to members of the Board consistent with the provisions of the first
sentence of paragraph 2(A) above, if applicable. All grants of Stock Rights to
members of the Board shall in all other respects be made in accordance with the
provisions of this Plan applicable to other eligible persons. Consistent with
the provisions of the first sentence of paragraph 2(A) above, members of the
Board who are either (i) eligible for Stock Rights pursuant to the Plan or (ii)
have been granted Stock Rights may vote on any matters affecting the
administration of the Plan or the grant of any Stock Rights pursuant to the
Plan, except that no such member shall act upon the granting to himself of Stock
Rights, but any such member may be counted in determining the existence of a
quorum at any meeting of the Board during which action is taken with respect to
the granting to him of Stock Rights.
3. Eligible Employees and Others. The maximum number of shares
of Common Stock that may be issued to any officer, director, employee or
consultant pursuant to the Plan is 600,000 shares. ISOs may be granted to any
employee of the Company or any Related Corporation. Those officers and directors
of the Company who are not employees may not be granted ISOs under the Plan.
Non-Qualified Options, Awards and authorizations to make Purchases may be
granted to any employee, officer or director (whether or not also an employee)
or consultant of the Company or any Related Corporation. The Committee may take
into consideration a recipient's individual circumstances in determining whether
to grant an ISO, a Non-Qualified Option, an Award or an authorization to make a
Purchase. Granting of any Stock
<PAGE>
-3-
Right to any individual or entity shall neither entitle that individual or
entity to, nor disqualify him from, participation in any other grant of Stock
Rights.
4. Stock. The stock subject to Options, Awards and Purchases shall
be authorized but unissued shares of Common Stock of the Company, par value $.01
per share (the "Common Stock"), or shares of Common Stock reacquired by the
Company in any manner. The aggregate number of shares which may be issued
pursuant to the Plan is 3,585,500 subject to adjustment as provided in paragraph
13; provided, however, that such number of shares shall not be subject to
adjustment by reason of the four for one stock split in the form of a stock
dividend declared by the Board of Directors of the Company at a meeting on March
27, 1992. Any such shares may be issued as ISOs, Non-Qualified Options or
Awards, or to persons or entities making Purchases, so long as the number of
shares so issued does not exceed such number, as adjusted. If any Stock Right
granted under the Plan shall expire or terminate for any reason without having
been exercised in full or shall cease for any reason to be exercisable in whole
or in part, the unissued shares subject to such Stock Options shall again be
available for grants of Stock Rights under the Plan. For the purposes of the
foregoing sentence, shares withheld from the Stock Right exercise to pay the
exercise price and/or tax consequences of the exercise shall be deemed to have
been issued.
5. Granting of Stock Rights. Stock Rights may be granted under
the plan at any time on or after March 27, 1992 and prior to March 27, 2002. The
date of grant of a Stock Right under the Plan will be the date specified by the
Committee at the time it grants the Stock Right; provided, however, that such
date shall not be prior to the date on which the Committee acts to approve the
grant. The Committee shall have the right, with the consent of the optionee, to
convert an ISO granted under the Plan to a Non-Qualified Option pursuant to
paragraph 16.
6. Minimum Option Price; ISO Limitations.
A. Price for Non-Qualified Options. The exercise price per share
specified in the agreement relating to each Non-Qualified Option granted
under the Plan shall in no event be less than the minimum legal
consideration required therefor under the laws of Delaware or the laws of
any jurisdiction in which the Company or its successors in interest may be
organized.
B. Price for ISOs. The exercise price per share specified in the
agreement relating to each ISO granted under the Plan shall not be less
than the fair market value per share of Common Stock on the date of such
grant. In the case of an ISO to be granted to an employee owning stock
possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, the
price per share specified in the agreement relating to such ISO shall not
be less than one hundred ten percent (110%) of the fair market value per
share of Common Stock on the date of grant.
C. $100,000 Annual Limitation on ISOs. Each eligible employee
may be granted ISOs only to the extent that, in the aggregate under this
Plan and all incentive stock option plans of the Company and any Related
Corporation, such ISOs do not become exercisable
<PAGE>
-4-
for the first time by such employee during any calendar year in a manner
which would entitle the employee to purchase more than $100,000 in fair
market value (determined at the time the ISOs were granted) of Common
Stock in that year. Any options granted to an employee in excess of such
amount will be granted as Non-Qualified Options.
D. Determination of Fair Market Value. If, at the time an Option is
granted under the Plan, the Company's Common Stock is publicly traded,
"fair market value" shall be determined as of the last business day for
which the prices or quotes discussed in this sentence are available prior
to the date such Option is granted and shall mean (i) the average (on that
date) of the high and low prices of the Common Stock on the principal
national securities exchange on which the Common Stock is traded, if the
Common Stock is then traded on a national securities exchange; or (ii) the
last reported sale price (on that date) of the Common Stock on the NASDAQ
National Market List, if the Common Stock is not then traded on a national
securities exchange; or (iii) the closing bid price (or average of bid
prices) last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the
NASDAQ National Market List. However, if the Common Stock is not publicly
traded at the time an Option is granted under the Plan, "fair market
value" shall be deemed to be the fair value of the Common Stock as
determined by the Committee after taking into consideration all factors
which it deems appropriate, including, without limitation, recent sale and
offer prices of the Common Stock in private transactions negotiated at
arm's length.
7. Option Duration. Subject to earlier termination as provided in
paragraphs 9 and 10, each Option shall expire on the date specified by the
Committee, but not more than (i) ten years and one day from the date of grant
in the case of Non-Qualified Options, (ii) ten years from the date of grant in
the case of ISOs generally, and (iii) five years from the date of grant in the
case of ISOs granted to an employee owning stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or any Related Corporation. Subject to earlier termination as provided
in paragraphs 9 and 10, the term of each ISO shall be the term set forth in the
original instrument granting such ISO, except with respect to any part of such
ISO that is converted into a Non-Qualified Option pursuant to paragraph 16.
8. Exercise of Option. Subject to the provisions of paragraphs
9 through 12, each Option granted under the Plan shall be exercisable as
follows:
A. Vesting. The Option shall either be fully exercisable on the
date of grant or shall become exercisable thereafter in such installments
as the Committee may specify.
B. Full Vesting of Installments. Once an installment becomes
exercisable it shall remain exercisable until expiration or termination of
the Option, unless otherwise specified by the Committee.
C. Partial Exercise. Each Option or installment may be exercised
at any time or from time to time, in whole or in part, for up to the total
number of shares with respect to which it is then exercisable.
<PAGE>
-5-
D. Acceleration of Vesting. The Committee shall have the right to
accelerate the date of exercise of any installment of any Option; provided
that the Committee shall not, without the consent of an optionee,
accelerate the exercise date of any installment of any Option granted to
any employee as an ISO (and not previously converted into a Non-Qualified
Option pursuant to paragraph 16) if such acceleration would violate the
annual vesting limitation contained in Section 422(d) of the Code, as
described in paragraph 6(C).
9. Termination of Employment. If an ISO optionee ceases to be employed
by the Company and all Related Corporations other than by reason of death or
disability as defined in paragraph 10, no further installments of his ISOs shall
become exercisable, and his ISOs shall terminate after the passage of ninety
(90) days from the date of termination of his employment, but in no event later
than on their specified expiration dates, except to the extent that such ISOs
(or unexercised installments thereof) have been converted into Non-Qualified
Options pursuant to paragraph 16. Employment shall be considered as continuing
uninterrupted during any bona fide leave of absence (such as those attributable
to illness, military obligations or governmental service) provided that the
period of such leave does not exceed 90 days or, if longer, any period during
which such optionee's right to reemployment is guaranteed by statute. A bona
fide leave of absence with the written approval of the Committee shall not be
considered an interruption of employment under the Plan, provided that such
written approval contractually obligates the Company or any Related Corporation
to continue the employment of the optionee after the approved period of absence.
ISOs granted under the Plan shall not be affected by any change of employment
within or among the Company and Related Corporations, so long as the optionee
continues to be an employee of the Company or any Related Corporation. Nothing
in the Plan shall be deemed to give any grantee of any Stock Right the right to
be retained in employment or other service by the Company or any Related
Corporation for any period of time.
10. Death; Disability.
A. Death. If an ISO optionee ceases to be employed by the Company
and all Related Corporations by reason of his death, any ISO of his may be
exercised, to the extent of the number of shares with respect to which he could
have exercised it on the date of his death, by his estate, personal
representative or beneficiary who has acquired the ISO by will or by the laws of
descent and distribution, at any time prior to the earlier of the specified
expiration date of the ISO or 180 days from the date of the optionee's death.
B. Disability. If an ISO optionee ceases to be employed by the
Company and all Related Corporations by reason of his disability, he shall have
the right to exercise any ISO held by him on the date of termination of
employment, to the extent of the number of shares with respect to which he could
have exercised it on that date, at any time prior to the earlier of the
specified expiration date of the ISO or 180 days from the date of the
termination of the optionee's employment. For the purposes of the Plan, the term
"disability" shall mean "permanent and total disability" as defined in Section
22(e)(3) of the Code or successor statute.
<PAGE>
-6-
11. Assignability. No Option shall be assignable or transferable
by the optionee except by will or by the laws of descent and distribution.
During the lifetime of the optionee each Option shall be exercisable only by
him.
12. Terms and Conditions of Options. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. In granting any Non-Qualified Option, the
Committee may specify that such Non-Qualified Option shall be subject to the
restrictions set forth herein with respect to ISOs, or to such other
termination and cancellation provisions as the Committee may determine. The
Committee may from time to time confer authority and responsibility on one or
more of its own members and/or one or more officers of the Company to execute
and deliver such instruments. The proper officers of the Company are
authorized and directed to take any and all action necessary or advisable from
time to time to carry out the terms of such instruments.
13. Adjustments. Upon the occurrence of any of the following events,
an optionee's rights with respect to Options granted to him hereunder shall be
adjusted as hereinafter provided, unless otherwise specifically provided in the
written agreement between the optionee and the Company relating to such Option:
A. Stock Dividends and Stock Splits. If the shares of Common Stock
shall be subdivided or combined into a greater or smaller number of shares
or if the Company shall issue any shares of Common Stock as a stock
dividend on its outstanding Common Stock, the number of shares of Common
Stock deliverable upon the exercise of Options shall be appropriately
increased or decreased proportionately, and appropriate adjustments shall
be made in the purchase price per share to reflect such subdivision,
combination or stock dividend.
B. Consolidations or Mergers. If the Company is to be consolidated
with or acquired by another entity in a merger, sale of all or
substantially all of the Company's assets or otherwise (an "Acquisition"),
the Committee or the board of directors of any entity assuming the
obligations of the Company hereunder (the "Successor Board"), shall, as to
outstanding Options, either (i) make appropriate provision for the
continuation of such Options by substituting on an equitable basis for the
shares then subject to such Options the consideration payable with respect
to the outstanding shares of Common Stock in connection with the
Acquisition; or (ii) upon written notice to the optionees, provide that
all Options must be exercised, to the extent then exercisable, within a
specified number of days of the date of such notice, at the end of which
period the Options shall terminate; or (iii) terminate all Options in
exchange for a cash payment equal to the excess of the fair market value
of the shares subject to such Options (to the extent then exercisable)
over the exercise price thereof.
<PAGE>
-7-
C. Recapitalization or Reorganization. In the event of a
recapitalization or reorganization of the Company (other than a
transaction described in subparagraph B above) pursuant to which
securities of the Company or of another corporation are issued with
respect to the outstanding shares of Common Stock, an optionee upon
exercising an Option shall be entitled to receive for the purchase price
paid upon such exercise the securities he would have received if he had
exercised his Option prior to such recapitalization or reorganization.
D. Modification of ISOs. Notwithstanding the foregoing, any
adjustments made pursuant to subparagraphs A, B or C with respect to ISOs
shall be made only after the Committee, after consulting with counsel for
the Company, determines whether such adjustments would constitute a
"modification" of such ISOs (as that term is defined in Section 424 of the
Code) or would cause any adverse tax consequences for the holders of such
ISOs. If the Committee determines that such adjustments made with respect
to ISOs would constitute a modification of such ISOs, it may refrain from
making such adjustments.
E. Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, each Option will terminate
immediately prior to the consummation of such proposed action or at such
other time and subject to such other conditions as shall be determined by
the Committee.
F. Issuances of Securities. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares subject to Options. No adjustments shall be made for
dividends paid in cash or in property other than securities of the
Company.
G. Fractional Shares. No fractional shares shall be issued under
the Plan and the optionee shall receive from the Company cash in lieu of
such fractional shares.
H. Adjustments. Upon the happening of any of the events described
in subparagraphs A, B or C above, the class and aggregate number of shares
set forth in paragraph 4 hereof that are subject to Stock Rights which
previously have been or subsequently may be granted under the Plan shall
also be appropriately adjusted to reflect the events described in such
subparagraphs. The Committee or the Successor Board shall determine the
specific adjustments to be made under this paragraph 13 and, subject to
paragraph 2, its determination shall be conclusive.
If any person or entity owning restricted Common Stock obtained by
exercise of a Stock Right made hereunder receives shares or securities or
cash in connection with a corporate transaction described in subparagraphs
A, B or C above as a result of owning such restricted Common Stock, such
shares or securities or cash shall be subject to all of the conditions and
restrictions applicable to the restricted Common Stock with respect to
which such shares or securities or cash were issued, unless otherwise
determined by the Committee or the Successor Board.
<PAGE>
-8-
14. Means of Exercising Stock Rights. A Stock Right (or any part or
installment thereof) shall be exercised by giving written notice to the Company
at its principal office address. Such notice shall identify the Stock Right
being exercised and specify the number of shares as to which such Stock Right
is being exercised, accompanied by full payment of the purchase price therefor
(a) in United States dollars in cash or by check, (b) at the discretion of the
Committee, through delivery or withholding from the Stock Right exercise of
shares of Common Stock having a fair market value equal as of the date of the
exercise to the cash exercise price of the Stock Right, (c) at the discretion
of the Committee, by delivery of the grantee's personal recourse note bearing
interest payable not less than annually at no less than 100% of the lowest
applicable Federal rate, as defined in Section 1274(d) of the Code, (d) at the
discretion of the Committee and consistent with applicable law, through the
delivery of an assignment to the Company of a sufficient amount of the proceeds
from the sale of the Common Stock acquired upon exercise of the Stock Right and
an authorization to the broker or selling agent to pay that amount to the
Company, which sale shall be at the participant's direction at the time of
exercise, or (e) at the discretion of the Committee, by any combination of (a),
(b), (c) and (d) above. If the Committee exercises its discretion to permit
payment of the exercise price of an ISO by means of the methods set forth in
clauses (b), (c), (d) or (e) of the preceding sentence, such discretion shall
be exercised in writing at the time of the grant of the ISO in question.
Notwithstanding the foregoing, no employee may pay any part of the exercise
price hereof by delivering shares of Common Stock to the Company unless such
Common Stock has been owned by such employee free of any substantial risk of
forfeiture for at least six months. The holder of a Stock Right shall not have
the rights of a shareholder with respect to the shares covered by his Stock
Right until the date of issuance of a stock certificate to him for such shares.
Except as expressly provided above in paragraph 13 with respect to changes in
capitalization and stock dividends, no adjustment shall be made for dividends
or similar rights for which the record date is before the date such stock
certificate is issued.
15. Term and Amendment of Plan. This Plan was adopted by the Board
of Directors and Stockholders of the Company on March 31, 1992. The Plan shall
expire at the end of the day on March 27, 2002 (except as to Options outstanding
on that date). The Board may terminate or amend the Plan in any respect at any
time, except that, without the approval of the stockholders obtained within 12
months before or after the Board adopts a resolution authorizing any of the
following actions: (a) the total number of shares that may be issued under the
Plan may not be increased materially (except by adjustment pursuant to paragraph
13); (b) the benefits accruing to participants under the Plan may not be
materially increased; (c) the requirements as to eligibility for participation
in the Plan may not be materially modified; (d) the provisions of paragraph 3
regarding eligibility for grants of ISOs may not be modified; (e) the provisions
of paragraph 6(B) regarding the exercise price at which shares may be offered
pursuant to ISOs may not be modified (except by adjustment pursuant to paragraph
13); (f) the expiration date of the Plan may not be extended; and (g) the Board
may not take any action which would cause the Plan to fail to comply with Rule
16b-3. Except as otherwise provided in this paragraph 15, in no event may action
of the Board or stockholders alter or impair the rights of a grantee, without
his consent, under any Stock Right previously granted to him.
<PAGE>
-9-
16. Conversion of ISOs into Non-Qualified Options; Termination of
ISOs. The Committee, at the written request of any optionee, may in its
discretion take such actions as may be necessary to convert such optionee's ISOs
(or any installments or portions of installments thereof) that have not been
exercised on the date of conversion into Non-Qualified Options at any time prior
to the expiration of such ISOs, regardless of whether the optionee is an
employee of the Company or a Related Corporation at the time of such conversion.
Such actions may include, but not be limited to, extending the exercise period
or reducing the exercise price of the appropriate installments of such ISOs. At
the time of such conversion, the Committee (with the consent of the optionee)
may impose such conditions on the exercise of the resulting Non-Qualified
Options as the Committee in its discretion may determine, provided that such
conditions shall not be inconsistent with this Plan. Nothing in the Plan shall
be deemed to give any optionee the right to have such optionee's ISOs converted
into Non-Qualified Options, and no such conversion shall occur until and unless
the Committee takes appropriate action. The Committee, with the consent of the
optionee, may also terminate any portion of any ISO that has not been exercised
at the time of such termination.
17. Application Of Funds. The proceeds received by the Company from
the sale of shares pursuant to Options granted and Purchases authorized under
the Plan shall be used for general corporate purposes.
18. Governmental Regulation. The Company's obligation to sell and
deliver shares of the Common Stock under this Plan is subject to the approval
of any governmental authority required in connection with the authorization,
issuance or sale of such shares.
19. Withholding of Additional Income Taxes. Upon the exercise of a
Non-Qualified Option, the grant of an Award, the making of a Purchase of Common
Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 20) or the vesting of restricted Common
Stock acquired on the exercise of a Stock Right hereunder, the Company, in
accordance with Section 3402(a) of the Code, may require the optionee, Award
recipient or purchaser to pay additional withholding taxes in respect of the
amount that is considered compensation includible in such person's gross
income. The Committee in its discretion may condition (i) the exercise of an
Option, (ii) the grant of an Award, (iii) the making of a Purchase of Common
Stock for less than its fair market value, or (iv) the vesting of restricted
Common Stock acquired by exercising a Stock Right, on the grantee's payment of
such additional withholding taxes. Payment of such additional withholding
taxes shall be in United States dollars in cash or by check and/or at the
discretion of the Committee, through the delivery of previously held shares of
common stock or withholding from the Stock Right exercise of shares of Common
Stock having a fair market value equal as of the date of exercise to the amount
of such withholding taxes.
20. Notice to Company of Disqualifying Disposition. Each employee
who receives an ISO must agree to notify the Company in writing immediately
after the employee makes a Disqualifying Disposition of any Common Stock
acquired pursuant to the exercise of an ISO. A Disqualifying Disposition is any
disposition (including any sale) of such Common Stock before the later of (a)
two years after the date the employee was granted the ISO, or (b) one year after
<PAGE>
-10-
the date the employee acquired Common Stock by exercising the ISO. If the
employee has died before such stock is sold, these holding period requirements
do not apply and no Disqualifying Disposition can occur thereafter.
21. Governing Law; Construction. The validity and construction of
the Plan and the instruments evidencing Stock Rights shall be governed by the
laws of the State of Delaware, or the laws of any jurisdiction in which the
Company or its successors in interest may be organized. In construing this Plan,
the singular shall include the plural and the masculine gender shall include the
feminine and neuter, unless the context otherwise requires.
<PAGE>
Register of Amendments to Plan
<TABLE>
<CAPTION>
Paragraph No. Date of Stockholder
and Change Board Approval Approval
- - ----------------- -------------- --------------
<S> <C> <C>
3. Limit to 600,000 January 11, 1994 March 10, 1994
the number of shares
of Common Stock that
may be issued to
any participant under
the Plan
4. Increase number January 11, 1994 March 10, 1994
of shares under Plan
from 800,000 to 2,300,000
4. Increase number of February 23, 1995 May 1, 1995
shares under Plan from
2,300,000 to 2,900,500
14. Only allow payment March 29, 1995 N/A
of exercise price by delivery
of shares of Common Stock
after shares have been owned
by employee for at least six
months
4. Increase number of February 8, 1996 May 6, 1996
shares under Plan from
2,900,500 to 3,585,500
</TABLE>
<PAGE>
EXHIBIT 4.2
(As Amended, March 11, 1996)
PERSEPTIVE BIOSYSTEMS, INC.
1992 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. Purpose. This Non-Qualified Stock Option Plan, to be known as
the 1992 Non-Employee Director Stock Option Plan (hereinafter, this "Plan") is
intended to promote the interests of PerSeptive Biosystems, Inc. (hereinafter,
the "Company") by providing an inducement to obtain and retain the services of
qualified persons who are not employees or officers of the Company to serve as
members of its Board of Directors (the "Board").
2. Available Shares. The total number of shares of Common Stock,
par value $.01 per share, of the Company (the "Common Stock"), for which options
may be granted under this Plan shall not exceed 200,000 shares, subject to
adjustment in accordance with paragraph 10 of this Plan; provided, however, that
such number of shares shall not be subject to adjustment by reason of the four
for one stock split in the form of a stock dividend declared by the Board of
Directors of the Company at a meeting on March 27, 1992. Shares subject to this
Plan are authorized but unissued shares or shares that were once issued and
subsequently reacquired by the Company. If any options granted under this Plan
are surrendered before exercise or lapse without exercise (and without being
used to pay the exercise price or tax withholding), in whole or in part, the
shares reserved therefor shall continue to be available under this Plan.
3. Administration. This Plan shall be administered by the Board or
by a committee appointed by the Board (the "Committee"). In the event the Board
fails to appoint or refrains from appointing a Committee, the Board shall have
all power and authority to administer this Plan. In such event, the word
"Committee" wherever used herein shall be deemed to mean the Board. The
Committee shall, subject to the provisions of the Plan, have the power to
construe this Plan, to determine all questions hereunder, and to adopt and amend
such rules and regulations for the administration of this Plan as it may deem
desirable. No member of the Board or the Committee shall be liable for any
action or determination made in good faith with respect to this Plan or any
option granted under it.
4. Automatic Grant of Options. Subject to the availability of
shares under this Plan, (a) each person who is a member of the Board on June 1,
1992 and who is not an employee or officer of the Company on such date shall be
automatically granted on June 1, 1992, without further action by the Board, an
option (an "Initial Option") to purchase 6,000 shares of the Common Stock; (b)
each such person who continues to serve as a member of the Board on each
successive anniversary of June 1, 1992 during the term of this Plan and who is
not an employee or officer of the Company on such date shall be automatically
granted on each such date, without further action of the Board, an option (an
"Annual Option") to purchase 7,500 shares of the Common Stock; and (c) with
respect to a person who is first elected as a member of the Board after June 1,
1992 during the term of this Plan and who is not an employee or officer of the
1
<PAGE>
-2-
Company on the date of such election shall be automatically granted an Initial
Option to purchase 10,000 shares of the Common Stock on the date of his or her
first election as a member of the Board, and each such person who continues to
serve as a member of the Board on each successive anniversary of such date
during the term of this Plan and who is not an employee or officer of the
Company on such date shall be automatically granted on each such date an Annual
Option to purchase 7,500 shares of Common Stock. The options to be granted under
this paragraph 4 shall be the only options ever to be granted at any time to
such member under this Plan. The number of shares covered by options granted
under this paragraph 4 shall be subject to adjustment in accordance with the
provisions of paragraph 10 of this Plan.
Except for the specific options referred to above, no other options
shall be granted under this Plan.
5. Option Price. The purchase price of the stock covered by an
option granted pursuant to this Plan shall be 100% of the fair market value of
such shares on the day the option is granted. The option price will be subject
to adjustment in accordance with the provisions of paragraph 10 of this Plan.
For purposes of this Plan, if, at the time an option is granted under the Plan,
the Company's Common Stock is publicly traded, "fair market value" shall be
determined as of the last business day for which the prices or quotes discussed
in this sentence are available prior to the date such option is granted and
shall mean (i) the average (on that date) of the high and low prices of the
Common Stock on the principal national securities exchange on which the Common
Stock is traded, if the Common Stock is then traded on a national securities
exchange; or (ii) the last reported sale price (on that date) of the Common
Stock on the Nasdaq National Market, if the Common Stock is not then traded on a
national securities exchange; or (iii) the closing bid price (or average of bid
prices) last quoted (on that date) by an established quotation service for over-
the-counter securities, if the Common Stock is not reported on the Nasdaq
National Market.
6. Period of Option. Unless sooner terminated in accordance with
the provisions of paragraph 8 of this Plan, an option granted hereunder shall
expire on the date which is ten (10) years after the date of grant of the
option.
7. Vesting of Shares and Non-Transferability of Options.
(a) Vesting. Options granted under this Plan shall not be
exercisable until they become vested.
(i) Initial Options granted under this Plan shall vest
in the optionee and thus become exercisable, in accordance with
the following schedule provided that the optionee has
continuously served as a member of the Board through such
vesting date:
<PAGE>
-3-
<TABLE>
<CAPTION>
Percentage of Initial Option
Shares for which Initial
Option Will be Exercisable Date of Vesting
- - ---------------------------- ---------------
<S> <C>
0 Less than one year from the date of grant
25% One year from the date of grant
50% Two years from the date of grant
75% Three years from the date of grant
100% Four years from the date of grant
</TABLE>
(ii) Annual Options granted under this Plan shall vest
in the optionee and thus become exercisable, in accordance with
the following schedule provided that the optionee has
continuously served as a member of the Board through such
vesting date:
<TABLE>
<CAPTION>
Percentage of Annual Option
Shares for which Annual
Option Will be Exercisable Date of Vesting
- - ---------------------------- ---------------
<S> <C>
0 Less than one year from the date of grant
33 1/3% One year from the date of grant
66 2/3% Two years from the date of grant
100% Three years from the date of grant
</TABLE>
(iii) The number of shares as to which options may be exercised
shall be cumulative, so that once the option shall become
exercisable as to any shares it shall continue to be exercisable
as to said shares, until expiration or termination of the option
as provided in this Plan.
(b) Legend on Certificates. The certificates representing
such shares shall carry such appropriate legend, and such written instructions
shall be given to the Company's transfer agent, as may be deemed necessary or
advisable by counsel to the Company in order to comply with the requirements of
the Securities Act of 1933 or any state securities laws.
(c) Non-transferability. Any option granted pursuant to this
Plan shall not be assignable or transferable other than by will or the laws of
descent and distribution and shall be exercisable during the optionee's lifetime
only by him or her.
<PAGE>
-4-
8. Termination of Option Rights.
(a) In the event an optionee ceases to be a member of the
Board for any reason other than death or permanent disability, any then
unexercised portion of options granted to such optionee shall, to the extent not
then vested, immediately terminate and become void; any portion of an option
which is then vested but has not been exercised at the time the optionee so
ceases to be a member of the Board may be exercised, to the extent it is then
vested, by the optionee within 90 days of the date the optionee ceased to be a
member of the Board; and all options shall terminate after such 90 days have
expired.
(b) In the event that an optionee ceases to be a member of
the Board by reason of his or her death or permanent disability, any option
granted to such optionee shall be immediately and automatically accelerated and
become fully vested and all unexercised options shall be exercisable by the
optionee (or by the optionee's personal representative, heir or legatee, in the
event of death) until the scheduled expiration date of the option.
9. Exercise of Option. Subject to the terms and conditions of this
Plan and the option agreements, an option granted hereunder shall, to the extent
then exercisable, be exercisable in whole or in part by giving written notice to
the Company by mail or in person addressed to PerSeptive Biosystems, Inc., 500
Old Connecticut Path, Framingham, Massachusetts 01701, at its principal
executive offices, stating the number of shares with respect to which the option
is being exercised, accompanied by payment in full for such shares, which
payment may be (a) in whole or in part in shares of the Common Stock of the
Company already owned by the person or persons exercising the option or shares
subject to the option being exercised (subject to such restrictions and
guidelines as the Board may adopt from time to time), valued at fair market
value determined in accordance with the provisions of paragraph 5 or (b) at the
discretion of the Committee, and consistent with applicable law, through the
delivery of an assignment to the Company of a sufficient amount of the proceeds
from the sale of the Common Stock acquired upon exercise of the option and an
authorization to the broker or selling agent to pay that amount to the Company,
which sale shall be at the participant's direction at the time of exercise;
provided, however, that there shall be no such exercise at any one time as to
fewer than one hundred (100) shares or all of the remaining shares then
purchasable by the person or persons exercising the option, if fewer than one
hundred (100) shares. The Company's transfer agent shall, on behalf of the
Company, prepare a certificate or certificates representing such shares acquired
pursuant to exercise of the option, shall register the optionee as the owner of
such shares on the books of the Company and shall cause the fully executed
certificate(s) representing such shares to be delivered to the optionee as soon
as practicable after payment of the option price in full. The holder of an
option shall not have any rights of a stockholder with respect to the shares
covered by the option, except to the extent that one or more certificates for
such shares shall be delivered to him or her upon the due exercise of the
option.
10. Adjustments Upon Changes in Capitalization and Other Matters.
Upon the occurrence of any of the following events, an optionee's rights with
respect to options granted to him or her hereunder shall be adjusted as
hereinafter provided:
<PAGE>
-5-
(a) Stock Dividends and Stock Splits. If the shares of
Common Stock shall be subdivided or combined into a greater or smaller
number of shares or if the Company shall issue any shares of Common
Stock as a stock dividend on its outstanding Common Stock, the number of
shares of Common Stock deliverable upon the exercise of options shall be
appropriately increased or decreased proportionately, and appropriate
adjustments shall be made in the purchase price per share to reflect
such subdivision, combination or stock dividend.
(b) Issuances of Securities. Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect,
and no adjustment by reason thereof shall be made with respect to, the
number or price of shares subject to options. No adjustments shall be
made for dividends paid in cash or in property other than securities of
the Company.
(c) Adjustments. Upon the happening of any of the foregoing
events, the class and aggregate number of shares set forth in paragraphs
2 and 4 of this Plan that are subject to options which previously have
been or subsequently may be granted under this Plan shall also be
appropriately adjusted to reflect such events. The Board shall determine
the specific adjustments to be made under this paragraph 10 and its
determination shall be conclusive.
11. Restrictions on Issuance of Shares. Notwithstanding the
provisions of paragraphs 4 and 9 of this Plan, the Company shall have no
obligation to deliver any certificate or certificates upon exercise of an option
until one of the following conditions shall be satisfied:
(i) The shares with respect to which the option has been
exercised are at the time of the issue of such shares effectively
registered under applicable Federal and state securities laws as now in
force or hereafter amended; or
(ii) Counsel for the Company shall have given an opinion that
such shares are exempt from registration under Federal and state
securities laws as now in force or hereafter amended; and the Company
has complied with all applicable laws and regulations with respect
thereto, including without limitation all regulations required by any
stock exchange upon which the Company's outstanding Common Stock is then
listed.
12. Representation of Optionee. If requested by the Company, the
optionee shall deliver to the Company written representations and warranties
upon exercise of the option that are necessary to show compliance with Federal
and state securities laws, including representations and warranties to the
effect that a purchase of shares under the option is made for investment and not
with a view to their distribution (as that term is used in the Securities Act of
1933).
13. Option Agreement. Each option granted under the provisions of
this Plan shall be evidenced by an option agreement, which agreement shall be
duly executed and delivered on behalf of the Company and by the optionee to whom
such option is granted. The option agreement shall contain such terms,
provisions and conditions not inconsistent with this Plan as may be determined
by the officer executing it.
<PAGE>
-6-
14. Termination and Amendment of Plan. Options may no longer be
granted under this Plan after March 27, 2002, and this Plan shall terminate when
all options granted or to be granted hereunder are no longer outstanding. The
Board may at any time terminate this Plan or make such modification or amendment
thereof as it deems advisable; provided, however, that the Board may not,
without approval by the affirmative vote of the holders of a majority of the
shares of Common Stock present in person or by proxy and entitled to vote at the
meeting, (a) increase the maximum number of shares for which options may be
granted under this Plan or the number of shares for which an option may be
granted to any participating director hereunder, (b) change the provisions of
this Plan regarding the termination of the options or the times when they may be
exercised, (c) change the period during which any options may be granted or
remain outstanding or the date on which this Plan shall terminate, (d) change
the designation of the class of persons eligible to receive options, or
otherwise change paragraph 4, (e) materially increase benefits accruing to
option holders under this Plan, or (f) amend this Plan in any manner which would
cause Rule 16b-3 to become inapplicable to this Plan; and provided further that
the provisions of this Plan specified in Rule 16b-3(c)(2)(ii)(A) may not be
amended more than once every six months, other than to comport with changes in
the Internal Revenue Code, the Employee Retirement Income Security Act, or the
rules thereunder. Termination or any modification or amendment of this Plan
shall not, without consent of a participant, affect his or her rights under an
option previously granted to him or her.
15. By accepting options under the Plan, each optionee acknowledges
that the Company may be required to withhold taxes in connection with the
exercise of such options in respect of amounts considered to be compensation
includible in the optionee's gross income.
16. Governing Law. The validity and construction of this Plan and
the instruments evidencing options shall be governed by the laws of the State of
Delaware, without giving effect to the principles of conflicts of law thereof.
Date Approved by Board of Directors of the Company: March 27, 1992. Date
approved by the Stockholders of the Company: March 30, 1992.
<PAGE>
-7-
Register of Amendments to Plan
<TABLE>
<CAPTION>
Paragraph No. Date of Stockholder
and Change Board Approval Approval
------------- -------------- -------------------
<S> <C> <C>
4. Increase to the annual March 11, 1996 May 6, 1996
grant under the Plan from
1,500 to 7,500 shares of
Common Stock.
4. Insert as the third March 11, 1996 N/A
sentence of paragraph 4 as
follows: "The number of shares
covered by options granted
under this paragraph 4 shall be
subject to adjustment in
accordance with the provisions
of paragraph 10 of this Plan."
5. Amend the last sentence of March 11, 1996 N/A
paragraph 5 to correct the
reference to the Nasdaq
National Market
9. Amend the first sentence March 11, 1996 N/A
of paragraph 9 to correct the
Company's address.
10(c). Amend the first March 11, 1996 N/A
sentence of paragraph 10(c) to
read in its entirety as follows:
"Upon the happening of any of
the foregoing events, the class
and aggregate number of
shares set forth in
paragraphs 2 and 4 of this Plan
that are subject to options
which previously have been or
subsequently may be granted
under this Plan shall also be
appropriately adjusted to
reflect such events."
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Balance Sheets, Consolidated Statements of Operations, Consolidated Statements
of Cash Flows and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 10,938
<SECURITIES> 13,006
<RECEIVABLES> 20,856
<ALLOWANCES> 2,266
<INVENTORY> 21,475
<CURRENT-ASSETS> 66,393
<PP&E> 36,231
<DEPRECIATION> 5,593
<TOTAL-ASSETS> 134,757
<CURRENT-LIABILITIES> 40,079
<BONDS> 27,230
0
27,023
<COMMON> 170
<OTHER-SE> 31,889
<TOTAL-LIABILITY-AND-EQUITY> 134,757
<SALES> 48,532
<TOTAL-REVENUES> 48,532
<CGS> 27,271
<TOTAL-COSTS> 32,108
<OTHER-EXPENSES> 4,837
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,422
<INCOME-PRETAX> (23,940)
<INCOME-TAX> 100
<INCOME-CONTINUING> (24,040)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24,040)
<EPS-PRIMARY> (1.72)
<EPS-DILUTED> (1.72)
</TABLE>
