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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: SEPTEMBER 30, 1997.
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 (I.R.S. employer identification no.)
incorporation or organization)
500 OLD CONNECTICUT PATH 01701
FRAMINGHAM, MASSACHUSETTS (Zip code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (508) 383-7700
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE PER SHARE
CLASS E WARRANTS TO PURCHASE SHARES OF COMMON STOCK
CLASS G WARRANTS TO PURCHASE SHARES OF COMMON STOCK
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK PURCHASE RIGHTS
(Title of class)
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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
Aggregate market value, as of December 24, 1997, of Common Stock held by
non-affiliates of the Company: $253,288,768 based on the last reported sale
price on The Nasdaq National Market.
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AT DECEMBER 24, 1997:
22,785,758
DOCUMENTS INCORPORATED BY REFERENCE
The Company intends to file a definitive proxy statement pursuant to
Regulation 14A within 120 days of the end of the fiscal year ended September 30,
1997. Portions of such proxy statement are incorporated by reference in Part
III of this Form 10-K.
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ITEM 1. BUSINESS
OVERVIEW
PerSeptive Biosystems, Inc. develops, manufactures and markets an
integrated line of proprietary advanced instrumentation systems and consumable
products for the purification, analysis and synthesis of biomolecules. The
Company's enabling products are used in the life sciences industry to
significantly reduce the time and costs required for the discovery, development
and manufacture of novel pharmaceutical products. The Company's current and
planned products are based on its patented core technologies in the fields of
chromatography, immunoassay, biological mass spectrometry, solid-phase synthesis
and microfluidic assay devices. Unless the context otherwise requires, all
references to "PerSeptive" or the "Company" are to PerSeptive Biosystems, Inc.
and its subsidiaries./1/
RECENT DEVELOPMENTS
Pending Merger with Perkin-Elmer Corporation. On August 27, 1997, The
Perkin-Elmer Corporation ("Perkin-Elmer"), Seven Acquisition Corp., a wholly
owned subsidiary of Perkin-Elmer, and PerSeptive entered into an Agreement and
Plan of Merger (the "Merger Agreement"). Pursuant to the Merger Agreement, all
outstanding shares of PerSeptive common stock, $.01 per share par value per
share (the "PerSeptive Common Stock"), will be converted into shares of Perkin-
Elmer common stock, $1.00 par value per share (the "Perkin-Elmer Common Stock")
at an exchange rate equal to $13.00 divided by the average of the closing sales
prices of Perkin-Elmer Common Stock on the New York Stock Exchange composite
tape on each of the 20 consecutive trading days preceding the second trading day
prior to the effective date of the merger. In no event, however, will the
exchange rate be more than 0.1926, or less than 0.1486, of a share of Perkin-
Elmer Common Stock for each share of PerSeptive Common Stock. At the effective
time of the merger, PerSeptive will become a wholly owned subsidiary of Perkin-
Elmer. On December 4, 1997, the proposed merger was approved by PerSeptive's
stockholders. The completion of the merger is subject to regulatory approvals
and other closing conditions. There can be no assurance that the proposed
merger will be completed. Either party has the right to terminate the merger
agreement if the merger is not consummated on or before January 31, 1998, unless
the parties agree to extend that date.
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Any statements which are not historical facts contained in this Annual
Report on Form 10-K, including without limitation projections or statements
concerning revenues, operating or other results or improvements thereto, use and
success of technology, progress of programs, completion, timing and benefits of
development programs, liquidity, suitability of products for specific
applications, product performance, advantages or significance of technology and
benefits and results of acquisitions, collaborations and strategic and other
alliances, are forward-looking statements that involve risks and uncertainties,
including but not limited to those relating to product demand, pricing, market
acceptance, the effect of economic conditions, intellectual property rights and
litigation, the results of governmental proceedings, competitive products, risks
in product and technology development, the results of financing efforts, the
ability to exploit technologies, the ability to complete transactions including
the pending merger with Perkin-Elmer, and other risks identified under the
caption "Certain Factors That May Affect Future Results" and elsewhere in this
Annual Report, as well as in the Company's other Securities and Exchange
Commission filings. The Company's actual results may differ significantly from
the results discussed in the forward-looking statements.
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/1/ AutoPilot(R), BioCAD(R), BioMag(R), Biosearch(R), CytoFluor(R), Perfusion
Chromatography(R), PerSeptive Biosystems(R), POROS(R),Poroszyme(R), RPM(R),
SelfPack(R) and TiterZyme(R), are registered trademarks of the Company.
Biospectrometry/TM/, Capillary-Perfusion, ConSep, DEcode, Delayed Extraction
Technology, Expedite, GeneSpectrometry, ImmunoDetection(ID)/TM/, INTEGRAL,
InterPlate, MemSyn, Oligo R3, OligoPak, Mariner, MemSep, PEG-PS, PepMap C18,
PinPoint, Pioneer,Rational Surface Design/TM/ , SCOUT, Sequazyme, SPRINT/TM/,
Symbiot, TiterFluor, TiterScreen, VISION, Voyager-DE, and Voyager/TM /are
trademarks of the Company. Microsoft(R) and Windows(R) are registered
trademarks of Microsoft Corporation. LifeSeq is a trademark of Incyte
Pharmaceuticals Inc. Any other trademarks or trade names used in this Report are
the property of their respective owners.
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GLOSSARY OF TERMS
Analytes........................ the target molecules to be measured in
diagnostic tests.
Amino acids..................... a group of chemical compounds that are the
basic structural units of all proteins and
peptides.
Antibody........................ a protein molecule capable of binding to an
antigen.
Antigen......................... a molecule, typically a portion of a protein,
that is recognized by the immune system as a
foreign substance.
Assay........................... analysis for one or more specific components.
Biomolecules.................... molecules that have biological activity or are
derived from biological sources, such as
proteins, peptides, oligonucleotides and
genes.
Biopharmaceuticals.............. therapeutic drugs that are biomolecules.
Bioseparations.................. a means of extracting a biomolecule from a
mixture of biomolecules for the purpose of
purification or analysis.
Biospectrometry................. an analytical technique used to detect and
measure biomolecules based on their molecular
weight.
Chemiluminescence detection..... an analytical method for detecting
biomolecules using light_generated by a
chemical reaction.
Cholesterol..................... a type of lipid found in cell membranes: high
cholesterol levels in circulating blood have
been linked to atheroschlerosis (accumulation
of fatty tissue on the lining of the
arteries), coronary heart disease and stroke.
Chromatography.................. as used in this Report, liquid chromatography,
which is a method of separating biomolecules
for purification and analysis by binding them
to the internal surfaces of porous particles.
Chromatography skid............. a portable, skid-mounted chromatography system
designed for pilot and production scale
purification of biomolecules.
Clinical diagnostics............ the testing of samples derived from body
fluids.
Diffusion....................... random molecular motion.
DNA............................. deoxyribonucleic acid, strands of nucleic
acids that contain genetic coding
instructions.
Electrophoresis................. an analytical technique that separates
molecules based on their differential movement
in a solution to which electrical charge has
been applied, such differential movement being
characteristic of the size and charge of the
molecule.
ELISA immunoassays.............. Enzyme Linked ImmunoSorbent Assays: i.e.
assays that use enzymes linked to
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antibodies to detect antigens.
Enzymes......................... biomolecules that have a catalytic effect on
chemical reactions.
Fluorogenic..................... a non-fluorescent substrate for an enzyme that
when acted on by an enzyme induces
fluorescence.
Fluorescent assay............... an assay using a very sensitive fluoregenic
substrate to detect and measure enzyme
activity in living cells.
Genomic(s)...................... relating to genes encoded by DNA; used in
connection with the process of identifying the
sequence of nucleotides in DNA-encoded genes.
HPLC............................ high performance liquid chromatography, a
predominantly analytical chromatography
technique in which liquid samples are forced
to flow through columns using high pressure.
Immunoassay..................... a laboratory procedure that uses an antibody
reagent to detect the presence of a target
biomolecule based on its specific binding to
such antibody reagent.
ImmunoDetection................. an immunoassay technique that can be performed
with antibodies in a flow-through cartridge
format.
In vitro........................ refers to laboratory measurements or tests
carried out in test tubes, microtitre plates
and similar devices.
Magnetic separation............. a separation method in which a target is
labeled with specific surface binding
molecules which have magnetic properties, via
iron groups and then separated by attraction
to a magnetic field.
Mass spectrometry............... an analytical technique used to identify
chemical compounds by their mass-to-charge
ratio.
MALDI-TOF....................... Matrix Assisted Laser Desorption Ionization
Time of Flight Mass spectrometry systems for
analyzing the mass of proteins, peptides, and
DNA molecules based on measuring the time of
flight of charged molecules, where small
molecules fly faster than large molecules.
Microfluidic assay devices...... an automated instrument designed to perform
assays at microscopic scale using capillaries
not much larger than human hairs and requiring
5-10 ul sample volumes instead of 50-10,000 ul
volumes.
mRNA............................ messenger ribonucleic acid, the form of RNA in
a cell which transfers genetic information
from a DNA molecule to the ribosome used in
the production of peptides and protein chains.
Nucleotides..................... building blocks of nucleic acids, each of
which consists of one of four different bases
along with sugar and phosphate groups to which
each base is attached.
Oligonucleotide................. a short strand of DNA or RNA.
Peptide......................... a fragment of a protein consisting of at least
two amino acids.
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Peptide synthesis............... the combining of short chains of amino acids,
called peptides, ranging in length from 20 to
60 amino acids.
Perfusion Chromatography........ a liquid chromatography technique in which
liquid flows through and around
chromatographic particles to increase the rate
at which separations occur.
Phosphoramidites................ a family of nonnatural, organic molecules used
to synthesize RNA and DNA oligomers
(molecules).
PNA............................. peptide nucleic acid, a synthetic DNA analog
of a DNA molecule that can be used as a probe
with higher affinity and specificity than
traditional DNA and RNA probes.
Protein......................... chains of amino acids linked by peptide bonds
and often folded in various ways based on the
sequence of amino acids.
Rational Surface Design......... a technique for the creation of a non-
biological, synthetic surface to which target
biomolecules bind with the high specificity of
antibodies.
Reagents........................ consumable products that are active
ingredients in scientific experiments and
clinical diagnostics.
Ribosome........................ any of several minute particles composed of
protein and RNA.
RNA............................. ribonucleic acid, chains of nucleic acids that
transport and translate genetic instructions
encoded in DNA.
RPM............................. a real-time, on-line product monitoring system
for the measurement of biomolecule purity,
concentration and product consistency.
Solid-phase synthesis........... chemical synthesis of molecules using an
organic or inorganic substrate in either a
bead, membrane or other matrix configuration.
Substrate....................... a substance acted upon by an enzyme.
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INDUSTRY BACKGROUND
Biopharmaceutical Product Development and Manufacture
The identification, development and manufacture of a biopharmaceutical
product involve a number of interdependent stages that generally overlap in
time. In the discovery stage, scientists isolate and identify a candidate
biomolecule with potential therapeutic applications and analyze its physical,
chemical and biological characteristics. This can involve the synthesis of
multiple compounds to create a library of potential molecules from which certain
promising drug candidates are isolated. Next, a biopharmaceutical company must
develop an effective means of producing and purifying small quantities of the
target biomolecule for testing. Generally, cells are genetically engineered to
produce the target biomolecule. These engineered cells, however, produce only
small quantities of the desired biomolecule compared to the volume of culture
medium in which the cells are grown. For example, one liter of culture medium
containing mammalian cells engineered to produce a biopharmaceutical protein may
yield only milligrams of purified protein.
After the therapeutic potential of a biomolecule has been established by
preclinical testing, the biopharmaceutical company must complete three
interrelated development programs. First, it conducts clinical trials (in three
phases) to evaluate the safety and efficacy of the biopharmaceutical in humans.
Second, the biopharmaceutical company must develop a manufacturing process to
produce increasing amounts of the pure biopharmaceutical as the product passes
through each phase of clinical testing and into commercial manufacture. Third,
the company must develop commercial-scale manufacturing capacity with the
appropriate quality control and quality assurance programs to ensure that the
commercial product is of sufficient purity and consistent quality. In each
case, the U.S. Food and Drug Administration (the "FDA") either reviews
purification and analysis procedures directly or reviews data derived from those
procedures as part of the overall biopharmaceutical approval process.
Once approved by the FDA for commercial sale, the biopharmaceutical must
continue to be produced in a highly purified form with constant quality control
and quality assurance monitoring. Significant changes in the manufacturing
process, including purification, are subject to FDA review.
Synthesis, Purification and Analysis
A variety of synthesis, purification and analysis procedures are conducted
in each stage in the discovery, development and production of a
biopharmaceutical product. Synthesis involves the creation and replication of
multiple compounds that can be identical or subtly differentiated by as little
as one amino acid. Purification involves the isolation and separation of a
target biomolecule from other substances, such as contaminants, without
destroying the biological activity of the biomolecule. Analysis involves
techniques used to measure the quantity of a biomolecule, to identify its
biological characteristics and to assess the nature and quantity of
contaminants. The synthesis, purification and analysis of biopharmaceuticals,
especially proteins, is generally more difficult than for conventional drugs.
Only very small amounts of the target biomolecule are produced in large volumes
of cell culture medium containing many different kinds of contaminants. In
addition, biopharmaceuticals are often fragile molecules that can easily lose
their biological activity if subjected to excessive physical or chemical forces
during purification. Finally, the contaminants that must be identified by
analysis and removed by purification are often biomolecules that are similar in
structure to the target biomolecule and are consequently difficult to separate.
The purification process must produce target biopharmaceuticals that are
typically at least 99.9% pure, because contaminants can be harmful if
administered internally to humans.
Conventional Separations and Analysis Technologies
The biopharmaceutical industry today relies primarily on purification and
analysis technologies developed 10 to 20 years ago for small-scale research use
in biochemistry laboratories. Purification techniques are, in order of
increasing efficiency: centrifugation, membrane filtration and chromatography.
Efficiency in purification is the speed of the technique in separating the
target biomolecule from contaminants without loss of or damage to the
biomolecule. Analysis techniques are, in order of increasing sensitivity:
electrophoresis, chromatography and immunoassay. Sensitivity in analysis is the
effectiveness of the technique in detecting very small amounts of one specific
biomolecule in a mixture of other substances. The preferred technique for the
purification of biomolecules is chromatography. Chromatography and immunoassay
are the preferred methods for biomolecule analysis.
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Chromatography. Chromatography is a method of separating biomolecules by
binding them to surfaces of porous particles (chromatography media) contained in
columns. Active chemical coatings may be applied to the internal surfaces of
these particles to bind selectively with biomolecules of interest. These
coatings determine performance factors, including degree of purification and
percentage of product recovery. Chromatography column volumes range from less
than one milliliter to more than 1,000 liters. A liquid mixture containing the
target biomolecule and contaminants is pumped into the top of the column. As the
mixture flows through the column, the target biomolecules move by diffusion
(random molecular motion) and bind to the surfaces of the pores in the
particles. A series of chemical washes are used to remove contaminants and
collect the target biomolecules in a purified form. When used for analysis,
chromatography also employs a detector to measure the concentration of each
component as it exits the column. There are two methods of chromatography used
for biomolecule separations: liquid chromatography ("LC") and high performance
liquid chromatography ("HPLC").
Conventional liquid chromatography is a slow process and previous attempts
to accelerate its performance have resulted in a reduction in separation
performance and capacity. Speed in conventional chromatography is limited by the
rate at which biomolecules diffuse into the pores of particles and bind to their
surfaces. The relatively large size of biomolecules causes them to diffuse
slowly, especially within the confines of the porous network of conventional
chromatography particles. Conventional LC purifications usually require two to
five hours to complete and, in commercial-scale applications, can require 12
hours or more. For example, a commercial-scale purification of 200 grams of
monoclonal antibodies from 4,000 liters of cell culture may require 100 hours
and three or more separate purification steps to complete.
High performance liquid chromatography uses smaller diameter particles and
higher pressure within the column than are used with conventional LC to reduce
the time required to complete a separation. Consequently, a typical HPLC
separation can be completed in 30 to 60 minutes. HPLC is widely used for the
analysis of biomolecules, but it is infrequently used for commercial-scale
purification of biomolecules because of cost and safety concerns related to
pumping mixtures through large columns at high pressures.
Immunoassay. Immunoassays are laboratory procedures that use an antibody
reagent to detect the presence of a specific biomolecule and are conventionally
performed in shallow reservoirs contained in plastic devices known as
microtitre-well plates. During an immunoassay, a biological sample containing
the targeted biomolecule is first allowed to react with the antibody in a series
of processing steps, which usually requires several hours to complete. When
added to the sample, a second reagent generates a signal (for example, by
fluorescence) proportional to the amount of the biomolecule present. In addition
to being relatively slow, conventional immunoassays can have high margins of
error, are very labor intensive and are difficult and costly to automate.
PERSEPTIVE'S TECHNOLOGIES
PerSeptive's current and planned products for the purification, analysis
and synthesis of biomolecules are based on the following core technologies:
Perfusion Chromatography. The Company's patented Perfusion Chromatography
process and media, which use proprietary flow-through particles, separate
biomolecules 10 to 1,000 times faster than conventional LC or HPLC and achieve
the same or better levels of purity. Prior to the invention of Perfusion
Chromatography, it was generally accepted in the chromatography industry that
the slow speed of diffusion was an inherent limitation to the potential speed of
chromatography.
In conventional chromatography, liquid flows around porous particles and
biomolecules diffuse slowly from the flowing liquid into pores in those
particles where they bind. In contrast, the particles in the Company's
Perfusion Chromatography media have two types of pores. One type of pore is a
large transecting "throughpore," which permits rapid flow of the liquid through
the particles and ready access to the interior of the particles. The other type
of pore is a smaller pore that lines the throughpores to provide a large surface
area into which the targeted biomolecules can diffuse and bind. This pore
structure creates very short diffusion paths to the large accessible surface
area within the particles. This reduction in diffusion distance is the main
reason for the increased speed associated with Perfusion
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Chromatography.
PerSeptive has developed a variety of coating techniques and surface
chemistries to separate biomolecules based on their electrical charge,
hydrophobicity, bioaffinity and other factors. These chemistries have enabled
the Company to offer a broad range of products that are more durable than
competing products because of the stability of the Company's proprietary coating
chemistries and base particle materials.
ImmunoDetection. PerSeptive has developed novel immunoassays that can be
performed using its Perfusion Chromatography technology with antibodies to
perform the steps of an immunoassay in a flow-through column format
("ImmunoDetection"). ImmunoDetection permits target molecule detection in
seconds or minutes, far faster than conventional immunoassay techniques, which
require several hours to complete. ImmunoDetection also takes advantage of the
higher degree of automation available in chromatography instruments, as compared
with immunoassay instruments, and can produce results with much lower margins of
error. The Company has filed a patent application for its ImmunoDetection
technology.
The Company has also developed a novel, patent-pending method for in-line
process monitoring that provides continuous analysis of the concentration,
purity and structural integrity of a target biomolecule during the manufacturing
process. In addition, the Company has developed a patented method of analyzing
extremely small amounts of contaminants in a biopharmaceutical product by
removing all of the biopharmaceutical from a sample and concentrating the
remaining contaminants until they are present in detectable quantities. The
Company is commercializing these techniques as a part of its INTEGRAL
workstation and RPM technology. See "Business-- Purification Products."
Rational Surface Design. The Company is working to develop products based
on Rational Surface Design ("RSD"), a method of creating synthetic surfaces to
which target biomolecules bind with the high specificity characteristic of
antibodies. This specificity is achieved by engineering RSD surfaces to behave
in a manner analogous to antibody binding sites. These surfaces do not,
however, contain any antibodies or other biological materials. RSD is an
extension of the Company's expertise in developing new chemistries to coat the
surfaces of chromatography media. The Company owns a U.S. patent relating to
its RSD technology and compositions of matter for surfaces engineered for
specific biomolecules.
Biospectrometry. PerSeptive owns a significant body of technology relating
to biological mass spectrometry ("Biospectrometry"). Biospectrometry is an
analytical technique used to detect and measure biomolecules based on their
molecular weight (mass). Mass spectrometers work by producing charged particles
of the injected molecular sample and then sorting ionized species of the
original molecule based on its mass/charge ratio. Although there are many
different kinds of mass spectrometers, most instruments are defined by
differences in two subsystems. One is the ionization source that creates the
ionic species and the other is the detection system. Biomolecular analysis
using mass spectrometry has been limited to date due to the inability of mass
spectrometers to resolve (identify) large biomolecules as well as the high cost
and difficulty of use of mass spectrometry. PerSeptive believes that the use of
its technology in the integration of mass spectrometry with liquid
chromatography and other separation systems, laser desorption and electrospray
ionization sources, and time-of-flight detection systems is broadly enabling in
overcoming the deficiencies of mass spectrometry for biomolecular analysis.
Microfluidic Assays. The Company is developing technology to perform
assays at microscopic scale using capillaries not much larger than human hairs
and requiring minimal sample volumes. The MicroElectrophoresis Assay System
(MEASure) technology evolved from PerSeptive's early expertise with immunoassays
and the Company's desire to develop a system that provides highly sensitive and
instantaneous detection in an easy to use, automated, low sample volume format.
Largely funded by PTC-II, the development work done to date on MEASure has
extended beyond early feasibility and prototype phases. The Company believes
the use of this technology will enable the next generation of diagnostic tests
where low sample volumes, minimal sample handling, high sensitivity and
simultaneous detection are desired parameters.
DNA and Peptide Synthesis. PerSeptive owns leading technology for DNA and
peptide synthesis. The preparation of synthetic replicas or analogs of
naturally occurring molecules such as nucleic acids (DNA and RNA) and
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peptides has been made routine through the use of instruments called
synthesizers. Synthesizers contain a small reaction chamber into which is
placed disposable "support" media on which the molecules are built.
Synthesizers also contain an array of bottles containing the building-block
reagents: for DNA or RNA synthesis, nucleotide monomers (each corresponding to a
"base"); and for peptide synthesis, the 20 amino acids from which peptides are
formed. A personal computer and dedicated software are used to program and
control a pump which adds these reagents in the programmed sequence (along with
other protecting/deprotecting, activator and wash reagents). After synthesis,
the material must be chemically removed from the support and be purified and
analyzed. PerSeptive's patented phosphoramidite chemistries (bulk and small-
pack DNA reagents) are the industry standard for synthesizing oligonucleotides.
PerSeptive has an exclusive license for technology to manufacture and sell
peptide nucleic acid ("PNA") for molecular biology research and, subject to
certain limited reservations, for other applications. PNA is a synthetic mimic
of the DNA molecule with a modified neutrally charged peptide-like "backbone."
The unique chemical structure of PNA enhances its affinity and specificity as a
DNA or RNA probe.
PerSeptive's peptide synthesis chemistry products are differentiated from
competing products by the use of proprietary support structures of polyethylene
glycol polystyrene and by innovative amino acid activation reagents that allow
synthesis of complex peptides, which are otherwise difficult to synthesize.
Superparamagnetic Bead-Based Separations. PerSeptive owns technology
relating to magnetic separations particles and processes. Magnetic separations
enable biomedical researchers to improve the speed, purity and yield of many
common laboratory protocols, including separation of cell populations and
isolation and purification of nucleic acids. Researchers can perform techniques
based on magnetic separation either manually or with automated instruments.
PURIFICATION PRODUCTS
PerSeptive's purification products can be incorporated readily into any
stage of the development and manufacture of a biopharmaceutical product and
offer productivity advantages over conventional counterparts. The Company
believes that the integration and use of a single family of purification
products, such as POROS columns and media and BioCAD Workstations, will
facilitate the transition of biopharmaceutical products from discovery, through
laboratory-scale development, to commercial-scale production. Companies using
conventional purification technology usually make several significant changes in
materials, equipment and processes in moving from the development stage to
commercial manufacture. As a result, an integrated line of purification
products is expected to enhance productivity by reducing or eliminating these
costly and time-consuming changes. Moreover, because the FDA must approve
significant changes in manufacturing processes, an integrated line of
purification products may simplify and expedite the process of obtaining
approvals from the FDA.
The Company's family of purification products includes consumables and
instrumentation systems. The following table shows the Company's primary
purification products and their applications to the four main functional groups
within companies developing and commercializing biopharmaceuticals: research and
development; process development; quality control and quality assurance; and
manufacturing. The estimated timing of future product introductions, including
those described below and in the following sections, depends on a number of
factors, such as timely completion of current development programs. There can
be no assurance that these development programs will be completed successfully
or within the expected time frames:
<TABLE>
<CAPTION>
PRODUCT
PRODUCT LAUNCH APPLICATION/USE TARGET MARKETS*
------- ------ -------------- ---------------
CONSUMABLES AND REAGENTS: R&D PD QC MFG
--- -- -- ---
<S> <C> <C> <C> <C> <C> <C>
POROS Chromatography 1990 Methods development, * * *
Prepacked Columns analysis and small-scale
purification
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C> <C>
POROS Bulk Media 1991 Biopharmaceutical *
manufacturing
POROS Self Pack 1994 Laboratory-scale * *
purification and analysis
Oligo R3 1995 Purification of * * *
oligonucleotides and
antisense compounds
INSTRUMENT SYSTEMS:
BioCAD Workstation 1991 - Laboratory and * * * *
Family 1996 development scale
purification and analysis
SCOUT 1995 Automated, multi-column * * * *
switching device
Vision Workstation 1996 Integrated purification * * *
and analysis system with
sample-handling robotics
and RPM
Real-Time Monitoring 1992 On-line product monitoring * *
in manufacturing.
Integral 100Q System 1997 Fully integrated * * *
Multi-dimensional Biospecific HPLC workstation optimized to
perform rapid protein
analysis, characterization
and micropurification
</TABLE>
___________________
* R&D - Research & Development; PD - Process Development; QC - Quality Control
& Assurance; MFG - Manufacturing.
Consumables and Reagents
PerSeptive's POROS products consist of a family of consumable
chromatography columns and media used to perform Perfusion Chromatography for
both purification and analysis. POROS products enable purification and analysis
procedures to be performed 10 to 1,000 times faster than with conventional
chromatography media. The POROS media particles are made of polystyrene polymers
and are coated with the Company's proprietary surface chemistries. These
materials are rigid and can withstand the high pressures associated with HPLC,
although high pressure is not required for their use. The coatings can also
withstand chemicals employed in cleaning that are harsher than those generally
tolerated by conventional media, significantly extending the useful life of
POROS products. The efficiency and durability of POROS products are significant
cost-saving features.
The Company has developed and currently markets a line of POROS products
representing different combinations of two particle types, three particle sizes,
more than 25 surface chemistries and various column configurations. These
products can be used with conventional HPLC and LC equipment for purposes
ranging from laboratory-scale analyses through large-scale manufacturing
processes. The Company's POROS 50 chromatography media provides high resolution
separations at the low pressures typical of pilot-scale production and
manufacturing applications. PerSeptive sells POROS in prepacked columns for
methods development, analytical applications and
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small-scale purifications and in bulk for biopharmaceutical manufacturing. The
POROS Self Pack Column Packing System allows for laboratory-scale purification
and analysis at lower cost than conventional prepacked columns.
Other purification media such as Olgio R3 have been designed for specific
purification applications. Oligo R3 was developed specifically to optimize the
purification of oligonucleotides.
Purification Instrumentation
The Company's BioCAD Workstation is a computer-aided instrumentation system
designed to achieve the optimal use of the Company's POROS chromatography media
for laboratory and development scale purifications and for analysis. Each BioCAD
Workstation combines high speed pumps, valves, detectors and a built-in computer
and proprietary software used with Microsoft Windows. The BioCAD Workstation is
able to collect and process the large amounts of data generated by Perfusion
Chromatography over short periods of time. Unlike conventional chromatography
instruments, the BioCAD Workstation can be used equally well for both analysis
and purification. The BioCAD Workstation facilitates the design, optimization
and execution of purification and analysis procedures by allowing the user to
test and optimize various operating parameters. Results of completed procedures
can be quickly reviewed and grouped using integrated computational and graphics
software.
The Company is currently reviewing its software to determine whether its
customers are likely to experience any performance issues related to use of two
digits to represent years, which is commonly called the "year 2000 problem." If
such issues exist, the Company does not believe that they, or the steps to be
taken by the Company or its vendors to correct them, will have a material
adverse effect on the Company.
The Company believes that a single BioCAD Workstation has the analytical
productivity of at least five HPLC instruments using POROS media and up to 15
HPLC instruments using conventional chromatographic media. For example, a
BioCAD Workstation using a POROS column typically has a separation cycle of two
minutes and can complete up to approximately 600 cycles in a day, taking into
account cleaning and preparation time. A conventional HPLC instrument using a
POROS column typically has a 12-minute cycle and can complete 100 cycles in a
day. A conventional HPLC instrument using a conventional HPLC column typically
has a 30-minute cycle and can complete only 40 cycles in the same time period.
PerSeptive has developed and introduced new versions of the BioCAD
Workstation for specific markets, including BioCAD SPRINT, a lower cost model
directed at the academic market, and the BioCAD 700E, a second-generation
version of PerSeptive's industry leading BioCAD System introduced during fiscal
1996 with enhanced features. The SCOUT Column Switching Device, a fully
integrated, software-driven, automated multi-column switching device that
greatly enhances systematic purification methods of the Company's instruments,
was introduced in 1995.
PerSeptive introduced the Vision Workstation, the first chromatography
system to offer simultaneous biomolecule purification and analysis in a single
instrument through robotics. Components and features such as the SCOUT and RPM
are integrated into the Vision Workstation.
Real-Time Process Monitor ("RPM") technology is incorporated into several
automated purification and analysis instruments such as the Vision and BioCAD
workstations to analyze and monitor target biomolecules during production on a
continuous basis. Biopharmaceuticals are generally produced in cell culture and
are extracted through a series of purification steps. The Company believes that
RPM technology is the biopharmaceutical industry's first real-time, on-line
product monitoring system for the measurement of biomolecule purity,
concentration and product consistency. Prior to the introduction of RPM
technology, biopharmaceutical companies were unable to monitor these production
and purification processes without lengthy delays (typically one-half to two
days) in obtaining the results from conventional analytical techniques. The
Company believes that RPM technology represents an important tool in developing
optimal purification and fermentation processes. Furthermore, the Company also
believes that RPM technology has the potential to provide information important
for process monitoring, regulatory review and quality control.
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PerSeptive recently released the Integral 100Q System, which represents a
redesign of PerSeptive's Integral instrument which was originally introduced in
1993, which incorporates PerSeptive's unique technology of "Biospecific MDLC
("Multidimensional Liquid Chromatography) which is based on the combining of
orthogonal chromatography with on-line biospecific chemistries for accurate
selection and characterization of picomole amounts of biomolecules.
ANALYSIS PRODUCTS
The following table shows the Company's primary analysis products and their
applications to the four main functional groups within companies developing and
commercializing biopharmaceuticals:
<TABLE>
<CAPTION>
PRODUCT PRODUCT
------- LAUNCH APPLICATION/USE TARGET MARKETS*
------- --------------- ---------------
CONSUMABLES AND REAGENTS: R&D PD QC MFG
--- -- -- ---
<S> <C> <C> <C> <C> <C> <C>
CytoFluor Reagent Kits 1990 Cell studies and fluorescence * *
immunoassays and other binding
assays
ID Sensor Cartridges and ID SelfPack 1992 - Immunoassay analysis * * * *
1995
TiterZyme, TiterScreen, and other 1992 Enzyme immunoassays for research * *
Immunoassay Test Kits and clinical diagnostics
BioMag Magnetic Particles 1993 Molecular biology and cell * *
separations
Poroszyme Cartridges 1995 Enzyme digests * * *
TiterFluor Kits 1995- Fluorescence immunoassays * *
1996
PepMap C18 Pre-packed Columns 1996 Peptide mapping *
Capillary Perfusion Tool Kits 1996 Micro-analysis and purification *
Sequazyme Kits 1996 Enzyme digestion for mass * *
spectrometry analysis and
sequencing
Sequazyme Mass Standard Kit 1997 GMP and GLP compliance issues * *
INSTRUMENT SYSTEMS:
CytoFluor Fluorescence Plate Readers 1990 - Cell studies and fluorescence * *
1996 immunoassays and other binding
assays
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Voyager Biospectrometry 1994 - Easy measurement and analysis of * * *
Workstations and Delayed Extraction 1996 molecular weight using Mass
Technology Spectrometry, suitable for
sequencing biomolecules
InterPlate Micro-Fraction Collector 1996 Automated sample preparation for * * *
MALDI analysis
Symbiot Sample Workstation 1997 Automated Sample preparation * * *
Mariner LC/MS System 1997 Interfaces Mass Spectrometry with * * *
Liquid Chromatography
</TABLE>
_______________
* R&D - Research & Development; PD - Process Development; QC - Quality Control
& Assurance; MFG - Manufacturing.
CytoFluor Reagent Kits
The Company sells a line of fluorescence assay reagent kits to be used with
its CytoFluor Fluorescence Plate Reader described below. Fluorescence assays
determine what kinds of cells will accept or receive an experimental therapeutic
agent or nutrient, can detect whether a cell is infected with a virus or other
microorganism and can determine toxicity of molecules that may be carcinogens.
CytoFluor is also used extensively as a fluorescence plate reader for the
increasing number of fluorescence-based assays for molecular biological research
and for immunoassays.
ID Sensor Cartridges and SelfPack
The Company's ID Sensor Cartridges are a line of new products designed to
combine the flow-through characteristics of Perfusion Chromatography with the
specificity and sensitivity of antibodies for immunoassays in a flow-through
column format, permitting target molecule detection in seconds to minutes, with
very low coefficients of variation. ID Sensor Cartridges are designed to be
customized with specific antibodies by users in order to perform immunoassays on
BioCAD and INTEGRAL Workstations or conventional HPLC instruments. The Company
introduced ID SelfPack for cost conscious customers in 1995.
Immunoassay Test Kits
PerSeptive sells a line of in vitro products that includes immunoassay test
kits for use in medical and pharmaceutical research applications. These tests
are used to measure levels of certain hormones, lymphokines, eicosanoids,
cytokines and growth factors in several applications, including the evaluation
of new pharmaceutical products. These kits are manufactured in microtitre plate
or coated tube formats. The Company also provides research, development and
manufacturing services related to in vitro diagnostic products on a fee basis to
third parties.
BioMAG Magnetic Particles
Magnetic separation enables the biomedical researcher to greatly improve
the speed, purity, and yield for many common laboratory protocols including
selection of cell subpopulations and the isolation of mRNA and DNA for genetic
studies and sequencing. PerSeptive's superparamagnetic bead technology offers
both a manual and an automatic system for separations.
Sequazyme Kits and DEcode software
Related to the launch of PerSeptive's Delayed Extraction (DE) Technology,
the Company developed Sequazyme Kits and DEcode software to enable scientists to
determine the sequence of proteins and peptides using Voyager Biospectrometry
Workstations. Sequazyme Kits use optimized enzyme digestion procedures to
sequentially eliminate either nucleic or amino acids from oligonucleotides or
peptides, respectively, and to allow scientists to unravel a given molecular
sequence. The Sequazyme Mass Standard Kit provides an essential set of
standards for ensuring instrument
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<PAGE>
GMP and GLP compliance. DEcode software then automates and facilitates the
identification process using the mass to charge ratios detected by the Voyager-
DE Biospectrometry Workstation and the known molecular weight of all amino acids
or nucleotide bases.
CytoFluor Fluorescence Plate Reader
The Company's CytoFluor line of fluorescence detection and scanning
instruments are used principally for the monitoring of cell behavior by
fluorescence assays. The market for fluorescence scanners of the type produced
by the Company has grown due to the desire to replace radioactivity-based
research assays in order to alleviate health, safety and environmental concerns
and disposal expense inherent in the use of radioactive assays. The Company
launched the CytoFluor 4000 in 1996 with Temperature Control and enhanced
features and is currently launching TiterFluor fluorescence in vitro assays for
use with the CytoFluor 4000.
Voyager Biospectrometry Workstations
The Voyager matrix-assisted laser desorption ionization time-of-flight
("MALDI-TOF") Biospectrometry Workstations enable molecular biologists and
biochemists to determine very accurately the purity and structure of a
biomolecule's mass in their laboratories, rather than in conventional
centralized mass spectrometry laboratories. Mass spectrometry is an analytical
technique used to identify the molecular weight of molecules. Molecular weight
determines the molecule's unique identity or "fingerprint." Mass spectrometry
can also be used to detect other impurities or foreign elements in a given
sample.
The Company is a leader in technical innovations in the field of mass
spectrometry. In recent years, the Company has focused on the application of
mass spectrometry to biopharmaceutical development. In 1995, the Company
introduced the Voyager Elite-Biospectrometry System for advanced research
applications, and recently launched a complete line of Voyager MALDI-TOF
Biospectrometry Workstations enhanced with PerSeptive's proprietary Delayed
Extraction ("DE") Technology which enables the sequencing of biomolecules.
PerSeptive received two patents covering Delayed Extraction in 1997. Recently,
the Voyager Elite was redesigned and the Voyager-DE STR was released as a higher
performance instrument.
InterPlate
PerSeptive's InterPlate Micro-fraction Collector for MALDI analysis
facilitates sample preparation for life scientists. InterPlate can be used to
automate the process by taking purified product from an INTEGRAL workstation and
depositing it directly onto a Voyager Biospectrometry sample plate, for example.
In December 1996, PerSeptive announced the development of a range of new
techniques called GeneSpectrometry to accelerate high throughput identification
of gene mutations using the Company's PinPoint mutation detection technology,
which allows you to detect single point mutations.
Symbiot Sample Workstation
The Symbiot Sample Workstation fully automates and dramatically accelerates
the current manual sample treatment steps involved with Time-of-Flight ("TOF")
Mass Spectrometry. With the introduction of this new platform, scientists
involved with protein and peptide analysis, with DNA sequence and variation
analysis, or with combinatorial chemistry, can now easily take advantage of the
unequaled analytical capabilities of Mass Spectrometry.
Mariner LC/MS System
Per Septive recently launched the Mariner LC/MS system which is based on
the Company's proprietary Time-of-Flight mass spectrometry ("TOF/MS")
technology. Mariner is a bench-top detector with an electrospray interface
which couples to liquid chromatography systems. Key features of the instrument
include its wide mass range and extremely fast data acquisition speed along with
the capability to provide high resolution mass spectra with minimal sample
consumption. These characteristics make the instrument an ideal detector for
all forms of fast liquid chromatography. The high resolution mass separation
allows more accurate, exact mass measurements. Liquid Chromatography/mass
spectrometry ("LC/MS") has recently emerged as a preferred technology for
complex anaylsis problems in the pharmaceutical industry and in biomedical
research labs.
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<PAGE>
SYNTHESIS PRODUCTS
PerSeptive has been a technological leader in the development of new
chemistries and instruments for the synthesis of nucleic acids and peptides.
PerSeptive's family of over 3000 synthesis products includes instruments and
consumable reagents, supports, activators, linkers and other chemical products
used for nucleic acid and peptide synthesis. The following table shows
PerSeptive's primary synthesis products and the applications for which they are
used:
<TABLE>
<CAPTION>
PRODUCT
PRODUCT LAUNCH APPLICATION/USE TARGET MARKETS/*/
------- ------- --------------- -----------------
SYNTHESIS CHEMICALS: R&D PD QC MFG
--- -- -- ---
<S> <C> <C> <C> <C> <C> <C>
Nucleic Acid and Peptide Synthesis 1986 - Synthesis of DNA, PNA and RNA * * *
Reagents, Activators, Linkers and 1996
Supports
EDITH 1997 Sulfur transfer reagent for * *
synthesis of DNA
NUCLEIC ACID SYNTHESIS PRODUCTS:
Expedite System 1992 - Synthesis of research and * * *
1995 manufacturing quantities of
DNA, RNA and PNA
Multiple Oligo Synthesizer System 1995 - Permits sixteen column parallel * * *
(MOSS) 1996 oligonucleotide synthesis
MemSyn, MemSyn HV 1995 - DNA and RNA membrane synthesis * * *
1996 devices
PEPTIDE SYNTHESIS PRODUCTS:
Pioneer Peptide Synthesizer 1996 Synthesis of both simple and * * *
complex peptides
Multiple Peptide Synthesis (MPS) 1997 Permits 32 column parallel * * *
peptide synthesis
Pioneer Peptide Synthesizer 1997 Expanded peptide synthesis * *
Workstation Software capacity
</TABLE>
_______________
* R&D - Research & Development; PD - Process Development; QC - Quality Control
& Assurance; MFG - Manufacturing.
PerSeptive's patented phosphoramidite chemistries (bulk and small-pack DNA
reagents) are the industry
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<PAGE>
standard for synthesizing oligonucleotides. In addition, the Company believes
that its Expedite family of reagents enables even faster DNA/RNA synthesis than
conventional systems. Expedite reagents are compatible with PerSeptive's and
competitors' instruments.
Synthesis Chemicals
PerSeptive offers a wide range of standard and specialty chemicals for
synthesis of nucleic acids, nucleic acid analogues, and peptides. Products
include standard and modified bases for nucleic acid synthesis, bead and
membrane based synthesis supports for peptides, RNA and DNA, and other high
quality reagents manufactured under ISO 9002 guidelines. Certain chemistries
such as peptide activators including TFFH, HATU, and HOAT and PNA oligomers are
highly proprietary and exclusively available for research purposes from
PerSeptive.
Recently PerSeptive launched a new DNA synthesis reagent which dramatically
improves the sulfur transfer efficiencies over the other existing reagents on
the market. With sulfur transfer efficiencies greater than 99% at each cycle,
EDITH will enable the synthesis of phosphothioated oligonucleotides with minimal
contamination of phoshodiester linkages.
Recently PerSeptive announced a new technique for single point mutation
analysis based on PerSeptive's proprietary PNA technology. This new technique,
"Pre-Gel Hybridization," developed by PerSeptive scientists, is a rapid
alternative for one of the most fundamental techniques in molecular biology,
"Southern blotting."
Expedite System
The Expedite Nucleic Acid Synthesis System performs solid-phase synthesis
of DNA, RNA and PNA utilizing a unique and patented microfluidic system which is
designed to consume less reagent and generate less waste during operation than
prior and competing instruments, potentially allowing significant operational
savings for Expedite users. This results in a reduction of reagent consumption
of 50% and reduced cycle times, giving high quality oligonucleotide at
significantly lower cost. Expedite products can be used for the synthesis of
RNA, normally a very difficult task. While currently this is a relatively small
application, there is increasing customer interest in the synthesis of RNA for
use in RNA-based drugs that have either a catalytic or anti-sense effect on
genetic processes.
Multiple Oligo Synthesis System (MOSS)
The MOSS, when used in conjunction with the Expedite Nucleic Acid Synthesis
System, extends the synthesis throughput and overall capacity of PerSeptive's
synthesis instruments. The MOSS enables customers to efficiently synthesize
nucleic acid and peptides in less time and with less effort. The MOSS can be
used in conjunction with recently introduced MemSyn and reusable MemSyn HV
membrane devices to further facilitate ease of use and handling in the synthesis
process.
Pioneer Peptide Synthesizer
Pioneer Peptide Synthesizer is an automated, versatile peptide system
introduced in 1996 for research applications. The multiple column instrument
utilizes enhanced monitoring and flexible programming for high efficiency
synthesis of standard and difficult peptides. Innovative design lowers reagent
consumption and increases throughput.
Multiple Peptide Synthesis Option (MPS)
The MPS can be used in conjunction with the Pioneer to run up to 32 peptide
synthesis runs in parallel or to create two independent entry operated
synthesizers using the Pioneer as a workstation.
Pioneer Workstation Software
The Pioneer Workstation Software expands the capabilities of the peptide
synthesis system. New capabilities include multiple instrument control,
synthesis monitoring, and use of an internal database as well as other features.
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<PAGE>
BUSINESS DEVELOPMENT
The Company believes that its core technologies are directly applicable to
many biomedical industry applications as well as applications in other
industries. The Company plans to explore corporate collaborations or other
business arrangements to address the broader application of its technologies to
clinical diagnostics and other businesses.
PTC-II
In December 1993, the Company and PTC-II completed a public offering with
total net proceeds to PTC-II of $54.1 million. PerSeptive formed PTC-II as a
separate special purpose corporation in order to accelerate research and
development aimed at the application of PerSeptive's core technologies to
commercial opportunities in large life science markets. From December 1993 to
March 1996, PTC-II operated as a separate company from PerSeptive and pursued
applications of PerSeptive's technologies in four programs: DNA and peptide
synthesis; DNA and protein sequencing; clinical diagnostics; and systematic
screening of chemical and biological compounds for drug discovery. During this
time period, PerSeptive licensed to PTC-II the technology necessary to pursue
these programs and PTC-II contracted with PerSeptive to develop products and
services aimed at these market opportunities which extended beyond PerSeptive's
principal business.
In November 1995, PerSeptive, PerSeptive Acquisition Corporation ("PAC"), a
wholly owned subsidiary of PerSeptive, and PTC-II entered into a definitive
agreement pursuant to which PerSeptive 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, $.01 par
value per share, of PTC-II and one Class E Warrant of PerSeptive exercisable for
one share of PerSeptive Common Stock at $33.00 per share until December 1998.
Effective March 8, 1996, PerSeptive acquired 2,603,125 PTC-II units that were
validly tendered and not withdrawn in the exchange offer. The PTC-II unit
holders, who participated in the exchange offer, exchanged their PTC-II units
for 2,603,125 shares of PerSeptive Common Stock and new Class I Warrants which
expired on August 8, 1997. On March 13, 1996, PTC-II merged with PAC and became
a wholly owned subsidiary of PerSeptive. 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 PerSeptive Common
Stock upon the merger of PTC-II with PAC. The total value of the Company's
Common Stock issued in the exchange offer was approximately $16 million based on
the last reported sales price or closing price of the Company's Common Stock on
The Nasdaq National Market on March 8, 1996. See "--Recent Developments."
PerSeptive pursued the following research and development programs on
behalf of PTC-II, and except for its Drug Discovery Program (See "-- ChemGenics
and Millennium Transactions" below) will continue to pursue certain of these
projects through its own research and development programs:
DNA and Peptide Synthesis Program. PerSeptive has worked towards the
development of DNA and peptide synthesis systems that are based on the superior
mass transport characteristics of PerSeptive's POROS media. PerSeptive believes
that the systems it is developing will substantially reduce the costs of DNA and
peptides synthesis and will more readily enable the large-scale manufacture and
commercialization of DNA- and peptide-based biotherapeutics.
DNA and Protein Sequencing Program. PerSeptive has pursued the use of its
high-resolution, high-sensitivity mass spectrometers and innovative separations
analysis of DNA and protein molecules. Sequencers identify the order of
chemical groups that constitute DNA and proteins. Continuing research directed
toward an understanding of biology at a molecular level has caused the expansion
of the market for automated sequencers. PerSeptive believes that the mass
spectrometry and separations technologies it is developing will substantially
increase productivity in sequencing of biomolecules and that this increase in
sequencing productivity at the gene and protein level can have an enabling
effect on biomedical research aimed at identifying better diagnostics and
therapeutics.
PerSeptive has developed a range of new techniques for faster and more
accurate detection and analysis of genomic sequences and mutations. The new
techniques, which are based on PerSeptive's mass spectrometry instrumentation,
are called GeneSpectrometry.
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<PAGE>
Clinical Diagnostics Program. PerSeptive has pursued development of
several clinical diagnostic systems, which are being developed to include
innovations both in instrument and reagent technology. These systems will
incorporate new separation and detection formats that are designed to result in
substantial improvements in speed, precision, sensitivity and cost. For
example, the MEASure system has been extended beyond early feasibility and
prototype development stages and is expected to provide considerable advantages
over current technology. These systems will be designed to detect and measure
target molecules (analytes) currently measured by existing diagnostic systems,
as well as analytes related to the emerging genetic testing market.
Another facet of this program area was the development of clinical
diagnostic kits for use on random access analyzers. PerSeptive has developed
clinical diagnostic assays for a number of companies as part of PerSeptive's
contract research services which generates a small amount of revenue.
Drug Discovery Program. Through its work for PTC-II, PerSeptive developed
new methodologies for the screening of libraries of biological and chemical
compounds based on its high-throughput separations technologies and automated
instrumentation systems. Pharmaceutical drug discovery has traditionally been
based on random screening techniques. The time-consuming and costly nature of
drug development, together with advances in life sciences technologies, have
propelled many developers to pursue rational drug design approaches that are
intended to enhance productivity in drug discovery. PerSeptive has developed
novel screening methods that it believes will combine the benefits of both
random and rational drug design approaches to increase productivity in drug
discovery significantly.
ChemGenics and Millennium Transactions
In June 1996, the Company entered into a transaction with ChemGenics
Pharmaceuticals, Inc. (ChemGenics") (formerly, Myco Pharmaceuticals Inc.), in
which the Company transferred certain assets and employees of the Company's drug
discovery program to ChemGenics and granted a non-exclusive license to
ChemGenics to use the Company's technology (including technology developed
through PTC-II) in the field of drug discovery in exchange for shares of
ChemGenics common stock and warrants to purchase additional shares of ChemGenics
common stock exercisable until June 28, 2000. The warrants were exercisable at
$5.00 per share. The Company was subject to certain contractual restrictions on
the sale or distribution of its holdings of ChemGenics common stock. In
December 1996, the Company and ChemGenics executed amendments to their
agreements pursuant to which the Company exchanged a portion of its ChemGenics
common stock for a promissory note for $3 million payable on the earlier of the
closing of ChemGenics' initial public offering or December 31, 2002. The
Company held approximately 34% of the outstanding common stock of ChemGenics as
of December 28, 1996.
In January 1997, ChemGenics and Millennium Pharmaceuticals, Inc.
("Millennium") entered into an Agreement and Plan of Merger ("Agreement").
Under the terms of the Agreement, the stockholders of ChemGenics received common
stock of Millennium in exchange for their common stock of ChemGenics. At the
closing on February 10, 1997, the Company received 1,612,582 shares of
Millennium common stock, $.001 par value per share ("Millennium common stock"),
in exchange for its shares of ChemGenics common stock. In addition, the Company
received $4 million cash in exchange for the warrants for ChemGenics common
stock and in satisfaction of the above referenced promissory note. The parties
to the Agreement contemplate that the transaction will qualify as a tax-free
merger. The Company's shares of Millennium common stock were subject to
restrictions on sale which expired in increments between June and September
1997. During the quarter ended June 28, 1997, the Company sold approximately
50% of its investment in Millennium for $12.9 million and realized a gain on the
sale of approximately $800,000.
RESEARCH AND DEVELOPMENT
As of December 24, 1997, PerSeptive's technical research and development
group consisted of approximately 85 persons, many of whom have graduate degrees
in fields such as biochemistry, chemical engineering, organic chemistry, polymer
science and protein chemistry. During the Company's fiscal years ended
September 30, 1997, 1996 and 1995 research and development expenditures funded
internally were approximately $15.2 million, $11.3 million and $7.0 million,
respectively.
The Company believes that applications of its technologies extend beyond
use in biopharmaceutical and clinical
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<PAGE>
applications to uses in the environmental services, agriculture and food
processing industries. PerSeptive may seek collaborative arrangements to develop
future products for these applications. The Company is considering entering
into research and development and collaborative arrangements to develop specific
products, processes and technologies with third parties, including customers.
No assurance can be given that the Company will be successful in entering into
such arrangements or developing commercially valuable products or technologies
as a result of such arrangements.
MARKETING AND SALES
PerSeptive markets its products in the United States, Germany, France, the
United Kingdom, Canada and Japan through a direct sales and marketing staff.
Approximately 50% of the Company's product revenues are from outside North
America. As of December 24, 1997, the Company's sales, marketing and customer
support organization consisted of approximately 258 employees. PerSeptive also
has independent distributors in Australia, Austria, Benelux (Belgium, the
Netherlands, Luxembourg), the People's Republic of China, Denmark, Egypt,
Finland, Greece, Iceland, India, Israel, Italy, Korea, Malaysia, New Zealand,
Norway, Philippines, Singapore, South Africa, Spain, Sweden, Switzerland,
Taiwan, Thailand, Turkey, and Vietnam.
CUSTOMERS
PerSeptive began sales of the first of its products, POROS chromatography
media, in April 1990 and its BioCAD Workstation in September 1991. No single
customer accounts for more than 10% of the Company's products sales. Contract
research and development revenue generated by the Company from PTC-II was 12%
and 22% of the Company's total revenues in fiscal 1996 and 1995, respectively.
No revenue was generated from PTC-II in the fiscal year ended September 30,
1997. At September 30, 1997, the Company had a backlog estimated at
approximately $3.3 million.
COMPETITION
PerSeptive's products compete on the basis of superior performance, cost
effectiveness, breadth of product line and expertise in application support.
The Company is not aware of any other companies with patented or proprietary
technologies comparable to its Perfusion Chromatography, ImmunoDetection, PNA,
Expedite or RSD technologies. The Company's products, however, compete with
products using a number of other technologies, including LC, HPLC, immunoassay
and other conventional technologies. Additional competitive products using new
technologies may also be introduced. Many of the companies selling or
developing such products have financial, manufacturing and distribution
resources significantly greater than those of the Company. In addition, many of
these competing companies have had long-term supplier relationships with the
Company's existing and potential customers. See "Legal Proceedings," for
information concerning the Company's Perfusion Chromatography patent
infringement litigation.
The Company's POROS chromatography products compete primarily with products
that differ in base material, particle size and composition, surface chemistries
and operating environment. The dominant suppliers of chromatography instruments
and supplies are Pharmacia AB Biotech, Inc., a subsidiary of Pharmacia & Upjohn
Co., and Waters Corporation.
Direct competition for the Company's analysis products, INTEGRAL Micro-
Analytical Workstation and RPM process monitoring technology comes primarily
from conventional immunoassay technology. The Company believes that its
products offer cost-effectiveness and performance capabilities not available
with products based on other existing technologies.
In its biospectrometry products business, the Company competes with well-
established suppliers of mass spectrometers and other analytical instruments.
The Company believes, however, that it has a major presence in time-of-flight
mass spectrometry for biological analysis and that it is the only competitor
with a dedicated focus on biomolecular analysis. The Company also believes that
its products have superior performance capabilities, but the Company also
competes on the basis of price, technical support and service.
The Company's synthesis products business faces vigorous competition and it
is anticipated that competition will become more intense in the future. The
Company generally competes on the basis of product performance, innovative
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<PAGE>
product design and technology, superior technical support of customer
applications and cost effectiveness. With respect to its synthesis products,
the Company's principal competitor is the Applied Biosystems Division of The
Perkin-Elmer Corporation.
Competition in the marketing of immunodiagnostic tests and reagents is
intense. Many of the Company's competitors in this market have substantially
greater resources than those of the Company. PerSeptive believes that market
shares in its sector of the immunodiagnostic and research industry have
historically been volatile because of continuing technological developments.
PerSeptive believes that its ability to develop and manufacture superior and
novel products at commercially acceptable prices will in large part determine
its success in the immunodiagnostic and research market.
MANUFACTURING
PerSeptive manufactures substantially all of its own consumable products
and instrumentation systems. POROS media is manufactured from raw chemicals
utilizing standard synthesis techniques and proprietary Company technology.
Coating chemicals are synthesized and applied to the particles using the
Company's patented and proprietary techniques. POROS media is shipped in bulk
quantities or in columns pre-packed using proprietary techniques developed by
the Company.
Manufacturing activities for the Company's synthesis reagents are
conducted at the Company's manufacturing facility in Hamburg, Germany which was
completed during fiscal 1996. See "Properties."
GOVERNMENT REGULATION
Government regulations play a significant role in the research,
development, production and commercialization of health care products, such as
biopharmaceuticals. While none of the Company's current purification, analysis
and synthesis products require FDA approval, many of the Company's customers are
required to obtain the approval of the FDA and similar health authorities in
foreign countries for the clinical testing and commercial sale of
biopharmaceuticals for human use. FDA regulations apply not only to health care
products, but also to the process and production facilities used to produce such
products. These regulations are called FDA current Good Manufacturing Practices
("cGMP"). The Company is often required to adopt aspects of cGMP regulations to
support its customer's use of its products.
The Company's in vitro clinical diagnostic products, as well as any
clinical diagnostic applications of the Company's ImmunoDetection technologies,
are subject to FDA device and reagent approval and regulation. This means that
before any new medical devices can be commercially distributed, the manufacturer
must submit to the FDA either a premarket notification ("510(k)") or a premarket
approval ("PMA") application. A 510(k) notification can be submitted when the
Company believes the device is substantially equivalent to another device
currently being marketed by itself or by another organization. There can be no
assurance that the use of a 510(k) notification will be available for any of the
Company's future diagnostic products.
A PMA, which is required for medical devices not eligible to be marketed
under a 510(k) notification, must demonstrate that the product is safe and
effective, requires more time to prepare and is a much more complex submission
to the FDA. Following completion of laboratory evaluations and adequate
controlled clinical trials to establish safety and efficacy of the product for
its intended use, the Company would be required to file a PMA application, which
includes the results of all research and product development, clinical studies
and related information. FDA review and approval of a PMA application often
takes 12 to 18 months, or even longer, and must be completed before the product
may be sold for clinical diagnostic use in the United States. The process of
obtaining PMAs from the FDA and other regulatory authorities can be costly, time
consuming and subject to unanticipated delays. There can be no assurance that
the approvals of the Company's or its customers' products, processes or
facilities will be granted. Any failure to obtain, or delay in obtaining, any
such required approval could adversely affect the Company's marketing efforts.
The Company believes that its production and documentation procedures for
its current clinical diagnostic products comply with FDA cGMP requirements. In
support of its customer's requirements to comply with FDA regulations regarding
the use of its purification, analysis, and synthesis products, the Company
strives to maintain
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<PAGE>
production and documentation procedures for them that parallel applicable parts
of the FDA cGMP requirements.
In addition to the regulatory framework for clinical trials and product
approvals, PerSeptive is subject to regulation under federal, state and local
law, including requirements regarding occupational safety, laboratory practices,
environmental protection and hazardous substance control, and may be subject to
other present and possible future local, state, federal and foreign regulation.
PATENTS, PROPRIETARY TECHNOLOGY AND LICENSES
PerSeptive's policy since its inception has been to seek patent protection
for certain of its inventions. The Company pursues patent protection in the
United States and files corresponding patent applications in certain foreign
jurisdictions. The Company believes that patent protection is an important
element in the protection of its competitive and proprietary position, but other
elements, including trade secrets and customer service, are of at least equal
importance. The Company owns or has exclusive rights to more than 82 patents
worldwide, of which more than 58 are U.S. patents. The Company has more than 88
patent applications on file worldwide, of which more than 40 are U.S. patent
applications.
PerSeptive currently holds five issued U.S. Patents relating to its
Perfusion Chromatography technology. See "--PerSeptive's Technologies--Perfusion
Chromatography." The last of these patents expire in 2013. PerSeptive also has
additional U.S. patents and pending U.S. patent applications that relate to its
Perfusion Chromatography, surface coating, ImmunoDetection, RSD and related
technologies. There can be no assurance that any of such applications will
result in the issuance of a patent or that an issued patent will afford the
Company any significant protection. The invalidation of key patents owned by
the Company or the failure of patents to issue on pending patent applications
could create increased competition, with potential adverse effects on the
Company and its business prospects. PerSeptive has pending applications in
various other technologies, including time-of-flight, laser desorption mass
spectrometry and its use in DNA sequencing, isoelectric focusing, drug
screening, peptides, sequencing of nucleic acids and applications of magnetic
particles to both biomolecule separations and binding assays.
Certain of the Company's coating technologies and patent rights have been
derived in collaboration with Purdue University ("Purdue"). The Company has an
exclusive license to, including the right to sublicense, United States patents
covering such technologies. Under the license agreement, the Company has
certain royalty obligations, including minimum royalties.
Certain of PerSeptive's patent rights were acquired from Millipore
Corporation in connection with PerSeptive's acquisition of its synthesis
business. As a result of this acquisition, PerSeptive either owns or holds
license rights to more than fifty-one U.S. patents and pending U.S. patent
applications related to preparation of oligonucleotides using phosphoramidite
reagent products, a nucleic acid synthesis product, the Expedite Synthesizer and
PNA products.
The Company also relies upon trade secret protection for its confidential
and proprietary information. There can be no assurance that others will not
independently develop substantially equivalent proprietary information or
techniques, gain access to the Company's trade secrets or disclose such
technology, or that the Company can effectively protect its trade secrets. The
unauthorized disclosure of the Company's trade secrets could have a material
adverse effect on the Company's business.
The Company's policy is to require each of its employees, consultants and
significant scientific collaborators to execute confidentiality agreements upon
the commencement of an employment or consulting relationship with the Company.
These agreements generally provide that all confidential information developed
or made known to the individual during the course of the individual's
relationship with the Company is to be kept confidential and not disclosed to
third parties except in specific circumstances. In the case of employees and
consultants, the agreements generally provide that all inventions conceived by
the individual in the course of rendering services to the Company shall be the
exclusive property of the Company. There can be no assurance, however, that
these agreements will provide meaningful protection or adequate remedies for the
Company's trade secrets in the event of unauthorized use or disclosure of such
information.
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<PAGE>
EMPLOYEES
As of December 24, 1997, the Company employed approximately 605 persons
full time. None of the Company's employees is covered by a collective
bargaining agreement. The Company considers its relations with its employees to
be good.
ITEM 2. PROPERTIES
In connection with its core business, PerSeptive leases the following
properties: 196,000 square feet of space in Framingham, Massachusetts;
approximately 10,000 square feet of space in Cambridge, Massachusetts; 12,000
square feet in Holliston, Massachusetts; and additional space in: Weisbaden,
Germany; Voisins le Bretonneux, France; Hertfordshire, England; Ontario, Canada;
and Tokyo and other locations in Japan. In addition, PerSeptive leases
approximately 2,300 square feet in San Francisco, California; and approximately
14,000 square feet in Houston, Texas. These facilities are used for
manufacturing, laboratories, warehouses, distribution centers and offices. The
leases expire beginning in 1997 through 2009.
In early calendar 1996, the Company moved its synthesis operations in
Hamburg, Germany to a new 58,000 square foot facility built on land purchased by
PerSeptive for manufacturing, office and laboratory use. See "--
Manufacturing." In addition, the Company's synthesis products business shares
distribution facilities with Millipore Corporation in Yonezawa, Japan.
ITEM 3. LEGAL PROCEEDINGS
1. The Company has sued Pharmacia Biotech, Inc. and certain of its
affiliates, and their parent Pharmacia AB (collectively, "Pharmacia"), now part
of Pharmacia & Upjohn Co., Sepracor Inc. ("Sepracor") and BioSepra Inc.
("BioSepra"), a company partially owned by Sepracor, for willful infringement of
three PerSeptive patents (U.S. Nos. 5,019,270, 5,228,989 and 5,384,042),
covering the process of Perfusion Chromatography(R) and the manufacture, sale
and use of chromatography particles and matrices that enable Perfusion
Chromatography (collectively, the "Original Perfusion Patents"). The Company
commenced its action against Pharmacia and Sepracor on October 14, 1993, and the
consolidated action has been pending in the United States District Court for the
District of Massachusetts. BioSepra was added as a party on May 19, 1994. The
lawsuit also claims that Sepracor and BioSepra made false and misleading
representations of fact with respect to the Company's products, and that
BioSepra engaged in false and misleading advertising. The lawsuit, in an
amended complaint filed by Purdue University and the Company, also claims that
Sepracor and BioSepra infringe a fourth patent ("the Coatings Patent"), licensed
exclusively by PerSeptive, covering novel coatings for chromatography media.
The lawsuit seeks to enjoin the defendants from infringing the four patents and
asks for treble damages, as well as other relief and damages. Pharmacia,
Sepracor and BioSepra each have asserted that their products do not infringe the
Original Perfusion Patents and that the Original Perfusion Patents are invalid
and unenforceable, and have asserted counterclaims against the Company alleging
that the Company's assertions that they have infringed the patents, and that
statements allegedly made by the Company to customers concerning the litigation,
constitute unfair competition, commercial disparagement, unfair trade practices,
tortious interference with customer relationships and violation of the Lanham
Act, and seeking an unspecified amount of damages, and, under certain asserted
claims, double or treble damages, as well as attorneys' fees and expenses. The
Company has denied any liability on these 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 Original
Perfusion Patents, granting the Defendants' motions for partial summary judgment
that inventorship of the Original Perfusion Patents is improper for failure to
name one or more persons as additional joint inventors, and requiring the
Company to move to correct inventorship or have the patents declared invalid.
On March 12, 1996, the Court entered a ruling directing the Company to correct
inventorship and placed on the Company the burden of proving the absence of
deceptive intent in the designation of inventors at a hearing. The Company
moved to correct inventorship. The Company has preserved its right to appeal a
number of issues, including the Court's January 9, 1996 order that the Original
Perfusion Patents failed to name additional persons as joint inventors and the
Court's March 12, 1996 order imposing the burden of proof on PerSeptive. The
hearing was held in May and June 1996. On April 3, 1997, the Court issued a
ruling denying the Company's motion to correct inventorship, ruling
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<PAGE>
that the Company had not met its burden of proving that two British scientists,
who worked for a company that is not a party to the litigation, were not named
on the Original Perfusion Patents without deceptive intent within the meaning of
Section 256 of Title 35 United States Code, and granted judgment in favor of
Sepracor, BioSepra and Pharmacia on the Company's claims relating to the
Original Perfusion Patents. On April 16, 1997, the Company filed a motion to
permit an immediate appeal of the April 3, 1997 decision, and the related
January 9, 1996 and March 12, 1996 decisions, to the United States Court of
Appeals for the Federal Circuit, which has exclusive jurisdiction in the United
States to hear appeals in patent cases. On April 30, 1997, the defendants filed
a motion requesting that the District Court render a decision on the defendants'
defense of inequitable conduct prior to permitting the Company's appeal. On
July 30, 1997, the Company filed a motion seeking to (i) vacate the Court's
April 3, 1997 decision and (ii) enter a final judgment that will permit the
Company to appeal the Court's earlier January 9, 1996 and March 12, 1996 orders
that the patents do not name all of the inventors and imposing the burden of
proof on PerSeptive. The Company's motion is based on a decision by the Court
of Appeals for the Federal Circuit in an unrelated case, Stark v. Advanced
-----------------
Magnetics, Inc., issued on July 11, 1997, which the Company contends rendered
- ---------------
the Court's April 3, 1997 decision erroneous. The defendants filed motions
again requesting that the District Court render a decision on their defense of
inequitable conduct prior to permitting an appeal. The Court has not rendered a
decision on the Company's or the defendants' motions. The Court has not yet
considered the issue of infringement of the Original Perfusion Patents or the
Coatings Patent.
On December 12, 1997, the Company announced that it had settled the
litigation with Sepracor and BioSepra. Under the terms of the settlement, the
Company received an unspecified amount and BioSepra obtained a non-exclusive
license under PerSeptive's Perfusion Chromatography patents. Sepracor and
BioSepra were removed as defendants in the litigation. The Company intends to
continue to vigorously pursue the litigation against Pharmacia, which remains a
defendant.
The Company may incur substantial 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.
In September 1996 and February 1997, two new United States patents relating
to Perfusion Chromatography systems were issued to the Company. Neither of
these patents, which cover instruments and systems that perform the high-speed,
high resolution chromatography which is the subject of the Original Perfusion
Patents, are the subject of the current litigation. Prior to the issuance of
these patents, the Company had submitted to the patent examiner the District
Court's January 9, 1996 order, and non-confidential portions of related briefs
filed by the parties, and the patents were issued naming only PerSeptive's
scientific founders as the inventors nonetheless.
2. Since November 1994, the Company has been responding to informal
requests for information from the Securities and Exchange 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 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.
There can be no assurance as to the timeliness of the completion of the
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 is cooperating fully with the investigation,
and has responded and will continue to respond to requests for information in
connection with the investigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 1997.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET, STOCKHOLDER AND DIVIDEND INFORMATION
PerSeptive's Common Stock is quoted on The Nasdaq National Market under the
symbol "PBIO." The following table sets forth the range of quarterly high and
low sales prices for PerSeptive's Common Stock for the two most recent fiscal
years:
<TABLE>
<CAPTION>
FISCAL 1997
HIGH LOW
---- ---
<S> <C> <C>
First Quarter........................... $ 7 3/4 $5 5/8
Second Quarter.......................... 9 3/4 5 3/4
Third Quarter........................... 8 1/16 4 5/8
Fourth Quarter.......................... 12 5/8 5 7/8
FISCAL 1996
First Quarter........................... $11 1/8 $8 3/8
Second Quarter.......................... 9 3/8 5 7/8
Third Quarter........................... 10 7/8 6 3/4
Fourth Quarter.......................... 10 3/8 6 5/8
</TABLE>
On December 24, 1997, the closing sale price of the Company's Common Stock
was $11 7/16 per share. As of December 24, 1997, there were approximately 739
holders of record of the Company's Common Stock and an estimated 3,000
additional beneficial holders.
The Company has never paid cash dividends on its Common Stock and has no
present intention to pay cash dividends in the future. The Company intends to
retain any future earnings to finance the growth of the Company.
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<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data of PerSeptive Biosystems, Inc. set
forth below as of and for each of the three years in the period ended September
30, 1997 has been derived from PerSeptive's Consolidated Financial Statements
which have been audited by Coopers & Lybrand L.L.P., independent accountants,
and which are included elsewhere in this Annual Report on Form 10-K. The
statement of operations data for each of the two years in the period ended
September 30, 1994 and the balance sheet data as of September 30, 1993 and 1994
were derived from PerSeptive's audited Consolidated Financial Statements not
included in this Annual Report on Form 10-K. The data set forth below should be
read in conjunction with the Consolidated Financial Statements and related notes
thereto of PerSeptive included elsewhere in this Annual Report on Form 10-K.
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------------------------------------------------
1993 1994 1995 1996 1997
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Product revenue $ 10,535 $ 30,707 $ 69,430 $ 75,916 $96,516
Contract revenue (1) 4,431 15,348 19,999 10,102 -
-------- --------- --------- --------- -------
Total revenue 14,966 46,055 89,429 86,018 $96,516
Cost of revenue:
Cost of product revenue 3,756 15,524 33,169 37,813 49,815
Cost of contract revenue (1) 2,924 13,009 16,968 8,571 -
Other charges (2) - - - 9,906 -
-------- --------- --------- --------- -------
Total cost of revenue 6,680 28,533 50,137 56,290 49,815
Gross Profit 8,286 17,522 39,292 29,728 46,701
Operating expenses:
Research and development 3,222 6,828 6,999 11,342 15,215
Selling, general and administrative 9,193 27,757 32,771 39,518 40,425
Other charges (2) - 14,681 15,459 24,239 -
Amortization 349 2,209 3,080 2,158 1,041
-------- --------- --------- --------- -------
Loss from operations (4,478) (33,953) (19,017) (47,529) (9,980)
Other income (expense), net (12) 1,259 307 (1,553) (2,938) 25,223
Provision for income taxes - (366) - - -
-------- --------- --------- --------- -------
Net income (loss) $ (3,219) $ (34,012) $ (20,570) $ (50,467) $15,243
======== ========= ========= ========= =======
Net income (loss) per common share,
primary (3)(4)(7) $ (0.31) $ (2.88) $ (1.88) $ (3.22) $ 0.63
======== ========= ========= ========= =======
Net income (loss) per common share,
fully diluted $ 0.60
=======
Weighted average common shares outstanding (3)(4) 10,240 11,903 12,340 16,296 21,905
======== ========= ========= ========= =======
Weighted average common shares - - - - 25,552
outstanding, fully diluted =======
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
September 30,
------------------------------------------------------------------
1993 1994 1995 1996 1997
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and
investments $36,357 $ 36,794 $ 23,816 $ 24,657 $ 34,929
Working capital 21,561 34,668 27,096 26,572 42,547
Total assets 54,888 137,246 138,209 121,655 133,951
Total long-term debt (including obligations under capital
lease) (5)(8) 137 27,230 32,559 33,165 25,834
Redeemable convertible preferred stock (6)(9)(10) - 33,342 - - -
Total stockholders' equity (3)(9)(10)(11) 50,658 40,349 65,107 50,285 67,398
</TABLE>
__________________
(1) In December 1992, March 1993 and December 1993, the Company entered into
certain technology license and research and development agreements with
PerSeptive Technologies Corporation ("PTC"), PerIsis II Development
Corporation ("PerIsis") and PTC-II, respectively. As of September 30, 1996,
all technology rights granted to these entities have been re-acquired by
the Company and no further contract revenue is anticipated to be derived
from these entities. See Note 15 of Notes to the Consolidated Financial
Statements.
(2) Other charges of $9.9 million recorded as part of cost of goods sold during
the year ended September 30, 1996 relate to various actions taken to
realign the current product offering and to write-off certain manufacturing
related assets. Other charges of $24.2 million recorded as part of
operating expenses during the year ended September 30, 1996 related to
various matters including the write-off of in-process research and
development in connection with the acquisition of PTC-II, write-off of
certain intangibles related to acquisitions reported in prior years, and
additional provisions for estimated litigation costs associated with
certain matters including the ongoing patent litigation. Charges of $15.5
million in the year ended September 30, 1995 include charges associated
with the Company's settlement of shareholder litigation related to the
restatement of the consolidated financial statements for the year ended
September 30, 1993 and in-process research and development charges related
to the purchase of the outstanding shares of PerIsis. Other charges of
$14.7 million in the year ended September 30, 1994 reflect the write-off of
in-process research and development in connection with the acquisition of
PTC effective December 28, 1993 and Vestec Corporation in the year ended
September 30, 1994. See Notes 13, 14, 15, and 16 of Notes to the
Consolidated Financial Statements.
(3) On June 5, 1992, the Company completed an initial public offering of
2,500,000 shares of its Common Stock. The net proceeds to the Company were
approximately $15,520,000. On July 2, 1992, the Company issued 375,000
shares of its Common Stock in exchange for $2,441,000 in net proceeds
pursuant to the exercise of the underwriters' over-allotment option in
connection with the Company's initial public offering. On March 4, 1993,
the Company completed a second public offering of 2,000,000 shares of its
Common Stock. The net proceeds to the Company were approximately
$33,840,000. On August 16, 1996, the Company completed a private placement
of 2,579,286 shares of its Common Stock. The net proceeds to the Company
were approximately $17 million (after commissions, but before offering
expenses).
(4) Effective March 27, 1992, the Company's Board of Directors authorized a
four-for-one stock split of the Company's Common Stock in the form of a
stock dividend. All common shares and per share amounts have been adjusted
to give retroactive effect to the Common Stock split for all years
presented.
(5) On August 22, 1994, the Company issued $25,000,000 aggregate principal
amount of 8-1/4% Convertible Subordinated Notes Due 2001 (the "Notes"). On
September 22, 1994, the Company issued an additional $2,230,000 aggregate
principal amount of the Notes pursuant to the exercise of the Initial
Purchasers' over-allotment option in connection with this offering. See
Note 8 of Notes to the Consolidated Financial Statements. The long-term
debt as of September 30, 1997 excludes the current portion which has been
reclassified to current liabilities in connection with the Company's
sinking fund obligation which begins in August 1998.
(6) On August 22, 1994, the Company issued to Millipore Corporation 4,000
shares of a newly designated series of non-voting redeemable convertible
preferred stock (the "Series A Preferred Shares"). See Note 9 of Notes to
the Consolidated Financial Statements.
(7) Net income/loss per share, primary, for the years ended September 30, 1994,
1995, 1996 and 1997 includes accretion of the Series A Preferred Shares.
See Note 2 of Notes to the Consolidated Financial Statements.
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<PAGE>
(8) During the year ended September 30, 1995, the Company secured financing
with several banks and financial institutions including a line of credit
for borrowings up to 8.5 million DM (approximately $6 million at September
30, 1995) for use in financing the construction of a new manufacturing
facility in Hamburg, Germany, short-term financing collateralized by the
Company's short-term investments, and a sale-leaseback transaction for $5
million secured by certain of the Company's fixed assets. See Note 8 of
Notes to the Consolidated Financial Statements.
(9) In August 1995, 1996, and 1997, the Company issued 912,199 shares,
1,248,050 shares, and 1,019,108 shares, respectively, of Common Stock to
satisfy the first three of four redemption payments of $10 million each to
Millipore in connection with the Series A Preferred Shares. See Note 9 of
Notes to the Consolidated Financial Statements.
(10) The Company has reclassified the redeemable convertible preferred stock to
stockholders' equity based on the Company's intent to redeem the future
remaining amounts through the issuance of Common Stock. See Note 9 of
Notes to the Consolidated Financial Statements.
(11) In September 1995, the Company issued 157,565 shares of Common Stock to
Boehringer Mannheim GmbH in exchange for $2 million. See Note 9 of Notes to
the Consolidated Financial Statements.
(12) Other income included a gain of $27.5 million recorded upon receipt and
subsequent partial sale of Millenium common stock which the Company had
received pursuant to the merger of Chemgenics and Millennium. See Note 16
of Notes to the Consolidated Financial Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This report on Form 10-K including Management's Discussion and Analysis of
Financial Condition and Results of Operations contains forward looking
statements that 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 differences include, but are not
limited to, those discussed 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.
The following discussion and analysis is based on the Company's financial
statements and should be read in conjunction with the Consolidated Financial
Statements and Notes thereto contained elsewhere herein.
RECENT DEVELOPMENTS
Pending Merger with Perkin-Elmer Corporation. On August 27, 1997, the
Perkin-Elmer Corporation ("Perkin-Elmer"), Seven Acquisition Corp., a wholly-
owned subsidiary of Perkin-Elmer, and PerSeptive entered into an Agreement and
Plan of Merger (the "Merger Agreement"). Pursuant to the Merger Agreement, all
outstanding shares of PerSeptive common stock, $.01 par value per share (the
"PerSeptive Common Stock"), will be converted into shares of Perkin-Elmer common
stock, $1.00 par value per share (the "Perkin-Elmer Common Stock") at an
exchange rate equal to $13.00 divided by the average of the closing sales prices
of Perkin-Elmer Common Stock on the New York Stock Exchange composite tape on
each of the 20 consecutive trading days preceding the second trading day prior
to the effective date of the merger. In no event, however, will the exchange
rate be more than 0.1926, or less than 0.1486, of a share of Perkin-Elmer Common
Stock for each share of PerSeptive Common Stock. At the effective time of the
merger, PerSeptive will become a wholly-owned subsidiary of Perkin-Elmer. On
December 4, 1997, the proposed merger was approved by PerSeptive's stockholders.
The completion of the merger is subject to regulatory approvals and other
closing conditions. There can be no assurance that the proposed merger will be
completed. Either party has the right to terminte the merger agreement if the
merger is not consummated on or before January 31, 1998, unless the parties
agree to extend that date.
RESULTS OF OPERATIONS
Years Ended September 30, 1997 and 1996
Revenue
Total revenue amounted to $96.5 million and $86 million in fiscal 1997 and
1996, respectively, reflecting an annual growth rate of 12%. This growth has
been offset by the elimination of approximately $10 million in contract revenue
derived during fiscal 1996 under a contract research and development agreement
between the Company and
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<PAGE>
PTC-II. The Company acquired PTC-II in March 1996 and has not generated any
significant contract revenue since the completion of the PTC-II acquisition.
Product revenue for fiscal 1997 was $96.5 million compared with $75.9
million for fiscal 1996, an increase of $20.6 million or 27.1%. The increase in
product revenue is attributable to continued growth in each of the analysis,
purification and synthesis product lines, further expansion into international
markets as well as improved sales productivity arising from increased
investments in the Company's North American field sales organization.
From a geographic perspective, fiscal 1997 product revenue generated in
North America grew by approximately $7 million or 17% from fiscal 1996 levels.
This growth was principally attributable to the growth experienced in the
Synthesis and Analysis product lines. Product revenue generated in Europe
increased by approximately $5.6 million or 34% and was attributable to increased
product sales in the Purification, Analysis and Synthesis product lines.
Product revenue in Japan and the Pacific Rim increased by approximately $8
million or 43%. This growth is attributable to increased product sales in the
Purification and Analysis product lines.
Gross Profit
Gross profit from product sales for fiscal 1997 was $46.7 million, or 48.4%
of product sales, as compared with $38.1 million, excluding other charges, or
50.2% of product sales 1996. The decline in gross profit as a percentage of
sales is primarily attributable to erosion of product pricing in a competitive
selling environment and to a lesser extent higher field service costs and
fluctuations in geographical and product mix as compared to fiscal 1996.
Offsetting the factors that led to a decline in gross profit was a reduction in
the level of unabsorbed overhead reflecting increased utilization levels of the
Company's various manufacturing facilities resulting from the increased level of
product shipments realized in fiscal 1997.
Other charges of $9.9 million reported as part of costs of goods sold for
fiscal 1996 relate to various charges recorded in connection with activities
undertaken to realign the Company's product offerings and to record impairment
charges associated with certain underutilized production assets. No similar
charges were recorded in fiscal 1997. See Notes 2 and 13 of Notes to the
Consolidated Financial Statements.
Contract revenue gross profit during fiscal 1996 equals the contractual
markup on contract research services provided by the Company as set forth in the
governing agreements between the Company and PTC-II, and the inclusion of
amortization of the license fee paid by PTC-II to the Company for technology
licensed to PTC-II at the time of its formation. These agreements in general
provided for a 10% profit on costs incurred by the Company on behalf of PTC-II.
Costs included in the cost of contract revenue for fiscal 1996 include
specifically allocable research and development expense and an allocation of
general and administrative expense as provided for under the agreements. As a
result of the Company's acquisition of PTC-II in March 1996, no contract
revenues or gross profits were realized during fiscal 1997.
Research and Development Expense
Research and development expense for fiscal 1997 was $15.2 million or 15.8%
of product sales, compared to $11.3 million or 14.9% of product sales for fiscal
1996. The increase in research and development expense as a percent of product
sales is attributable to the higher expense levels following the acquisition of
PTC-II in March 1996. The gross levels of research and development expenditures
for fiscal 1997 and 1996, which includes research and development expenditures
reflected in cost of contract revenue, were approximately$15.2 million (15.8% of
product sales) and $19.1 million (25.3% of product sales), respectively.
Various management initiatives were implemented following the acquisition that
resulted in a significant reduction in the ongoing level of research and
development expenditures. During fiscal 1997, incremental research and
development costs were incurred in connection with several new product launches
including Mariner, MPS and the redesigned Integral 100Q products. This
incremental spending offset some of the savings realized during the second half
of fiscal 1996 following the acquisition of PTC-II.
Selling, General and Administrative Expense
Selling, general and administrative expenses for fiscal 1997 were $40.4
million or 42% of product sales, compared with $39.5 million or 52% of product
sales for fiscal 1996. The reduction in selling, general and administrative
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expense as a percent of product sales is attributable to various factors,
including realization of efficiency gains from earlier investments in the
Company's European infrastructure and sales organization, which delivered a
significant increase in fiscal 1997 product revenues, and investment gains
realized on the ramp-up in domestic field sales organization resources and
related productivity improvements.
Amortization declined by approximately $1.1 million during fiscal 1997 from
fiscal 1996. The principal factor contributing to this decline relates to the
write-off of the unamortized portion of the PTC-II purchase options as part of
the PTC-II acquisition charge recorded during fiscal 1996. Interest expense
totaled approximately $3.5 million in both fiscal 1997 and 1996.
The Company did not record a provision for taxes in either fiscal 1997 or
fiscal 1996 due to recurring losses.
Accretion of redeemable preferred stock to its redemption value amounted to
$1.4 million during fiscal 1997 as compared to $2.1 million for fiscal 1996.
The reduction in the level of accretion is principally associated with the $10
million reduction in the level of preferred stock on which accretion is being
calculated for the current period.
Years Ended September 30, 1996 and 1995
Product Revenue
Product revenue for fiscal 1996 was $75.9 million compared with $69.4
million for fiscal 1995, an increase of $6.5 million or 9.4%. Total product
revenue growth excluding the impact of adverse currency effects was
approximately $9.7 million or 14%. The principal product revenue growth was in
the Company's Purification and Analysis product lines.
From a geographic perspective, fiscal 1996 product revenue generated in
North America declined by approximately $2 million or 5% from fiscal 1995
levels. This decline was principally attributable to the decline experienced in
the Synthesis product line. Product revenue generated in Europe increased by
approximately $5.6 million or 49% and was primarily attributable to increased
product sales in the Purification and Analysis product lines. Product revenue
generated in the Pacific Rim increased by $3 million or 20%, and was due to
growth primarily in the Analysis product line.
Contract Revenue
Contract revenue for fiscal 1996 was $10.1 million compared with $20
million in fiscal 1995. The decrease in contract revenue is attributable to the
elimination of contract revenue previously recorded in connection with the
Company's development efforts on behalf of PTC-II, following the acquisition of
PTC-II during the quarter ended March 31, 1996. See Note 15 of Notes to the
Consolidated Financial Statements.
Gross Profit
Gross profit from product sales for fiscal 1996 excluding other charges was
$38.1 million, or 50.2% of product sales, as compared with $36.3 million or
52.2% of product sales for fiscal 1995. The decline in gross profit as a
percentage of sales is primarily attributable to an increase in unabsorbed
overhead associated with the increase in manufacturing capacity resulting in
part from the addition of a new POROS manufacturing facility and the new
synthesis plant in Hamburg, Germany. In addition, unabsorbed overhead
associated with the Framingham instrumentation facility was higher during fiscal
1996. The Framingham facility was occupied beginning in March 1995, resulting in
the inclusion of only six months of under-absorption in fiscal 1995 and a full
year in fiscal 1996. Excess capacity currently exists within each of these
facilities. This excess capacity has been put in place to support future growth
within the product lines served by the respective facilities. See Notes 2 and
13 of Notes to the Consolidated Financial Statements.
Other charges of $9.9 million reported as part of costs of goods sold
relate to various charges recorded in connection with activities undertaken to
realign the Company's product offerings and to record impairment charges
associated with certain underutilized production assets. See Notes 2 and 13 of
Notes to the Consolidated Financial Statements.
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Contract revenue gross profits during fiscal 1996 and 1995 equal the
contractual markup on contract research services provided by the Company as set
forth in the governing agreements between the Company and PTC-II, and the
inclusion of amortization of the license fee paid by PTC-II to the Company for
technology licensed to PTC-II at the time of its formation. These agreements in
general provided for a 10% profit on costs incurred by the Company on behalf of
PTC-II. Costs included in the cost of contract revenue for fiscal 1996 and 1995
include specifically allocable research and development expense and an
allocation of general and administrative expense as provided for under the
agreements.
Research and Development Expense
Research and development expense for fiscal 1996 was $11.3 million or 14.9%
of product sales, compared to $7.0 million or 10% of product sales for fiscal
1995. The increase in research and development expense as a percent of product
sales is attributable to the higher expense levels following the acquisition of
PTC-II in March 1996. The gross level of quarterly research and development
expenditures, which includes research and development expenditures reflected in
cost of contract revenue, following the acquisition was approximately $5.5
million. Various management initiatives were implemented following the
acquisition that resulted in the reduction of this quarterly expenditure run
rate by approximately $2 million or 35%.
Selling, General and Administrative Expense
Selling, general and administrative expenses for fiscal 1996 were $39.5
million or 52% of product sales, compared with $32.8 million or 47% of product
sales for fiscal 1995. The increase in selling, general and administrative
expense both in aggregate dollars and as a percent of product sales is
attributable to various factors, including investment in the European
infrastructure and sales organization which delivered a significant increase in
fiscal 1996 product revenues, increased marketing expenditures associated with
the introduction of several new products, investment ramp-up in domestic field
sales organization resources, and strategic investments in the general and
administration organization to add key members to the senior management team as
well as enhance the Company's management information system capabilities. On a
run-rate basis, selling, general and administrative expenses declined from a
high of 57% of product sales in the second quarter of fiscal 1996, to a low of
47% of product sales in the fourth quarter of fiscal 1996.
Other Charges
Other charges of $24.2 million were recognized during fiscal 1996 and
related to charges recorded in connection with the PTC-II acquisition, a
provision for the impairment of certain intangible assets, accruals for
estimated legal costs related primarily to the ongoing patent enforcement action
and other miscellaneous matters. Elements of the charge recorded in connection
with the PTC-II acquisition included a $6.8 million in-process research and
development charge and a charge for costs relating to an organizational
realignment following the acquisition of approximately $3.3 million. The charge
also included provisions recorded in connection with ongoing litigation matters
totaling $5.2 million. The impairment charge recorded in connection with the
write-off of the goodwill associated with the purchase of the In Vitro Division
of Advanced Magnetics, Inc. totaled $5.3 million. Charges related to other
miscellaneous matters totaled $3.6 million.
Amortization declined by approximately $900,000 during fiscal 1996 from
levels in fiscal 1995. The principal factor contributing to this decline
relates to the write-off of the unamortized portion of the PTC-II purchase
options as part of the PTC-II acquisition charge.
The increase in interest expense of $515,000 is attributable to incremental
interest expense associated with a full year of interest cost on capital lease
obligations as well as the mortgage obtained to partially fund the construction
of the Company's new synthesis plant in Hamburg, Germany.
The Company did not record a provision for taxes in either fiscal 1997 or
fiscal 1996 due to recurring losses.
Accretion of redeemable preferred stock to its redemption value amounted to
$2.1 million during fiscal 1996 as compared to $2.7 million for fiscal 1995.
The reduction in the level of accretion is principally associated with the $10
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million reduction in the level preferred stock on which accretion is being
calculated for the current period.
LIQUIDITY AND CAPITAL RESOURCES
From inception through the end of fiscal 1997, the Company has met its
funding needs primarily through private placements of equity and debt
securities, public offerings of Common Stock and to a lesser extent through
various other types of borrowing and financing arrangements. In the event that
the pending merger with Perkin-Elmer is ultimately not completed, management
intends to pursue various funding alternatives in order to obtain adequate
capital to fund the operating and capital needs of the Company (see "--Certain
Factors That May Affect Future Results" below). These alternatives include but
are not limited to the generation of cash through managed reductions in the
Company's working capital investment; bank financings; cash generation through
the establishment of strategic partnerships, alliances and technology license
arrangements; and the sale of securities through private placements or public
offerings of debt and/or equity securities. There can be no assurance however,
that management will be able to obtain adequate future funding sources on
acceptable terms, if at all.
At September 30, 1997, the Company had available cash and cash equivalents,
and short-term investments totaling $34.9 million as compared with cash and cash
equivalents and short-term investments totaling $24.6 million as of September
30, 1996. During the year the Company realized value from a prior technology
spin-off in the form of the Common Stock of Millennium Stock Pharmaceuticals,
Inc. (see Note 16 of Notes to the Consolidated Financial Statements) and cash
totaling $30.6 million and approximately $2.4 million in net proceeds generated
principally from the exercise of employee stock options. On a net basis the
Company consumed approximately $22.7 million of cash and investments during
fiscal 1997. The principal uses of cash during fiscal 1997 were to: fund cash
operating losses (before the Millennium gain) of $4.7 million; to fund working
capital changes of $12.5 million resulting principally from the reduction of
various accrued liabilities and investments in accounts receivable and inventory
required to support the higher revenue levels achieved in fiscal 1997; to fund
various capital expenditures totaling $3.5 million; and to fund debt repayment
obligations totaling $2 million.
The Company's net accounts receivable increased to $20.8 million at
September 30, 1997 from $16.1 million as of September 30, 1996. This increase
is attributable to the 27.1% increase in product revenues in fiscal 1997 over
comparable fiscal 1996 revenues. The average days sales outstanding has been
reduced to 71 days as of September 30, 1997 from 75 days as of September 30,
1996. This decline is due to management's efforts to control the quality of
receivables and enhanced collection efforts.
The Company's net inventory increased to $23 million at September 30, 1997
from $21.1 million at September 30, 1996. The net $1.9 million increase in
inventory reflects a decrease in gross inventories of approximately $1.2
million, offset by a utilization of previously established inventory reserves of
$3.1 million during the year. The reserves established during fiscal 1996 were
associated with provisions recorded to eliminate identified inventory exposures
that resulted from the Company's fiscal 1996 product realignment initiatives and
new product introductions. Inventory turns improved from 1.9 times as of
September 30, 1996 to 2.5 times as of September 30, 1997. Management intends to
continue its focus on improving relative inventory levels during fiscal 1998.
On August 22, 1994, the Company acquired the Synthesis product business
from Millipore Corporation ("Millipore"). Under the acquisition agreement, the
Company paid Millipore $1.1 million in cash, assumed certain liabilities of the
business and issued Millipore 4,000 shares of a newly created non-voting
redeemable convertible preferred stock. The preferred stock is redeemable in
four equal installments on each of the first four anniversaries of the closing
of the acquisition in $10 million installments payable at the Company's option
in cash or Common Stock. In August 1997, the Company issued 1,019,108 shares of
Common Stock to Millipore in satisfaction of the third of four annual
installments related to the preferred stock issued in connection with this
acquisition. In August 1996, the Company issued 1,248,050 shares of Common
Stock to Millipore in satisfaction of the second annual installment. In August
1995, the Company issued 912,199 shares of Common Stock to Millipore in
satisfaction of the first annual installment. Management's intent is to satisfy
the remaining future annual installments under this preferred stock arrangement
as they become due through the issuance of Common Stock. As a result of the
action taken during fiscal 1995 and management's continued intent to satisfy
future installments with Common Stock, the remaining fair value of this
outstanding security has been reflected as a component of the Company's equity
beginning in September 1995.
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In June 1996, the Company entered into a transaction with ChemGenics in
which the Company transferred certain assets and employees of the Company's drug
discovery program to ChemGenics and granted a non-exclusive license to
ChemGenics to use the Company's technology (including technology developed
through PTC-II) in the field of drug discovery in exchange for shares of
ChemGenics Common Stock and warrants to purchase additional shares of ChemGenics
Common Stock exercisable until June 28, 2000. See "Business--Business
Development--ChemGenics and Millennium Transactions" and Note 16 of Notes to the
Consolidated Financial Statements.
In January 1997, ChemGenics and Millennium entered into an Agreement and
Plan of Merger ("Agreement"). Under the terms of the Agreement, the
stockholders of ChemGenics received common stock of Millennium in exchange for
their common stock of ChemGenics. At the closing on February 10, 1997, the
Company received 1,612,582 shares of Millennium common stock, $.001 par value
per share ("Millennium common stock"), in exchange for its shares of ChemGenics
common stock. In addition, the Company received $4 million cash in exchange for
the warrants for ChemGenics common stock and in satisfaction of a promissory
note. The parties to the Agreement contemplate that the transaction will
qualify as a tax-free merger. In connection with this event, the Company
recorded a gain of $25.8 million during the second quarter of fiscal 1997,
reflecting the fair market value of the cash received and the Company's
investment in Millennium common stock as of March 29, 1997. In June 1997, the
Company sold approximately 50% of its investment in Millennium for $12.9 million
and realized a gain on the sale of approximately $.8 million. During the fourth
quarter of fiscal 1997, the Company recognized an additional gain for book
purposes of $.8 million in connection with the release of a previously existing
contingency on approximately 52,000 shares of Millennium stock. The taxable
gain arising from this transaction will be offset by available net operating
loss carryforwards with the exception of a portion of the gain potentially
subject to the Federal alternative minimum tax.
At September 30, 1997, the Company had net operating loss carryforwards of
approximately $64 million for tax purposes. The net operating losses expire
through 2012. In addition, the Company has research and tax development credit
carryforwards which expire through 2012 of approximately $1.2 million. See Note
7 of Notes to the Consolidated Financial Statements.
The Company believes that its capital resources are sufficient to fund its
operations through the end of fiscal 1998. The Company believes that additional
financing will be required for the development of some of its currently planned
product introductions and to support the Company's future operations and revenue
growth. The Company's future working capital and capital requirements will
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 ability to reduce working capital investment levels, the
success of cost containment initiatives, the competitive environment and the
growth in the Company's business, and the potential adverse impact of the
failure or continued delay of consummating the pending merger with Perkin Elmer,
any of which factors may cause the Company's actual future capital resources and
needs 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. In the
event that the pending merger with Perkin-Elmer is ultimately not completed, the
Company will resume its efforts to actively seek to raise additional capital
through various initiatives, including through an equity or debt financing in
the near future and/or corporate partnering arrangements. There can be no
assurance, however, 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. In the event that additional financing is not obtained,
the Company is committed to take actions to significantly reduce its cost
structure in the future.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128 ("SFAS 128"), "Earnings per Share," which is effective for fiscal years
ended after December 15, 1997, including interim periods. SFAS 128 requires the
presentation of basic and diluted earnings per share ("EPS"). Basic EPS, which
replaces primary EPS, excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. Diluted EPS is computed
similarly to fully diluted EPS under the existing rules. SFAS 128 requires
restatement of all prior-period earnings per share data presented after the
effective date. The Company will adopt SFAS 128 in its fiscal year ended
September 30, 1998 and does not anticipate adoption to have a material effect on
the financial statements.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive
Income," which is effective for fiscal years ended after December 15, 1997,
including interim periods. SFAS 130 requires the presentation of comprehensive
income and its components. Comprehensive income presents a measure of all
changes in equity that results from recognized transactions and other economic
events of the period other than transactions with owners. SFAS 130 requires
restatement of all prior-period statements presented after the effective date.
The Company will adopt SFAS 130 in its fiscal year ended September 30, 1998 and
has not yet determined the impact of such adoption.
In July 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosures about Segments
of an Enterprise and Related Information" which is effective for fiscal years
ended after December 15, 1997. The interim reporting disclosures are not
required in the first year of adoption. SFAS 131 specifies revised guidelines
for determining an entity's operating segments and the type and level of
financial information to be disclosed. SFAS 131 changes current practice under
SFAS 14 by establishing a new framework on which to base segment reporting. The
"management" approach expands the required disclosures for each segment. The
Company will adopt SFAS 131 in its fiscal year ended September 30, 1998 and has
not yet determined the impact of such adoption.
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CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
Pending Merger. In August 1997, PerSeptive agreed to be acquired by The
Perkin-Elmer Corporation. Upon completion of the proposed merger, Perceptive
will become a wholly owned subsidiary of Perkin-Elmer. The consummation of the
merger is subject to regulatory approval and other closing conditions. There can
be no assurance that the proposed merger will be completed. Either party has the
right to terminate the merger agreement if the merger is not consummated on or
before January 31, 1998, unless the parties agree to extend that date. See
"Business-- Recent Developments."
Additional Financing Requirements. If the proposed acquisition by Perkin-
Elmer is not completed, additional long-term financing will be required for the
development of some of the Company's currently planned product introductions and
to support its planned operations and capital expenditures in its core business
relating to the purification, analysis and synthesis of biomolecules. Under
those circumstances, the Company intends to actively seek 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 terms acceptable to the Company will be reached.
Potential Fluctuations in Operating Results. 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, the introduction of new products by the Company and the capital
resources of the Company's customers. The Company's current and planned expense
levels are based in part on its expectations as to future revenue.
Consequently, revenue or profits may vary significantly from quarter to quarter
or year to year and revenue or profits in any period will not necessarily be
predictive of results in subsequent periods.
Uncertainties Associated With Future Performance. 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" and Note 14 of Notes to the Consolidated Financial Statements.
Uncertainties Associated with Expansion of Marketing and Manufacturing
Operations. The Company intends to continue expanding its sales and marketing
efforts in the United States and other countries. The Company's ability to
accomplish this objective is dependent on many factors, including, among others:
attracting and retaining a significant number of additional sales and marketing
professionals; expanding foreign sales operations; and developing distributor
relationships in certain markets. This continued expansion will involve
significant additional expense and the risks inherent in integrating new sales
and marketing personnel into the Company's existing organization. Increasing
sales may also require expansion of the Company's manufacturing capabilities for
the Biospectrometry product line, which would require significant capital
expenditures and management attention. There can be no assurance that the
Company will be able to accomplish its sales, marketing and manufacturing
objectives.
Potential Costs Associated with Patent Litigation. Patent litigation is
widespread in the biotechnology industry and, in general, it is not possible to
predict how any such litigation would affect the Company's business. The
Company has sued two competitors for infringement of Company patents relating to
Perfusion Chromatography. The defendants in that suit are seeking to have these
patents declared invalid and have asserted counterclaims against the Company.
The Company may incur substantial additional expenses relating to this and other
proceedings. There can be no assurance that the outcome of the litigation will
not have a material adverse effect on the Company. See "Legal Proceedings."
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
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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" and
Note 14 of Notes to the Consolidated Financial Statements. If the Company
participates in interference or other proceedings under the jurisdiction of the
U.S. Patent and Trademark Office, such proceedings could result in substantial
costs to the Company. Competitors, including those with substantially greater
resources than those of the Company, may initiate litigation to challenge the
validity of the Company's patents. Others may use their resources to design
comparable products that do not infringe the Company's patents. There may also
be pending or issued patents, of which the Company is not aware, held by parties
not affiliated with the Company that relate to the Company's products or
technology. The Company may need to acquire licenses to, or contest the
validity of, any such patents. It is likely that significant funds would be
required to contest the validity of any such patents. There can be no assurance
that any license required under any such patent would be made available on
acceptable terms or that the Company would prevail in any such contest.
Pending Governmental Investigation. Since November 1994, 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 the 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. Many of the Company's competitors and potential
competitors have substantially greater resources, manufacturing and marketing
capabilities, research and development staff and production facilities than
those of the Company.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is contained in the financial
statements included elsewhere in this Annual Report on Form 10-K.
CONSOLIDATED FINANCIAL STATEMENTS.
Report of Independent Accountants.
Consolidated Balance Sheets at September 30, 1997 and 1996.
Consolidated Statements of Operations for the years ended September 30, 1997,
1996 and 1995.
Consolidated Statements of Changes in Stockholders' Equity for the years
ended September 30, 1997, 1996 and 1995.
Consolidated Statements of Cash Flows for the years ended September 30, 1997,
1996 and 1995.
Notes to the Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
DIRECTORS
The information concerning directors of the Company required under this
item is incorporated herein by reference to the Company's definitive proxy
statement pursuant to Regulation 14A, to be filed with the SEC not later than
120 days after the close of the Company's fiscal year ended September 30, 1997,
under the heading "Election of Directors."
EXECUTIVE OFFICERS
The information concerning executive officers of the Company required under
this item is incorporated herein by reference to the Company's definitive proxy
statement pursuant to Regulation 14A, to be filed with the SEC not later than
120 days after the close of the Company's fiscal year ended September 30, 1997,
under the heading "Election of Directors."
ITEM 11. EXECUTIVE COMPENSATION.
The information required under this item is incorporated herein by
reference to the Company's definitive proxy statement pursuant to Regulation
14A, to be filed with the SEC not later than 120 days after the close of the
Company's fiscal year ended September 30, 1997, under the heading "Compensation
and Other Information Concerning Directors and Officers."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required under this item is incorporated herein by
reference to the Company's definitive proxy statement pursuant to Regulation
14A, to be filed with the SEC not later than 120 days after the close of the
Company's fiscal year ended September 30, 1997, under the headings "Securities
Ownership of Management" and "Election of Directors."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required under this item is incorporated herein by
reference to the Company's definitive proxy statement pursuant to Regulation
14A, to be filed with the SEC within 120 days after the close of the Company's
fiscal year ended September 30, 1997, under the headings "Securities Ownership
of Management" and "Election of Directors."
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) 1. CONSOLIDATED FINANCIAL STATEMENTS.
For the following financial information included herein, see
Index on page F-1:
Report of Independent Accountants.
Consolidated Balance Sheets at September 30, 1997 and 1996.
Consolidated Statements of Operations for the years ended
September 30, 1997, 1996 and 1995.
Consolidated Statements of Changes in Stockholders' Equity for
the years ended September 30, 1997, 1996 and 1995.
Consolidated Statements of Cash Flows for the three years ended
September 30, 1997, 1996 and 1995.
Notes to the Consolidated Financial Statements.
2. FINANCIAL STATEMENT SCHEDULES.
For the following financial information included herein, see
Index on page F-1:
II - Valuation and Qualifying Accounts.
All other schedules are omitted because
they are not applicable, not required or
because the information is included in the
Consolidated Financial Statements or Notes
to the Consolidated Financial Statements.
3. LIST OF EXHIBITS.
Exhibit
Number Description of Exhibit
------ ----------------------
2.1 Agreement and Plan of Reorganization dated as of October 8,
1993 by and among the Company, PV Merger Corporation and
Vestec Corporation, as amended (filed as Exhibit 2.1 to the
Company's Current Report on Form 8-K dated October 8, 1993,
as amended and incorporated herein by reference).
2.2 Agreement and Plan of Merger by and among the Company, PV
Merger Corporation and Vestec Corporation (filed as Exhibit
2.2 to the Company's Current Report on Form 8-K dated
October 8, 1993, as amended and incorporated herein by
reference).
2.3 Escrow and Exchange Agreement by and among the Company,
Vestec Corporation, Marvin L. Vestal as the representative
of the stockholders of Vestec, American Stock Transfer &
Trust Company and the stockholders of Vestec Corporation
whose names appear on the signature pages thereto (filed as
Exhibit 2.3 to the Company's Current Report on Form 8-K
dated October 8, 1993, as amended and incorporated herein by
reference).
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2.4 Registration Rights Agreement by and among the Company, PV
Merger Corporation and Vestec Corporation (filed as Exhibit
2.4 to the Company's Current Report on Form 8-K dated
October 8, 1993, as amended and incorporated herein by
reference).
2.5 Asset Purchase Agreement dated as of October 15, 1993 by and
between the Company and Advanced Magnetics, Inc. (filed as
Exhibit 2.1 to the Company's Current Report on Form 8-K
dated October 15, 1993, as amended and incorporated herein
by reference).
2.6 Asset Purchase and Sale Agreement dated as of July 14, 1994
by and among the Company, Millipore Corporation and
Millipore Investment Holdings Limited (filed as Exhibit 2.1
to the Company's Current Report on Form 8-K dated August 22,
1994, as amended and incorporated herein by reference).
2.7 Registration Rights Agreement by and among the Company,
Millipore Corporation and Millipore Investment Holdings
Limited dated August 22, 1994 (filed as Exhibit 2.3 to the
Company's Current Report on Form 8-K dated August 22, 1994,
as amended and incorporated herein by reference).
2.8 Registration Rights Agreement by and among the Company,
Alex. Brown & Sons Incorporated and Lehman Brothers Inc.
dated August 26, 1994 (filed as Exhibit 4.2 to the Company's
Registration Statement No. 33-74600 on Form S-3 and
incorporated herein by reference).
2.9 Agreement and Plan of Merger, dated as of November 1, 1995
among the Company, PerSeptive Acquisition Corporation and
PerSeptive Technologies II Corporation (filed as Exhibit
10.26 to the Company's Annual Report on Form 10-K for the
year ended September 30, 1995 and incorporated herein by
reference).
2.10 Amendment No. 1 to Agreement and Plan of Merger, dated
January 29, 1996 among the Company, PerSeptive Acquisition
Corporation and PerSeptive Technologies II Corporation
(filed as Exhibit 2.1 to the Company's Registration
Statement No. 333-1016 on Form S-4 and incorporated herein
by reference).
2.11 Agreement and Plan of Merger dated as of August 23, 1997
among The Perkin-Elmer Corporation, Seven Acquisition Corp.
and PerSeptive Biosystems, Inc. (filed as Exhibit 2.1 to the
Company's Current Report on Form 8-K dated August 26, 1997
and incorporated herein by reference).
3.1 Amended and Restated Certificate of Incorporation of the
Company (filed as Exhibit 3.2, 4.2 to the Company's
Registration Statement No. 33-46871 on Form S-1 and
incorporated herein by reference).
-36-
<PAGE>
3.2 Certificate of Amendment of Restated Certificate of
Incorporation of the Company (filed as Exhibit 4.1 to the
Company's Registration Statement No. 33-80856 on Form S-8
and incorporated herein by reference).
3.3 Amended and Restated By-Laws of the Company (filed as
Exhibit 3.4, 4.4 to the Company's Registration Statement No.
33-46871 on Form S-1 and incorporated herein by reference).
3.4 Certificate of Designations for the Series A Redeemable
Convertible Preferred Stock filed with the Secretary of
State of the State of Delaware on August 19, 1994 (filed as
Exhibit 2.2 to the Company's Current Report on Form 8-K
dated August 22, 1994, as amended, and incorporated herein
by reference).
3.5 Certificate of Amendment of the Amended and Restated
Certificate of Incorporation of the Company filed with the
Secretary of State of the State of Delaware on May 8, 1995
(filed as Exhibit 3.1 to the Company's Quarterly Report on
Form 10-Q for the period ended June 30, 1995 and
incorporated herein by reference).
3.6 Certificate of Designations for the Series B Junior
Participating Preferred Stock filed with the Secretary of
State of the State of Delaware on March 2, 1995 (exhibit to
Exhibit 4.9) (filed as Exhibit 3.6 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1995
and incorporated herein by reference).
3.7 Amended Certificate of Designation for the Series B Junior
Participating Preferred Stock filed with the Secretary of
State of the State of Delaware on October 24, 1995 (filed as
Exhibit 3.7 to the Company's Annual Report on Form 10-K for
the year ended September 30, 1995 and incorporated herein by
reference).
4.1 Description of Capital Stock contained in the Company's
Amended and Restated Certificate of Incorporation, as
amended, filed as Exhibits 3.1 through 3.7 hereto.
4.2 Form of Class A Warrants for the purchase of the Company's
Common Stock dated as of December 23, 1992 issued to the
stockholders of PTC-I (filed as Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q for the three-month period
ended March 31, 1993 and incorporated herein by reference).
4.3 Form of Class C Warrants for the purchase of the Company's
Common Stock dated as of March 15, 1993 issued to the
stockholders of PerIsis II (filed as Exhibit 4.3 to the
Company's Report on Form 10-Q for the three-month period
ended March 31, 1993 and incorporated herein by reference).
-37-
<PAGE>
4.4 Warrant Agreement relating to the issuance of Class E
Warrants of the Company dated as of December 29, 1993, as
executed (supersedes Exhibit 4.7 to Amendment No. 1 to the
Company's Registration Statement Nos. 33-71812, 33-71814 on
Form S-1/S-3) (filed as Exhibit 4.2 to the Company's
Quarterly Report on Form 10-Q for the Quarterly Period ended
March 31, 1994 and incorporated herein by reference).
4.5 Specimen Class E Warrant Certificate (filed as Exhibit 4.3
to Amendment No. 1 to the Company's Registration Statement
Nos. 33-71812, 33-71814 on Form S-1/S-3 and incorporated
herein by reference).
4.6 Specimen Unit Certificate (filed as Exhibit 4.1 to Amendment
No. 1 to the Company's Registration Statement Nos. 33-71812,
33-71814 on Form S-1/S-3 and incorporated herein by
reference).
4.7 Indenture dated as of August 26, 1994 between the Company
and State Street Bank and Trust Company, as Trustee (filed
as Exhibit 4.9 to the Company's Annual Report on Form 10-K
for the year ended September 30, 1994 and incorporated
herein by reference).
4.8* Rights Agreement, dated as of March 1, 1995, between the
Company and American Stock Transfer & Trust Company, as
amended on September 27, 1995 and August 23, 1997.
4.9 Warrant Purchase Agreement relating to the issuance of Class
F Warrants (filed as Exhibit 4.1 to the Company's Quarterly
Report on Form 10-Q for the period ended March 31, 1995 and
incorporated herein by reference).
4.10 Form of Class F Warrant (filed as Exhibit 4.2 to the
Company's Quarterly Report on Form 10-Q for the period ended
March 31, 1995 and incorporated herein by reference).
4.11 Warrant Agreement dated as of September 11, 1995 between the
Company and American Stock Transfer & Trust Company relating
to the Class G Warrants (filed as Exhibit 4.1 to the
Company's Current Report on Form 8-K dated as of September
11, 1995 and incorporated herein by reference).
4.12 Specimen of Class G Warrant Certificate (filed as Exhibit
4.2 to the Company's Current Report on Form 8-K dated as of
September 11, 1995 and incorporated herein by reference).
4.13 Form of Amendment to Class C Warrants (filed as Exhibit 4.15
to the Company's Annual Report on Form 10-K for the year
ended September 30, 1995 and incorporated herein by
reference).
4.14 Class H Warrant dated as of September 1, 1995 (filed as
Exhibit 4.19 to the Company's Annual Report on Form 10-K for
the year ended September 30, 1995 and incorporated herein by
reference).
-38-
<PAGE>
4.15 Amendment No. 1, dated as of September 27, 1995, to the
Rights Agreement, dated as of March 1, 1995, between the
Company and American Stock Transfer & Trust Company (filed
as Exhibit 4.20 to the Company's Annual Report on Form 10-K
for the year ended September 30, 1995 and incorporated
herein by reference).
4.16 Form of Warrant Agreement between the Company and American
Stock Transfer & Trust Company relating to the Company's
Class I Warrants (filed as Exhibit 4.7 to the Company's
Registration Statement No. 333-1016 on Form S-4 and
incorporated herein by reference).
4.17 Specimen of Class I Warrant Certificate (filed as Exhibit
4.8 to the Company's Registration Statement No. 333-1016 on
Form S-4 and incorporated herein by reference).
4.18 Stock Option Agreement dated August 23, 1997 between
PerSeptive Biosystems, Inc. and The Perkin-Elmer Corporation
(filed as Exhibit 4.1 to the Company's Current Report on
Form 8-K dated as of August 26, 1997 and incorporated by
reference herein).
10.1+ 1989 Stock Plan (filed as Exhibit 10.1 to the Company's
Registration Statement No. 33-46871 on Form S-1 and
incorporated herein by reference).
10.2+ 1992 Stock Plan of the Company, as amended on January 20,
1997 (filed as Exhibit 4.1 to the Company's Quarterly Report
on Form 10-Q for the Quarterly Period ended March 29, 1997
and incorporated herein by reference).
10.3+ 1992 Employee Stock Purchase Plan (filed as Exhibit 10.3 to
the Company's Registration Statement No. 33-46871 on Form S-
1 and incorporated herein by reference).
10.4+ 1992 Non-Employee Director Stock Option Plan, as amended on
March 11, 1996 (filed as Exhibit 4.2 to the Company's
Quarterly Report on Form 10-Q for the Quarterly Period ended
March 31, 1996 and incorporated herein by reference).
10.5 Consulting Agreement with Dr. Fred E. Regnier dated June 1,
1988 (filed as Exhibit 10.7 to the Company's Registration
Statement No. 33-46871 on Form S-1 and incorporated herein
by reference).
10.6 License Agreement with Purdue Research Foundation dated as
of June 16, 1990 (filed as Exhibit 10.8 to the Company's
Registration Statement No. 33-46871 on Form S-1 and
incorporated herein by reference).
10.7 Sublease Agreement with the Massachusetts Institute of
Technology dated October 1, 1990 (filed as Exhibit 10.10 to
the Company's Registration Statement No. 33-46871 on Form S-
1 and incorporated herein by reference).
-39-
<PAGE>
10.8 Form of Indemnity Agreement with directors and officers
(filed as Exhibit 10.15 to the Company's Registration
Statement No. 33-46871 on Form S-1 and incorporated herein
by reference).
10.9 Product License and Supply Agreement between Millipore
Corporation and the Company granting the Company an
exclusive worldwide royalty free license within the Life
Science market to use certain patented technology to process
membrane products and to carry out certain processes useful
to DNA synthesis operations and providing for the supply of
membrane products (filed as Exhibit 10.24 to the Company's
Annual Report on Form 10-K for the fiscal year ended
September 30, 1994 and incorporated herein by reference).
10.10 OEM Purchase and Supply Agreement between BioSearch, Inc.
and the Waters Chromatography Division of Millipore
Corporation with respect to the supply of certain high
performance liquid chromatography components, machined parts
and other materials to BioSearch, Inc. (filed as Exhibit
10.25 to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1994 and incorporated herein
by reference).
10.11 Assignment of Settlement Agreement between Millipore
Corporation, University Patents, Inc. and Applied
Biosystems, Inc. ("ABI") involving cross license of certain
patents, granting ABI a license under U.S. Patent No.
4,725,677, "Process for the Preparation of Oligonucleotides"
and Millipore a license under U.S. Patent Nos. 4,458,066 and
4,415,732 (filed as Exhibit 10.26 to the Company's Annual
Report on Form 10-K for the fiscal year ended September 30,
1994 and incorporated herein by reference).
10.12 License Agreement dated January 23, 1991 between the
University of Minnesota and Millipore Corporation granting
Millipore an exclusive worldwide license to make, use and
sell products under U.S. Patent Nos. 5,235,028, 5,196,566
and 5,117,009 and related pending applications covering
support structures for peptide synthesis operations (filed
as Exhibit 10.27 to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1994 and
incorporated herein by reference).
10.13 License Agreement dated January 1, 1988 between Hoffman-La
Roche Inc. and Millipore Corporation granting Millipore a
non-exclusive license to make, use and sell so-called FMOC
chemistries on laboratory instruments (filed as Exhibit
10.28 to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1994 and incorporated herein
by reference).
10.14 License Agreement dated March 9, 1992 between Novabiochem AG
and Millipore Corporation granting Millipore a non-exclusive
license to make, use and sell instruments for the monitoring
of certain peptide reactions related to the synthesis of
peptides (filed as Exhibit 10.29 to the Company's Annual
Report on Form 10-K for the fiscal year ended September 30,
1994 and incorporated herein by reference).
-40-
<PAGE>
10.15 License Agreement dated December 17, 1991 between Ole
Burkhardt, Peter E. Nielsen, Rolf H. Berg, Michael Egholm
and Millipore Corporation granting an exclusive, worldwide
license Danish Patent Application No. 0986/91
"Oligonucleotide Analogs Termed PNA" and corresponding
international counterparts (filed as Exhibit 10.30 to the
Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1994 and incorporated herein by
reference).
10.16 Lease Agreement between the Company and the Massachusetts
Institute of Technology dated March 19, 1993 for space
located at 12 Emily Street, Cambridge, Massachusetts (filed
as Exhibit 10.31 to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1994 and
incorporated herein by reference).
10.17 Lease Agreement between the Company and 500 Old Connecticut
Path Limited Partnership for space located at 500 Old
Connecticut Path, Framingham, Massachusetts (filed as
Exhibit 10.32 to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1994 and
incorporated herein by reference).
10.18 Master Lease Agreement between the Company and Hambrecht &
Quist Guaranty Finance, L.P. dated March 31, 1995 (filed as
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the period ended March 31, 1995 and incorporated herein
by reference).
10.19 Security Agreement between the Company and Hambrecht & Quist
Guaranty Finance, L.P. dated March 31, 1995 (filed as
Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
for the period ended March 31, 1995 and incorporated herein
by reference).
10.20 Stipulation and Compromise of Settlement dated as of June
14, 1995 relating to the action entitled In re: PerSeptive
Biosystems, Inc. Securities Litigation, Civ. Action No. 94-
12575(PBS), brought in the U.S. District Court for the
District of Massachusetts (filed as Exhibit 10.1 to the
Company's Current Report on Form 8-K dated as of September
11, 1995 and incorporated herein by reference).
10.21 Credit Agreements between the Company's subsidiary
PerSeptive Biosystems GmbH - Hamburg (formerly, "BioSearch
GmbH") IKB Deutsche Industriebank and Dresdner Bank (filed
as Exhibit 10.27 to Form 10K/A Amendment No. 1 to the
Company's Annual Report on Form 10-K for the year ended
September 30, 1995 and incorporated herein by reference).
10.22 Master Agreement, dated as of May 7, 1996, between the
Company and ChemGenics Pharmaceuticals a d/b/a of Myco
Pharmaceuticals Inc. (filed as Exhibit 2 to the Company's
Current Report on Form 8-K dated as of June 28, 1996 and
incorporated herein by reference).
-41-
<PAGE>
10.23 Omnibus Amendment Agreement dated December 18, 1996 between
the Company and ChemGenics Pharmaceuticals, Inc.
10.24 1997 Non-Qualified Stock Option Plan, as amended (filed as
Exhibit 4.1 to the Company's Registration Statement No. 333-
38989, on Form S-8 and incorporated herein by reference).
10.25+ Employment Agreement dated as of January 17, 1997 between
PerSeptive Biosystems, Inc. and John F. Smith (filed as
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the period ended June 28, 1997 and incorporated by
reference herein).
10.26+ Employment Agreement dated as of January 17, 1997 between
PerSeptive Biosystems, Inc. and Noubar B. Afeyan (filed as
Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
for the period ended June 28, 1997 and incorporated by
reference herein).
21* Subsidiaries of the Company.
23.1* Consent of Coopers & Lybrand L.L.P.
24 Power of Attorney (included in the signature page to the
Company's Annual Report on Form 10-K for the year ended
September 30, 1997).
________________________________
*Indicates exhibits filed herewith. All other exhibits have been
previously filed unless otherwise indicated.
+Indicates a management contract or compensatory plan or arrangement.
(B) REPORTS ON FORM 8-K.
Current Report on Form 8-K dated April 16, 1997, reporting under Item 5,
the Company's announcement that the Company had filed a motion to permit an
immediate appeal of an April 3, 1997 decision of the United States District
Court for the District of Massachusetts (C.A. No. 93-12237-PBS) denying the
Company's motion to correct inventorship of three U.S. patents issued to
the Company, Nos. 5,019,270, 5,228,989 and 5,384,042, covering the
Perfusion Chromatography (R) process and particles and matrix structures
used in that process.
Current Report on Form 8-K dated August 22, 1997, reporting the Company's
announcement that the Company issued 1,019,108 shares of its common stock,
$.01 par value per share, to Millipore Corporation in payment of the third
$10 million installment due upon the redemption by Millipore Corporation of
1,000 shares of the Company's non-voting Series A Redeemable Convertible
Preferred Stock, $.01 par value per share.
Current Report on Form 8-K dated August 26, 1997, reporting that the
Company, The Perkin-Elmer Corporation, and Seven Acquisition Corp., a
wholly owned subsidiary of Perkin-Elmer had entered into an Agreement and
Plan of Merger.
(C) EXHIBITS.
The Company hereby files as exhibits to this Annual Report on Form 10-K
those exhibits listed in Item 14(a)(3), above and denoted with an asterisk.
(d) FINANCIAL STATEMENT SCHEDULES.
The Company hereby files as financial statement schedules to this Annual
Report on Form 10-K those financial statement schedules listed in Item
14(a)(2), above, which are attached hereto.
-42-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized, in the Town of
Framingham, Commonwealth of Massachusetts, on the 29th day of December, 1997.
PERSEPTIVE BIOSYSTEMS, INC.
By: /s/ Noubar B. Afeyan
-------------------------------
Noubar B. Afeyan
Chief Executive Officer
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of the Registrant, hereby
severally constitute and appoint Noubar B. Afeyan, John F. Smith and Samuel P.
Hunt III, and each of them singly, our true and lawful attorneys with full power
to them, and each of them singly, to sign for us and in our names in the
capacities indicated below, the Annual Report on Form 10-K filed herewith and
any and all amendments to said Annual Report on Form 10-K, and generally to do
all such things in our names and on our behalf in our capacities as officers and
directors to enable the Company to comply with the provisions of the Securities
and Exchange Act of 1934, as amended, and all requirements of the Securities and
Exchange Commission, hereby ratifying and confirming our signatures as they may
be signed by our said attorneys, or any of them, to said Annual Report on Form
10-K and any and all amendments thereto.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Noubar B. Afeyan Chief Executive Officer December 29, 1997
- ------------------------ (Principal Executive
Noubar B. Afeyan Officer), Director and
Chairman of the Board of
Directors
/s/ John F. Smith President and Director December 29, 1997
- ------------------------
John F. Smith
/s/ Thomas G. Ruane Senior Vice President December 29, 1997
- ------------------------ and Chief Financial
Thomas G. Ruane Officer (Principal Financial
and Accounting Officer)
/s/ Daniel I.C. Wang Director December 29, 1997
- ------------------------
Daniel I.C. Wang
-43-
<PAGE>
/s/ Edwin M. Kania, Jr. Director December 29, 1997
- ------------------------
Edwin M. Kania, Jr.
/s/ William F. Pounds Director December 29, 1997
- ------------------------
William F. Pounds
/s/ Bruce J. Ryan Director December 29, 1997
- ------------------------
Bruce J. Ryan
-44-
<PAGE>
PERSEPTIVE BIOSYSTEMS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Accountants................................................ F-2
Consolidated Balance Sheets at September 30, 1997 and 1996....................... F-3
Consolidated Statements of Operations for the years ended
September 30, 1997, 1996 and 1995............................................... F-4
Consolidated Statements of Changes in Stockholders' Equity for the years ended
September 30, 1997, 1996 and 1995............................................... F-5
Consolidated Statements of Cash Flows for the years ended
September 30, 1997, 1996 and 1995............................................... F-8
Notes to the Consolidated Financial Statements................................... F-9
Financial Statement Schedules:
Report of Independent Accountants................................................ S-1
II - Valuation and Qualifying Accounts......................................... S-2
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of PerSeptive Biosystems, Inc.:
We have audited the accompanying consolidated balance sheets of PerSeptive
Biosystems, Inc., as of September 30, 1997 and 1996 and the related consolidated
statements of operations, cash flows and stockholders' equity for each of the
three years in the period ended September 30, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of PerSeptive
Biosystems, Inc. as of September 30, 1997 and 1996 and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended September 30, 1997, in conformity with generally accepted
accounting principles.
Boston, Massachusetts Coopers & Lybrand L.L.P.
December 1, 1997
F-2
<PAGE>
<TABLE>
<CAPTION>
PerSeptive Biosystems, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
September 30, September 30,
1997 1996
-------------- --------------
<S> <C> <C>
Assets:
Current Assets:
Cash and cash equivalents 18,283 5,384
Short-term investments, available for sale 16,646 19,273
Trade accounts receivable, net of allowance for doubtful accounts
of $1,963 and $2,386 at September 30, 1997 and 1996, respective 20,814 16,052
Inventories, net 22,602 21,074
Other current assets 3,600 2,107
----------- ------------
Total current assets 81,945 63,890
Fixed assets, net 27,626 32,017
Patent and license costs, net 5,458 5,913
Goodwill, net 17,478 18,518
Other long-term assets 1,444 1,317
----------- ------------
Total assets 133,951 121,655
=========== ============
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable 13,484 9,292
Accrued expenses 10,583 18,699
Current portion of deferred revenue 2,271 1,158
Short-term borrowing 5,055 5,032
Current portion of obligations and other current liabilities 8,004 3,137
----------- ------------
Total current liabilities 39,397 37,318
Long-term liabilities:
Convertible subordinated notes 20,423 27,230
Long-term debt 5,130 5,574
Capital lease obligations, less current portion 281 361
Deferred revenue and other liabilities 1,322 887
----------- ------------
Total long-term liabilities 27,156 34,052
Commitments & contingencies (Note 12)
Stockholders' equity:
Redeemable convertible preferred stock, $10 par value; 4000 shares
authorized; 1,000 and 2,000 issued and outstanding at
September 30, 1997 and 1996, respectively; redemption value
$10,000 and $20,000 at September 30, 1997 and 1996, respective 9,480 18,053
Common stock, $.01 par value; 100,000,000 shares authorized;
22,649,980 and 21,315,456 shares issued and outstanding
at September 30, 1997 and 1996, respectively 226 213
Additional paid-in-capital 170,669 158,556
Accumulated deficit (111,278) (125,094)
----------- ------------
69,097 51,728
Cumulative translation adjustment (4,785) (1,373)
Unrealized gain (loss) on investments 3,086 (70)
----------- ------------
Total stockholders' equity 67,398 50,285
----------- ------------
Total liabilities and stockholders' equity 133,951 121,655
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-3
<PAGE>
PerSeptive Biosystems, Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year ended September 30,
-----------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Revenue:
Product revenue $96,516 $75,916 $69,430
Contract revenue 10,102 19,999
------- ------- -------
96,516 86,018 89,429
------- ------- -------
Cost of goods sold:
Cost of product revenue 49,815 37,813 33,169
Cost of contract revenue 8,571 16,968
Other charges 9,906 -
------- ------- -------
49,815 56,290 50,137
------- ------- -------
Gross profit 46,701 29,728 39,292
Operating expenses:
Research and development 15,215 11,342 6,999
Selling, general and administrative 40,425 39,518 32,771
Other charges 24,239 15,459
Amortization 1,041 2,158 3,080
------- ------- -------
56,681 77,257 58,309
------- ------- -------
Loss from operations (9,980) (47,529) (19,017)
------- ------- -------
Other income (expense):
Interest income $ 648 $ 482 $ 1,209
Interest expense (3,534) (3,473) (2,958)
Other income, net 28,109 53 196
------- ------- -------
Net Income (Loss) $15,243 ($50,467) ($20,570)
======= ======= =======
Net income (loss) per common share, primary $ 0.63 ($3.22) ($1.88)
======= ======= =======
Net income per common share, fully diluted $ 0.60
=======
Weighted average common and common equivalent
shares outstanding, primary 21,905 16,296 12,340
======= ======= =======
Weighted average common and common equivalent
shares outstanding, fully diluted 25,552
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
PerSeptive Biosystems, Inc.
Consolidated Statement of Changes in Stockholders' Equity
For the Three Years in the Period Ended September 30, 1997
(in thousands)
<TABLE>
<CAPTION>
Redeemable
Convertible
Preferred Stock Common Stock
Shares Par Value Shares Par Value
------ --------- ------ ---------
<S> <C> <C> <C> <C>
Balance at September 30, 1994 - - 12,097 $120
Modification of warrants in connection with the
acquisition of PerIsis II
Issuance of warrants pursuant to shareholder
litigation settlement
Issuance of common stock pursuant to shareholder
litigation settlement 494 5
Reclassification of redeemable preferred stock pursuant
to the acquisition of the synthesis products business 3,000 $25,709
Conversion of preferred stock into common stock 912 9
Sale of common stock pursuant to stock
purchase agreement 158 2
Sale of common stock pursuant to employee stock
purchase plan and exercise of stock options and warrants 249 4
Accretion on redeemable convertible preferred stock 283
Cumulative translation adjustment
Amortization of deferred compensation
Net loss
---------- ---------- ---------- ----------
Balance at September 30, 1995 3,000 25,992 13,910 140
Issuance of contengent consideration relating to the
acquisition of AMI 373 4
Issuance of common stock pursuant to the
acquisition of PTC II 2,640 26
Issuance of common stock, through a private placement,
net of issuance costs 2,579 26
Conversion of warrants into common stock 331 3
Conversion of preferred stock into common stock (1,000) (10,000) 1,248 12
Sale of common stock pursuant to employee stock
purchase plan and exercise of stock options and warrants 235 2
Accretion on redeemable convertible preferred stock 2,061
Cumulative translation adjustment
Unrealized gain (loss) on investments
Amortization of deferred compensation
Net loss
---------- ---------- ---------- ----------
Balance at September 30, 1996 2,000 18,053 21,316 213
Conversion of preferred stock into common stock (1,000) (10,000) 1,019 10
Sale of common stock pursuant to employee stock
purchase plan and exercise of stock options and warrants 315 3
Accretion on redeemable convertible preferred stock 1,427
Cumulative translation adjustment
Unrealized gain on investments
Net Income
========== ========== ========== ==========
Balance at September 30, 1997 1,000 $9,480 22,650 $226
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
Perspective Biosystems, Inc.
Consolidated Statement of Changes in Stockholders'
For the Three Years in the Period Ended September 30, 1997
(in thousands)
<TABLE>
<CAPTION>
Additional Cumulative
Paid-in Accumulated Translation
Capital Deficit Adjustment
---------- ----------- -----------
<S> <C> <C> <C>
Balance at September 30, 1994 $ 89,743 $ (49,346)
Modification of warrants in connection with the
acquisition of PerIsis II 1,870
Issuance of warrants pursuant to shareholder
litigation settlement 2,000
Issuance of common stock pursuant to shareholder
litigation settlement 5,071
Reclassification of redeemable preferred stock pursuant
to the acquisition of the synthesis products business 3,000
Conversion of preferred stock into common stock 9,991
Sale of common stock pursuant to stock
purchase agreement 1,998
Sale of common stock pursuant to employee stock
purchase plan and exercise of stock options and warrants 699
Accretion on redeemable convertible preferred stock (2,650)
Cumulative translation adjustment 225
Amortization of deferred compensation
Net loss (20,570)
-------- ---------- --------
Balance at September 30, 1995 111,372 (72,566) 225
Issuance of contengent consideration relating to the
acquisition of AMI 3,461
Issuance of common stock pursuant to the
acquisition of PTC II 15,534
Issuance of common stock, through a private placement,
net of issuance costs 16,822
Conversion of warrants into common stock
Conversion of preferred stock into common stock 9,988
Sale of common stock pursuant to employee stock
purchase plan and exercise of stock options and warrants 1,379
Accretion on redeemable convertible preferred stock (2,061)
Cumulative translation adjustment (1,598)
Unrealized loss on investments
Amortization of deferred compensation
Net loss (50,467)
-------- ---------- --------
Balance at September 30, 1996 158,556 (125,094) (1,373)
Conversion of preferred stock into common stock 9,990
Sale of common stock pursuant to employee stock
purchase plan and exercise of stock options and warrants 2,123
Accretion on redeemable convertible preferred stock (1,427)
Cumulative translation adjustment (3,412)
Unrealized gain on investments
Net Income 15,243
-------- --------- --------
Balance at September 30, 1997 $170,669 $(111,278) $ (4,785)
======== ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
PerSeptive Biosystems, Inc.
Consolidated Statement of Changes in Stockholders'
For the Three Years in the Period Ended September 30, 1997
(in thousands)
<TABLE>
<CAPTION>
Unrealized
Gain (Loss) on Deferred Total
Investments Compensation Equity
----------- ------------ ------------
<S> <C> <C> <C>
Balance at September 30, 1994 ($168) $40,349
Modification of warrants in connection with the acquisition of
PerIsis II 1,870
Issuance of warrants pursuant to shareholder litigation settlement 2,000
Issuance of common stock pursuant to shareholder litigation
settlement 5,076
Reclassification of redeemable preferred stock pursuant to the
acquisition of the synthesis products business 25,709
Conversion of preferred stock into common stock 10,000
Sale of common stock pursuant to stock purchase agreement 2,000
Sale of common stock pursuant to employee stock purchase plan
and exercise of stock options and warrants 703
Accretion on redeemable convertible preferred stock (2,367)
Cumulative translation adjustment 225
Amortization of deferred compensation 112 112
Net loss (20,570)
----------- ------------ ------------
Balance at September 30, 1995 (56) 65,107
Issuance of contengent consideration relating to the acquisition of
AMI 3,465
Issuance of common stock pursuant to the acquisition of PTC II 15,560
Issuance of common stock, through a private placement, net of
issuance costs 16,848
Conversion of warrants into common stock 3
Conversion of preferred stock into common stock -
Sale of common stock pursuant to employee stock purchase plan
and exercise of stock options and warrants 1,381
Accretion on redeemable convertible preferred stock -
Cumulative translation adjustment (1,598)
Unrealized loss on investments (70) (70)
Amortization of deferred compensation 56 56
Net loss (50,467)
----------- ------------ ------------
Balance at September 30, 1996 (70) - 50,285
Conversion of preferred stock into common stock
Sale of common stock pursuant to employee stock purchase plan
and exercise of stock options and warrants 2,126
Accretion on redeemable convertible preferred stock -
Cumulative translation adjustment (3,412)
Unrealized gain on investments 3,156 3,156
Net Income 15,243
--------------------------------------
Balance at September 30, 1997 $3,086 $67,398
======================================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-7
<PAGE>
<TABLE>
<CAPTION>
PerSeptive Biosystems, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Year ended September 30,
-------------------------------------------------------
1997 1996 1995
----------- -------------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) (15,243) ($ 50,467) ($ 20,570)
Adjustments to reconcile net loss to net cash
used in operating activities, net of acquired amounts:
Depreciation and amortization (7,862) 10,530 11,009
Gain on ChemGenics exchange (27,481)
Bad debt expense - 1,275 438
Non-cash portion of other charges - 33,073 8,946
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (5,788) 220 (6,589)
(Increase) decrease in inventories (2,690) (5,263) 3,059
(Increase) decrease in other assets (1,621) 388 (651)
Increase (decrease) in accounts payable 4,192 (59) (2,979)
(Decrease) increase in accrued expenses (8,116) (6,935) 2,592
Increase (decrease) in other liabilities 1,548 (2,488) 571
----------- ------------- -----------
Net cash (used in) operating activities (16,851) (19,726) (4,174)
----------- ------------- -----------
Cash flows from investing activities:
Purchase of fixed assets, net (3,483) (10,725) (21,328)
Cash and securities available-for-sale acquired from PTC II - 11,851
Proceeds from ChemGenics notes and warrants (4,000)
Purchase of securities available-for-sale - (88,498) (53,156)
Proceeds from sale and maturities of securities available-for-sale (29,263) 80,756 71,615
Increase in patents and licenses - (27) (1,442)
----------- ------------- -----------
Net cash provided by (used in) investing activities (29,780) (6,643) (4,311)
----------- ------------- -----------
Cash flows from financing activities:
Proceeds from capital lease financing - 373 5,000
Principal payments under capital lease obligations (2,019) (2,173) (687)
Net proceeds from facility financing - 2,404 3,170
Payment of finance costs - (225) (254)
Net proceeds from short-term borrowing (320) 1,089 3,943
Proceeds from issuance of common stock (2,126) 18,298 2,706
----------- ------------- -----------
Net cash provided by financing activities (427) 19,766 13,878
----------- ------------- -----------
Effect of exchange rate changes on cash and cash equivalents (457) (228) 222
----------- ------------- -----------
Increase (decrease) in cash and cash equivalents (12,899) (6,831) 5,615
Cash and cash equivalents at beginning of year (5,384) 12,215 6,600
----------- ------------- -----------
Cash and cash equivalents at end of year $(18,283) $ 5,384 $ 12,215
=========== ============= ===========
Supplemental disclosure of cash flow information:
Interest paid ($3,284) $ 3,259 $1,203
Supplemental disclosure of non-cash activities:
Accretion of Series A Preferred Stock ($1,427) $2,061 $ 2,650
Issuance of stock in exchange for redemption of
Series A Preferred Stock (10,000) 10,000 10,000
Stock and warrants issued in connection with acquisition of PTC II,
net of warrants exchanged - 15,592 -
Issuance of stock and warrants pursuant to shareholder
litigation settle - 7,076
Stock issued in connection with acquisition of Perlsis II - 1,870
Stock issued to AMI in exchange for remaining acquisition costs - 3,423 -
Value of Millennium stock received, net of stock sold (10,575)
Value of Millennium stock unrealized Gain (3,108)
</TABLE>
The accompanying notes are an integral part of these financial statements
F-8
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Organization
PerSeptive Biosystems, Inc. (the "Company") develops, manufactures, and markets
proprietary products and systems for the purification, analysis and synthesis of
biomolecules.
Pending Merger with Perkin-Elmer Corporation.
On August 27, 1997, The Perkin-Elmer Corporation ("Perkin-Elmer"), Seven
Acquisition Corp., a wholly-owned subsidiary of Perkin-Elmer, and PerSeptive
entered into an Agreement and Plan of Merger (the "Merger Agreement"). Pursuant
to the Merger Agreement, all outstanding shares of PerSeptive common stock, $.01
par value per share (the "PerSeptive Common Stock"), will be converted into
shares of Perkin-Elmer common stock, $1.00 par value per share (the "Perkin-
Elmer Common Stock"), at the exchange rate equal to $13.00 divided by the
average of the closing sales prices of Perkin-Elmer Common Stock on the New York
Stock Exchange composite tape on each of the 20 consecutive trading days
preceding the second trading day prior to the effective date of the merger. In
no event, however, will the exchange rate be more than 0.1926, or less than
0.1486, of a share of Perkin-Elmer Common Stock for each share of PerSeptive
Common Stock. At the effective time of the merger, PerSeptive will become a
wholly-owned subsidiary of Perkin-Elmer. On December 4, 1997, the proposed
merger was approved by PerSeptive's stockholders. The completion of the merger
is subject to regulatory approvals and other closing conditions. There can be no
assurance that the proposed merger will be completed. None of the financial
statements reflect the effects of the proposed transaction. Either party has the
right to terminate the merger agreement if the merger is not consummated on or
before January 31, 1998, unless the parties agree to extend that date on or
before January 31, 1998. The Company has incurred costs of $878,000 through
September 30, 1997 in connection with the merger, which costs have been deferred
until the closing of the merger.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All intercompany balances and transactions have
been eliminated.
Revenue Recognition
The Company recognizes revenue upon shipment of its products to the customer.
Significant future obligations, such as satisfaction of subjective or more than
perfunctory customer-mandated performance criteria, and sales-related
contingencies, such as unilateral rights to return product, delay revenue
recognition until the obligation is satisfied or the contingency is resolved.
Cost of insignificant obligations are accrued when revenue is recognized.
The Company recognizes revenue from research contracts as the related costs are
incurred on a cost-plus basis and from development contracts using the
percentage of completion method.
Foreign Currency
Effective July 1, 1995, the Company changed the functional currency designation
of its foreign subsidiaries from the U.S. dollar to the local currency of its
subsidiaries. The change was based on significant changes in the nature of the
Company's foreign operations. Accordingly, the Company's foreign subsidiaries
translate assets and liabilities at year-end exchange rates and capital accounts
at historical exchanges rates. Income and expense accounts are translated at
the average exchange rates in effect during the year. The resulting translation
gains and losses are
F-9
<PAGE>
reported as a separate component of stockholders' equity.
The functional currency designation in the first three quarters of 1995 and in
previous years' financial statements was the U.S. dollar. Monetary assets and
liabilities were translated at year-end exchange rates, while nonmonetary items
were translated at historical exchange rates. Income and expense accounts were
translated at the average exchange rates in effect during the year, except for
depreciation, amortization, and cost of revenue which were translated at
historical rates. Gains and losses from changes in exchange rates were
recognized in the statement of operations. Translation gains and losses prior
to the change in functional currency designation were not material. Transaction
gains and losses which are immaterial, are included in other income.
Cash and Cash Equivalents
Cash equivalents consist of investments in money market funds, short term
government securities and highly liquid commercial paper of companies in varied
industries. Accordingly, these investments are subject to minimal credit and
market risk. The Company considers investments with an original maturity of
three months or less, at date of acquisition, to be cash equivalents.
Investments
The Company invests in high credit quality, interest-bearing instruments,
primarily government and corporate debt securities and Millennium
Pharmaceuticals Inc. common stock. (See Concentrations of Credit and Market
Risk, below)
Investments that mature within one year or that are expected to be sold within
the year to meet cash-flow requirements are classified as current assets. All
other investments are classified as long-term assets and are recorded at market
value, while securities classified as held-to-maturity are recorded at amortized
cost. Unrealized gains and losses on available-for-sale securities are reported
as a separate component of stockholders' equity. At September 30, 1997 and
1996, all of the Company's investments are classified as available-for-sale.
Investment income consists primarily of interest income, net realized gains and
losses from the sale of securities, and the amortization of premiums and
discounts. The cost of securities sold is based on the specific identification
method.
Inventories
Inventories are stated at the lower of cost or market with cost being determined
on the first-in, first-out basis (FIFO).
Fixed Assets
Fixed assets are recorded at cost and are depreciated over their estimated
useful lives on a straight-line basis. Leasehold improvements are depreciated
over their estimated useful lives or the terms of the lease, if shorter. Upon
retirement or other disposition of fixed assets the cost and related accumulated
depreciation are removed from the accounts and the resulting gain or loss is
reflected in income. Additions, renewals and betterments are capitalized.
Expenditures for maintenance and repairs are charged to expense as incurred.
Intangible Assets
Organization costs are amortized on a straight-line basis over a five year
period. Costs associated with patents and the licensing of patents are
capitalized as incurred and amortized on a straight-line basis over the shorter
of the legal term or the estimated economic life of the
F-10
<PAGE>
patent. Purchase options, consisting of the value ascribed to the options to
acquire the callable stock of certain research and development corporations,
were amortized over the term of the option. All purchase options outstanding at
September 30, 1995 were exercised during fiscal year 1996 in connection with the
acquisition of PTC-II. Goodwill is amortized on a straight-line basis over 20
years. Intangible assets are shown net of accumulated amortization of $5,744,000
and $5,174,000 at September 30, 1997 and 1996, respectively. Amortization
expense for intangible assets amounted to $1,752,000, $3,022,000 and $3,993,000
in fiscal year 1997, 1996 and 1995, respectively.
Deferred Financing Costs
Deferred financing costs, which consist of the costs associated with the
issuance of convertible subordinated notes, and obtaining other sources of
financing, are deferred and amortized on a straight-line basis, which
approximates the effective interest method, over the term of the debt.
Income Taxes
The Company accounts for income taxes on the liability method, which requires
the recognition of deferred tax liabilities and assets for the expected future
tax consequences of temporary differences between the carrying amounts and the
tax bases of assets and liabilities, measured using the enacted tax rates to be
in effect when those differences reverse net of any required valuation
allowance.
Product Warranty
The Company provides customers with up to a one year warranty from the date of
installation. Estimated warranty obligations, which are included in the results
of operations, are evaluated and provided for at the time of sale. Product
warranty costs were not significant.
Long-Lived Assets
Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. An impairment loss is
recognized if the sum of the estimated future cash flows expected to result from
use of the asset is less than the carrying amount of the asset. In 1996, the
Company compared the estimated future cash flows expected to result from
previous acquisitions and noted that the cash flows were greater than the
respective net goodwill amounts associated with those acquisitions, except for
the goodwill associated with the fiscal 1994 acquisition of the In Vitro
Division of Advanced Magnetics, Inc. which was written off during the fourth
quarter of fiscal 1996 (Note 13).
Concentrations of Credit and Market Risk
Financial instruments which subject the Company to concentrations of credit risk
consist primarily of accounts receivable, cash equivalents and investments. The
Company is subject to significant market risk through its investment in
Millennium stock (see Note 3).
In the normal course of business, the Company extends credit, on open accounts,
to its customers after credit and business analysis. The Company performs on-
going credit evaluation of its customers, does not require collateral and
maintains a reserve for potential credit losses. Historically, the Company has
not experienced significant losses related to its accounts receivables.
In addition, the Company has certain receivables, payables, borrowings and other
assets and liabilities denominated in foreign currencies, which are not hedged
and therefore are subject to
F-11
<PAGE>
exchange rate fluctuations. To date, the Company has not incurred significant
losses as a result of currency fluctuations.
Net Income (Loss) Per Share
Net income per share applicable to common shareholders is determined by dividing
net income, including accretion on preferred stock, by the weighted average
number of common and common equivalent shares outstanding during the period.
Net loss per share applicable to common shareholders is determined by dividing
net loss, including accretion on preferred stock, by the weighted average common
shares outstanding during the period. Common stock equivalents, consisting of
options, warrants, contingently issuable shares and shares held in escrow, are
included in the per share calculations, where the effect of their inclusion
would have been dilutive. Fully diluted earnings per share is calculated under
the if converted method which includes preferred stock as if it had been
converted to common stock at the beginning of the period. Under the if
converted method, accretion is not considered in the calculation of fully
diluted earnings per share." Net income (loss) (in thousands) and net income
(loss) per common share after preferred stock accretion for the year ended
September 30, 1997, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
Year ended September 30,
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net income (loss) before preferred stock $15,243 ($50,467) ($20,570)
accretion
Accretion of redeemable preferred stock (1,427) (2,061) (2,650)
------- -------- --------
Net income (loss) after preferred stock
accretion 13,816 ($52,528) ($23,220)
======= ======== ========
Net income (loss) per common share after
preferred stock accretion, primary $0.63 ($3.22) ($1.88)
======= ======== ========
Net income per common share, fully diluted $0.60
=======
Weighted average common and common equivalent
shares outstanding, primary 21,905 16,296 12,340
======= ======== ========
Weighted average common and common equivalent
shares outstanding, fully diluted 25,552
=======
</TABLE>
New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued Statement No.
128 ("SFAS 128"), "Earnings per Share," which is effective for fiscal years
ended after December 15, 1997, including interim periods. SFAS 128 requires the
presentation of basic and diluted earnings per share ("EPS"). Basic EPS, which
replaces primary EPS, excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. Diluted EPS is computed
similarly to fully diluted EPS under the existing rules. SFAS 128 requires
restatement of all prior-period earnings per share data presented after the
effective date. The Company will adopt SFAS 128 in its fiscal year ended
September 30, 1998 and does not
F-12
<PAGE>
anticipate adoption to have a material effect on the financial statements.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive
Income", which is effective for fiscal years ended after December 15, 1997,
including interim periods. SFAS 130 requires the presentation of comprehensive
income and its components. Comprehensive income presents a measure of all
changes in equity that result from recognized transactions and other economic
events of the period other than transactions with owners. SFAS 130 requires
restatement of all prior-period statements presented after the effective date.
The Company will adopt SFAS 130 in its fiscal year ended September 30, 1998 and
has not yet determined the impact of such adoption.
In July 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosures about Segments
of an Enterprise and Related Information" which is effective for fiscal years
ended after December 15, 1997. The interim reporting disclosures are not
required in the first year of adoption. SFAS 131 specifies revised guidelines
for determining an entity's operating segments and the type and level of
financial information to be disclosed. SFAS 131 changes current practice under
SFAS 14 by establishing a new framework on which to base segment reporting. The
"management" approach expands the required disclosures for each segment. The
Company will adopt SFAS 131 in its fiscal year ended September 30, 1998 and has
not yet determined the impact of such adoption.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect 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
reporting period. Actual results could differ from those estimates.
3. INVESTMENTS
As of September 30, 1997 all securities available-for-sale are stated at market
value. These securities consist of U.S. Government and U.S. Government Agency
debt securities and Millennium Pharmaceuticals Inc. Common Stock and are
included in current assets based on the securities' maturity dates and the
Company's expected utilization of the securities.
The estimated fair value of investments available for sale, by contractual
maturity, at September 30, 1997 is as follows (in thousands):
Common Stock $13,678
Due in one year or less 2,968
-------
$16,646
=======
The Common Stock value shown above includes unrealized gain (in thousands) of
$3,108.
Securities and cash equivalents with an estimated fair market value of
approximately $5,500,000 at September 30, 1997 and 1996 are pledged as
collateral to secure short-term borrowings.
4. INVENTORIES
Inventories consist of the following (in thousands):
F-13
<PAGE>
<TABLE>
<CAPTION>
September 30,
1997 1996
-------- --------
<S> <C> <C>
Raw materials $ 9,450 $ 7,368
Work in progress 2,338 2,751
Finished goods 10,814 10,955
------- -------
$22,602 $21,074
======= =======
</TABLE>
5. FIXED ASSETS
Fixed assets consist of the following (in thousands):
<TABLE>
<CAPTION>
Estimated September 30,
useful life (years) 1997 1996
------------------ ------- --------
<S> <C> <C> <C>
Land $ 1,296 $ 1,496
Building 20 8,096 9,084
Construction in progress 488 917
Demonstration equipment 3 4,520 4,317
Laboratory equipment 3-10 7,681 10,762
Computer and office equipment 3-7 5,969 4,814
Production equipment 3-10 6,051 4,970
Leasehold improvements 5 9,992 9,789
-------- --------
44,093 46,149
Accumulated depreciation and
amortization (16,467) (14,132)
-------- --------
$ 27,626 $ 32,017
======== ========
</TABLE>
Depreciation and amortization expense amounted to $6,366,000, $7,508,000, and
$6,851,000 in fiscal years 1997, 1996, and 1995, respectively.
At September 30, 1997 and 1996, laboratory, computer and office equipment under
capital leases included in fixed assets amounted to approximately $1,553,000 and
$5,891,000 respectively. Accumulated amortization related to assets under
capital leases was approximately $670,000 and $2,731,000 at September 30, 1997
and 1996, respectively, and is included in accumulated depreciation and
amortization. Fixed assets under capital leases are depreciated over the
shorter of the term of the lease or the useful life of the asset.
6. ACCRUED EXPENSES
Accrued expenses consist of the following (in thousands):
<TABLE>
<CAPTION>
September 30,
1997 1996
-------- ---------
<S> <C> <C>
Accrued professional fees $ 1,976 $ 5,041
Accrued transaction fees and purchase
accounting costs 378 1,732
Accrued warranty costs 1,088 1,297
Accrued wages and commissions 3,402 2,807
Other accrued expenses 3,739 7,822
------- -------
$10,583 $18,699
======= =======
</TABLE>
F-14
<PAGE>
7. INCOME TAXES
Pre-tax loss incurred under the following jurisdictions (in thousands):
<TABLE>
<CAPTION>
Year ended September 30,
1997 1996 1995
------- --------- --------
<S> <C> <C> <C>
Income (Loss) before income taxes:
Domestic $22,361 $(44,777) $(21,781)
Foreign (7,118) (5,690) 1,211
------- -------- --------
$15,243 $(50,467) $(20,570)
======= ======== ========
</TABLE>
The provision for income taxes was as follows (in thousands):
<TABLE>
<CAPTION>
Year ended September 30,
1997 1996 1995
------- --------- --------
<S> <C> <C> <C>
Current tax expense:
State and local $ - $ - $ -
Foreign - - 527
------- -------- -------
Total current $ _ $ - $ 527
------- -------- -------
Deferred tax expense (benefit)
Federal 7,855 $(17,521) $ (898)
State 822 (1,947) (148)
Foreign (6,966) (974) (527)
------- -------- -------
Total deferred 1,711 (20,442) (1,573)
------- -------- -------
Deferred tax asset valuation allowance (1,711) 20,442 1,046
------- -------- -------
Total provision $ - $ - $ -
======= ======== =======
</TABLE>
Deferred tax assets (liabilities) are comprised of the following (in thousands):
<TABLE>
<CAPTION>
Year ended September 30,
1997 1996
------- --------
<S> <C> <C>
Net operating loss carryforwards $ 39,013 $ 32,869
Research and development credit 1,169 863
Expense accruals 1,285 2,607
Depreciation (605) 44
Inventory reserves 2,214 3,553
Millennium stock transaction (4,285) -
Patent amortization (344) (355)
Accounts receivable 697 888
Warranty reserve 407 536
Other reserves and temporary differences 3,630 3,887
-------- --------
Gross deferred tax assets 43,181 44,892
Deferred tax assets valuation allowance (41,908) (43,619)
-------- --------
$ 1,273 $ 1,273
======== ========
</TABLE>
F-15
<PAGE>
A reconciliation between the amount of reported income tax expense and the
amount computed using the U.S. Federal Statutory rate of 35% is as follows (in
thousands):
<TABLE>
<CAPTION>
Year ended September 30,
1997 1996 1995
------- -------- --------
<S> <C> <C> <C>
Income/(Loss) at statutory rate $ 5,335 $(20,757) $(7,200)
Foreign loss net benefited 2,195 - -
Utilization of US NOL's (7,656)
Shareholder settlement (2,020) 3,546
Nondeductible amortization 65 - 194
ChemGenics Transaction - 1,250 -
PDI book goodwill write-off - 1,446 -
Charge for purchased research and development
acquired from PTC-II, net of anticipated tax benefit - 2,375 -
State tax benefit, net of federal tax liability - (2,613) -
R & D Credit - (149)
Other 61 26 2
------- -------- -------
- (20,442) (3,458)
Benefit of loss not recognized - 20,442 3,458
------- -------- -------
Provision for income taxes $ - $ - $ -
======= ======== =======
</TABLE>
The Company has provided a valuation allowance for certain deferred tax assets,
since it is not more likely than not that future benefits will be realized. If
the Company achieves profitability, these deferred assets would be available to
offset future income tax liabilities and expense, subject to the limitations
described below.
At September 30, 1997, the Company has net operating loss carryforwards and
research and development tax credits for federal income tax reporting purposes
of approximately $64 million and $1,169,000, respectively, which will expire
between 2003 and 2012. The net operating loss carryforward is offset by
$4,700,450 relating to deductions for non-qualified stock option exercises which
will be credited to additional paid-in-capital upon realization. The Company has
a net operating loss carryforward for foreign income tax reporting of $12
million some of which will expire between 1998 and 2002 and the rest with an
unlimited carryforward period.
Ownership changes, as defined in the Internal Revenue Code, resulting from the
issuance of Series A, Series B and Series C convertible preferred stock and from
the issuance of common stock may have limited the amount of net operating loss
and tax credit carryforwards that can be utilized annually to offset future
taxable income or tax liability.
8. CREDIT FACILITIES AND BORROWINGS
Convertible Subordinated Notes
In August 1994, the Company issued $27,230,000 aggregate principal amount of 8-
1/4% Convertible Subordinated Notes Due 2001 (the "Notes"). As of September 30,
1997, $6.8 million, representing the payment that is due on August 15, 1998, is
classified as a current liability. The Notes are convertible into the
F-16
<PAGE>
Company's common stock at any time after the expiration of 60 days following the
last date of original issuance through maturity, unless previously redeemed or
repurchased, at a conversion price of $13.80 per share, subject to adjustment in
certain circumstances. Beginning on August 15, 1998 and on each anniversary date
through the year 2000, the Company is required to deposit in a sinking fund,
cash sufficient to redeem, on each August 15, 25% of the outstanding principal
and accrued interest.
Interest on the Notes is payable semi-annually on each February 15 and August
15, commencing on February 15, 1995, and the Notes will mature on August 15,
2001, unless previously redeemed or repurchased. Interest expense in fiscal
year 1997, 1996 and 1995 was $2,246,000. The Notes are not redeemable by the
Company prior to August 25, 1997. Thereafter, the Notes will be redeemable at
the option of the Company, in whole or in part, at any time, at specified
redemption prices plus accrued and unpaid interest to the date of redemption.
The Notes are unsecured general obligations of the Company and are subordinated
to all existing and future senior indebtedness (as defined in the agreement) of
the Company.
Long-term Debt
The Company secured financing totaling 8.5 million DM (approximately $6 million
at September 30, 1995) in bank loans from two German banks during fiscal year
1995 to contribute to the construction of the Company's new manufacturing
facility in Hamburg, Germany. During fiscal year 1996 additional proceeds were
received to complete the construction. At September 30, 1996, total proceeds of
8.5 million DM (approximately $6 million at September 30, 1996) were received
from the Facility Financing.
The bank loans are payable in semi-annual installments of 363,640 DM
(approximately $206,657 at September 30, 1997) beginning March 31, 1997 through
September 30, 2007. Interest is calculated at 7.5% per annum and is payable at
the end of each year. The bank loans are collateralized by all real estate and
buildings owned by the Company in Hamburg, Germany.
Short-term Borrowing
The Company has secured short-term financing from an investment bank which is
collateralized by the Company's short-term investments. The short-term
borrowing is classified as a current liability and approximates $5 million at
September 30, 1997 and 1996, respectively. Interest is payable monthly and is
calculated daily, based on the broker call rate plus a percentage of the amount
borrowed. The rate paid in fiscal year 1997, 1996 and 1995 ranged from 6.10% to
8.25%.
9. STOCKHOLDERS' EQUITY
Redeemable Convertible Preferred Stock
In connection with its acquisition of the synthesis products business acquired
from Millipore Corporation ("Millipore"), the Company's Board of Directors
authorized the designation and issuance to Millipore of 4,000 shares of a newly
designated series of non-voting redeemable convertible preferred stock (the
"Series A Preferred Shares"), valued at approximately $33,121,000 as of the
acquisition date using an imputed interest rate of 8% (Note 16). The Series A
Preferred Shares are redeemable in four equal installments on each of the first
four anniversaries of the closing of the acquisition in $10 million
installments, payable at the Company's option in cash or the Company's common
stock. The Company will have the right to redeem all or any part of the Series A
Preferred Shares prior to their stated redemption date by paying cash or by
delivering shares of its common stock with a market value equal to the
redemption price. The holders of the Series A Preferred Shares will have
certain rights to
F-17
<PAGE>
convert, at the election of holders of 66-2/3% of the Series A Preferred Shares,
all, but not less than all, of the outstanding Series A Preferred Shares into
shares of common stock in the first year if the market price of the stock
exceeds $32.00 per share, and in the second year, if the market price exceeds
$38.00 per share. The conversion rate will be determined by dividing the
redemption value of the Series A Preferred Shares to be converted by the then
fair market value of the common stock at the time of conversion.
In August 1995, the Company issued 912,199 shares of common stock at $10.96 per
share to satisfy its first redemption payment due August 22, 1995. In August
1996, the Company issued 1,248,050 shares of common stock at $8.01 per share to
satisfy its second redemption payment due August 22, 1996. In August 1997, the
Company issued 1,019,108 shares of common stock at $9.81 per share to satisfy
its third redemption payment due August 22, 1997. Management's intent is to
satisfy the remaining installment under this preferred stock arrangement as it
becomes due through the issuance of common stock. As a result of the action
taken during fiscal year 1995 to convert the first installment of the preferred
stock to common stock and management's intent to satisfy future installments
with common stock, the remaining fair value of this outstanding security has
been reflected as a component of the Company's equity beginning in September 30,
1995.
The difference between the fair value of the Series A Preferred Shares recorded
at the date of issuance and the redemption value is accreted as a charge to
accumulated deficit using the effective interest method.
Capital Stock
The authorized capital stock of the Company consists of (i) 100,000,000 shares
of common stock and (ii) 1,000,000 shares of preferred stock, par value $.01 per
share, of which 4,000 shares have been designated Series A Redeemable
Convertible Preferred Stock ("Series A Preferred Stock") and 400,000 shares have
been designated Series B Junior Participating Preferred Stock ("Series B
Preferred Stock").
As of September 30, 1997 the Company had reserved 4,951,672 shares of common
stock for use in the Company's 1989, 1992 and 1997 Stock Plans and the Company's
1992 Non-Employee Director Plan (Note 10) and 59,039 shares of common stock for
use in the Company's 1992 Employee Stock Purchase Plan (Note 10).
Warrants
In addition, the Company also has outstanding the following warrants to purchase
common stock:
<TABLE>
<CAPTION>
Note Number of Exercise Date Expiration
Reference Shares Price Exercisable Date
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Warrants 15 401,100 $20.00 December 1992 December 1997
Class C Warrants 15 40,000 7.31 September 1993 March 1999
Class E Warrants 15 41,875 33.00 January 1996 December 1998
Class F Warrants 12 100,000 7.62 March 1996 October 2002
Class G Warrants 13 279,330 12.66 March 1996 September 2003
</TABLE>
The exercise prices and the number of shares of the Company's common stock
issuable upon exercise of the Class C, E, and G warrants will be appropriately
adjusted in the event of stock
F-18
<PAGE>
splits, combinations, rights offering, stock dividends or certain other special
dividends with respect to the Company's common stock. The Class A warrants
expired unexercised on December 23, 1997.
10. STOCK OPTION PLANS AND OTHER BENEFITS
1989 and 1992 Stock Plans
In June 1989 and March 1992, the Company adopted the 1989 and 1992 Stock Plans,
respectively (the "1989 Plan" and the "1992 Plan"), which provide for the
granting of incentive stock options, non-qualified stock options, stock purchase
rights and awards of stock. The Board of Directors determines the term of each
option, option price, number of shares for which each option is granted, whether
restrictions will be imposed on the shares subject to options, and the rate at
which each option is exercisable. The exercise price for incentive stock
options granted generally may not be less than the fair market value per share
of the underlying common stock on the date granted. The exercise price per
share for non-qualified options will be as determined by the Board of Directors.
Additionally, the term of the options cannot exceed ten years (five years for
options granted to holders of more than 10% of the voting stock of the Company).
The options vest on an annual or quarterly basis from the date of grant over
periods determined by the Board of Directors.
As a result of the decline in the market price of the Company's common stock,
during fiscal year 1995, the Company allowed holders of 1,230,000 options to
surrender their existing options having exercise prices ranging from $7.63 to
$26.75 in exchange for new options totaling 615,000 at an exercise price of
$5.38.
Under the 1989 Plan, 984,000 options were authorized for issuance and options
covering 130,625 shares are currently outstanding, of which all were exercisable
as of September 30, 1997. No further options will be granted under this plan.
On June 16, 1993, the Company amended the 1992 Plan to increase the number of
shares of common stock authorized for issuance under the 1992 Plan from 800,000
to 1,700,000. On March 10, 1994, May 1, 1995, May 6, 1996 and March 5, 1997 the
Company amended the 1992 Plan to increase the number of shares of common stock
authorized for issuance to 2,300,000; 2,900,500; 3,585,500; and 4,585,500;
respectively. In addition, the 1992 Plan was amended on March 10, 1994 and
March 5, 1997 to limit the number of shares of common stock that any participant
may purchase under the Plan to 600,000 and 1,400,000, respectively. Under the
1992 Plan, options covering 4,087,017 shares are currently outstanding, of which
1,760,402 options were exercisable and 35,530 were available for grant as of
September 30, 1997.
1992 Non-Employee Director Plan
During March 1992, the Company adopted the 1992 Non-Employee Director Stock
Option Plan. This plan provides for grants of non-qualified options to non-
employee members of the Board of Directors. The exercise prices of options
granted under this plan will equal the fair market value of the underlying
common stock on the date granted. The term of options under this plan is ten
years. The original plan provided that Directors receive 1,500 non-qualified
options per year, except that persons who were directors on June 1, 1992
received an initial grant of 6,000 options, and persons first elected as
directors subsequent to June 1, 1992 receive an initial grant of 10,000 options.
On March 11, 1996, the plan was amended to increase the annual automatic grant
under the Director Plan from 1,500 to 7,500 shares of the Company' s Common
Stock. Initial and annual grants of options will vest in four and three equal
annual amounts, respectively, commencing on the grant date. In the event that a
director ceases to be a member of the Board of
F-19
<PAGE>
Directors, any unexercised portion of options granted will terminate. Under this
plan, 200,000 shares of common stock have been authorized for issuance, and
options covering 107,000 shares are currently outstanding, of which 70,163
options were exercisable and 91,500 were available for grant as of September 30,
1997.
1997 Employee Non-Qualified Stock Option Plan
During 1997, the Company adopted the 1997 Non-Qualified Stock Option Plan. This
plan provides for grants of non-qualified options to employees, consultants and
certain new officers. The number of shares for which each option is granted,
whether restrictions will be imposed on the shares subject to options, and the
rate at which each is exercisable shall be determined at the discretion of the
Board of Directors. The maximum term of options under this plan is ten years.
The original plan authorized 200,000 shares of common stock for issuance. On
August 21, 1997, the number of shares of common stock authorized for issuance
was increased to 550,000. As of September 30, 1997, options covering 474,114
shares are currently outstanding, of which 15,000 options were exercisable, and
25,886 options were available for grant.
Stock-based Compensation Plans
The Company has adopted the disclosure requirements of Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation."
The Company continues to recognize compensation costs using the intrinsic value
based method described in Accounting Principles Board Opinion No. 25,
"Accounting for Stock issued to Employees."
Net income (loss) and net income (loss) per share as reported in these
consolidated financial statements and on a pro forma basis, as if the fair value
based method described in SFAS No. 123 had been adopted, are as follows (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
Year Ended September 30
-----------------------
1997 1996
------ ------
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income As reported $15,243 $(50,467)
Pro forma 12,625 (51,368)
Primary net income As reported $ .63 $ (3.22)
per share Pro forma .51 (3.28)
Fully diluted net As reported $ .60 -
income per share Pro forma .44 -
</TABLE>
The effects of applying SFAS No. 123 in fiscal year 1997 and 1996 are not
necessary indicative of the effects on reported net income in future years.
The following table summarizes the Company's stock option activity at September
30, 1997, 1996, and 1995, and changes during the years then ended:
F-20
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
------------------------ ------------------------ ------------------------
- -------------------------------------------------------------------------------------------------------
WEIGHTED- WEIGHTED WEIGHTED
SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE
UNDER EXERCISE UNDER EXERCISE UNDER EXERCISE
OPTION PRICE OPTION PRICE OPTION PRICE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 3,560 $7.83 2,491 $7.37 2,332 $15.79
Granted at fair
market value 1,646 7.04 1,604 7.98 1,908 6.39
Exercised (260) 6.22 (180) 5.30 (190) 1.85
Canceled (147) 7.40 (355) 6.83 (1,559) 19.28
- -------------------------------------------------------------------------------------------------------
Outstanding at
end of year 4,799 $7.70 3,560 $7.83 2,491 $7.37
- -------------------------------------------------------------------------------------------------------
</TABLE>
Options exercisable at September 30, 1997, 1996 and 1995 were 1,976,190,
1,227,458 and 1,208,184, respectively. The weighted-average grant-date fair
value of options granted during 1997 and 1996 were $4.19 and $3.99,
respectively.
The following table summarizes information about stock options outstanding at
September 30, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------- -------------------
Weighted
Average
Remaining Weighted Weighted
Number Contractual Average Number Average
Range of Outstanding Life Exercise Outstanding Exercise
Exercise prices At 9/30/97 (In Years) Price At 9/30/97 Price
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$0.39 - $6.10 1,048,762 6.25 $5.11 765,872 $4.98
$6.38 - $6.81 311,525 9.34 $6.61 17,990 $6.57
$7.13 - $7.13 1,117,879 9.32 $7.13 53,632 $7.13
$7.63 - $7.63 1,107,507 8.75 $7.63 364,673 $7.63
$7.81 - $31.50 1,213,084 7.47 $10.81 774,023 $11.68
--------- ---- ------ ---------- ------
$0.39 - $31.50 4,798,756 8.05 $7.70 1,976,190 $8.17
</TABLE>
For the purpose of providing pro forma disclosures, the fair values of options
granted were estimated using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants in 1997 and 1996,
respectively: a risk-free interest rate of 6.02 % and 6.13 %, an expected life
of 4 years, expected volatility of 57.27 %, and no expected dividends.
Employee Stock Purchase Plan
On May 29, 1992, the Company adopted the 1992 Employee Stock Purchase Plan. This
plan provides eligible employees the opportunity to purchase shares of common
stock annually at 85% of the fair market value at the lower of the beginning or
ending stock price of the shares during two six-month periods of each year. A
maximum of 250,000 shares of common stock have been authorized for issuance
under this plan. The term of this plan is ten years. Purchases under this plan
were 51,000 shares in fiscal year 1997 at prices ranging between $5.53 and $5.75
per share and 54,000 shares in fiscal year 1996 at prices ranging between $7.50
and $8.25 per share and 188,000 shares since inception through September 30,
1997. The plan was terminated by the Board of Directors effective November 30,
1997.
F-21
<PAGE>
Savings Plan
Effective May 1, 1993 the Company established the PerSeptive Biosystems, Inc.
401(k) Savings Plan (the "Plan") to provide employees the opportunity to defer
taxes on their savings. The Plan is a defined contribution plan covering all
full-time employees of the Company who have completed six months of service and
are age twenty-one or older. The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974. The Company is not required to
contribute to, and has made no contributions, to the Plan.
11. STOCKHOLDER RIGHTS PLAN
Effective March 2, 1995, the Company's Board of Directors implemented a
Stockholder Rights Plan by declaring a dividend of one preferred stock purchase
right (a "Right") for each outstanding share of the Company's common stock.
Each Right entitles the registered holder to purchase from the Company one one-
hundredth of a share (a "Unit") of Series B Junior Participating Preferred
Stock, $.01 par value per share at a purchase price of $47.00 per Unit (the
"Purchase Price"), subject to adjustment. Such rights are transferred with any
change in ownership of the Company's common stock.
The Rights will be exercisable only upon the occurrence of certain triggering
events. Such events would include the acquisition of or a tender offer that, in
the aggregate, equals or exceeds 15% of the outstanding shares of common stock
of the Company. Until a Right is exercised, the holder thereof will have no
rights as a stockholder of the Company. Until a triggering event occurs, the
Rights will not trade separately from the Company's common stock. The Rights
are not exercisable until the occurrence of a triggering event and will expire
at the close of business on March 2, 2005, unless earlier redeemed by the
Company.
On August 23, 1997, the Stockholder Rights Plan was amended in anticipation of
approving a merger pursuant to an Agreement and Plan of Merger with Perkin-Elmer
Corporation ("Merger"). This amendment stated that no triggering event has
occurred as a result of the approval of the Merger and consequently, no rights
have become exercisable.
12. COMMITMENTS AND CONTINGENCIES
Commitments
The Company has entered into license agreements pursuant to which it pays
royalties generally ranging from 1% to 6% on sales of certain consumable
products contained in the Company's finished goods. Royalty rates are higher on
bulk sales of consumable products to other resellers. Royalty expense incurred
in connection with these agreements for the years ended September 30, 1997, 1996
and 1995 totaled $535,000, $398,000 and $367,000, respectively.
The Company leases manufacturing facilities, office space and equipment under
noncancelable operating and capital leases expiring at various dates through
2009. The approximate minimum rental commitments under all noncancelable leases
as of September 30, 1997 are as follows (in thousands):
Operating Capital
leases leases
--------- -------
1998 $ 3,102 $ 512
1999 2,646 447
2000 2,559 239
2001 1,550 44
F-22
<PAGE>
2002 1,352 2
Thereafter 9,536 0
------- ------
Total minimum lease payments $20,745 1,244
=======
Less-amount representing interest (175)
------
Present value of obligations under $1,069
capital leases ======
Total rent expense was approximately $2,331,000, $2,651,000 and $4,415,000 for
the years ended September 30, 1997, 1996, and 1995, respectively.
On March 31, 1995, the Company entered into an agreement for the subsequent sale
and leaseback of equipment totaling $4,790,000 for $5 million. Under the terms
of the lease agreement, the Company has the option to repurchase the equipment
and is required to remit 30 equal monthly lease payments of approximately
$186,000 commencing March 31, 1995. Interest on the lease is calculated at 9%
per annum. For financial accounting purposes this lease had been recorded as a
capital lease. At September 30, 1997, the obligation under this lease was
fulfilled. The Company currently is negotiating an operating lease for this
equipment.
In conjunction with the sale and leaseback transaction: (1) Class F warrants to
purchase 100,000 shares of the Company's common stock were issued at an initial
per share exercise price of $7.25 and were exercised by the lessor during fiscal
1996; (2) the Company did not elect to exercise its right to repurchase the
equipment during fiscal 1996 and as a result additional Class F warrants to
purchase 100,000 shares of the Company's common stock were issued at an initial
per share exercise price of $7.62 and are exercisable any time on or after March
31, 1996 and on or before October 1, 2002. The value of the warrants issued has
been determined to be de minimus, and, therefore, no value has been ascribed.
Contingencies
During 1997 and 1996, the Company sold certain receivables for approximately
$17,518,000 and $11,936,000, respectively, to a financial institution with
recourse. At September 30, 1997 and 1996, approximately $4,572,018 and
$2,636,000, respectively, of the receivables sold had not been collected by the
financial institution. The Company paid interest on receivables sold of
approximately $78,855 and $55,000 during fiscal year 1997 and 1996,
respectively.
13. OTHER CHARGES
Other charges consist of costs of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995
-----------------------
<S> <C> <C>
In-process research and
development (Notes 15,16) $ 6,785 $ 1,879
Other charges 27,360 13,580
------- -------
$34,145 $15,459
Total other charges ======= =======
</TABLE>
1996 Charges
Other charges of $9,900,000 reported as part of costs of goods sold relate to
various charges recorded in connection with activities undertaken to realign the
Company's product offerings
F-23
<PAGE>
and to record impairment charges associated with certain underutilized
production assets.
Other charges of $17,460,000 were recognized during fiscal 1996 and related
to charges recorded in connection with the PTC-II acquisition, a provision for
the impairment of certain intangible assets, accruals for estimated legal costs
related primarily to the enforcement of the ongoing patent enforcement action
and other miscellaneous matters. The charge recorded in connection with the PTC-
II acquisition related to costs associated with organizational realignment
following the acquisition of approximately $3,300,000. The charge also included
provisions recorded in connection with ongoing litigation matters totaling
$5,200,000. The impairment charge recorded in connection with the write-off of
the goodwill associated with the purchase of the In Vitro Division of Advanced
Magnetics, Inc. ("AMI") totaled $5,300,000. Charges related to other
miscellaneous matters totaled $3,660,000.
1995 Charges
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 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 $1.5 million 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.
14. LITIGATION
The Company has sued Pharmacia Biotech, Inc. and certain of its affiliates, and
their parent Pharmacia AB (collectively, "Pharmacia"), now part of Pharmacia &
Upjohn Co., Sepracor Inc.
F-24
<PAGE>
("Sepracor") and BioSepra Inc. ("BioSepra"), a company partially owned by
Sepracor, for willful infringement of three PerSeptive patents (U.S. Nos.
5,019,270, 5,228,989 and 5,384,042), covering the process of Perfusion
Chromatography/(R)/ and the manufacture, sale and use of chromatography
particles and matrices that enable Perfusion Chromatography (collectively, the
"Original Perfusion Patents"). The Company commenced its action against
Pharmacia and Sepracor on October 14, 1993, and the consolidated action has been
pending in the United States District Court for the District of Massachusetts.
BioSepra was added as a party on May 19, 1994. The lawsuit also claims that
Sepracor and BioSepra made false and misleading representations of fact with
respect to the Company's products, and that BioSepra engaged in false and
misleading advertising. The lawsuit, in an amended complaint filed by Purdue
University and the Company, also claims that Sepracor and BioSepra infringe a
fourth patent ("the Coatings Patent"), licensed exclusively by PerSeptive,
covering novel coatings for chromatography media. The lawsuit seeks to enjoin
the defendants from infringing the four patents and asks for treble damages, as
well as other relief and damages. Pharmacia, Sepracor and BioSepra each have
asserted that their products do not infringe the Original Perfusion Patents and
that the Original Perfusion Patents are invalid and unenforceable, and have
asserted counterclaims against the Company alleging that the Company's
assertions that they have infringed the patents, and that statements allegedly
made by the Company to customers concerning the litigation, constitute unfair
competition, commercial disparagement, unfair trade practices, tortious
interference with customer relationships and violation of the Lanham Act, and
seeking an unspecified amount of damages, and, under certain asserted claims,
double or treble damages, as well as attorneys' fees and expenses. The Company
has denied any liability on these 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 Original Perfusion
Patents, granting the Defendants' motions for partial summary judgment that
inventorship of the Original Perfusion Patents is improper for failure to name
one or more persons as additional joint inventors, and requiring the Company to
move to correct inventorship or have the patents declared invalid. On March 12,
1996, the Court entered a ruling directing the Company to correct inventorship
and placed on the Company the burden of proving the absence of deceptive intent
in the designation of inventors at a hearing. The Company moved to correct
inventorship. The Company has preserved its right to appeal a number of issues,
including the Court's January 9, 1996 order that the Original Perfusion Patents
failed to name additional persons as joint inventors and the Court's March 12,
1996 order imposing the burden of proof on PerSeptive. The hearing was held in
May and June 1996. On April 3, 1997, the Court issued a ruling denying the
Company's motion to correct inventorship, ruling that the Company had not met
its burden of proving that two British scientists, who worked for a company that
is not a party to the litigation, were not named on the Original Perfusion
Patents without deceptive intent within the meaning of Section 256 of Title 35
United States Code, and granted judgment in favor of Sepracor, BioSepra and
Pharmacia on the Company's claims relating to the Original Perfusion Patents.
On April 16, 1997, the Company filed a motion to permit an immediate appeal of
the April 3, 1997 decision, and the related January 9, 1996 and March 12, 1996
decisions, to the United States Court of Appeals for the Federal Circuit, which
has exclusive jurisdiction in the United States to hear appeals in patent cases.
On April 30, 1997, the defendants filed a motion requesting that the District
Court render a decision on the defendants' defense of inequitable conduct prior
to permitting the Company's appeal. On July 30, 1997, the Company filed a
motion seeking to (i) vacate the Court's April 3, 1997 decision and (ii) enter a
final judgment that will permit the
F-25
<PAGE>
Company to appeal the Court's earlier January 9, 1996 and March 12, 1996 orders
that the patents do not name all of the inventors and imposing the burden of
proof on PerSeptive. The Company's motion is based on a decision by the Court of
Appeals for the Federal Circuit in an unrelated case, Stark v. Advanced
-----------------
Magnetics, Inc., issued on July 11, 1997, which the Company contends rendered
- --------------
the Court's April 3, 1997 decision erroneous. The defendants filed motions again
requesting that the District Court render a decision on their defense of
inequitable conduct prior to permitting an appeal. The Court has not rendered a
decision on the Company's or the defendants' motions. The Court has not yet
considered the issue of infringement of the Original Perfusion Patents or the
Coatings Patent.
On December 12, 1997, the Company announced that it had settled the litigation
with Sepracor and BioSepra. Under the terms of the settlement, the Company
received an unspecified amount (which is not material to the financial
statements) and BioSepra obtained a non-exclusive license under PerSeptive's
Perfusion Chromatography patents. Sepracor and BioSepra were removed as
defendants in the litigation. The Company intends to continue to vigorously
pursue the litigation against Pharmacia, which remains a defendant.
The Company may incur substantial 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.
In September 1996 and February 1997, two new United States patents relating to
Perfusion Chromatography systems were issued to the Company. Neither of these
patents, which cover instruments and systems that perform the high-speed, high
resolution chromatography which is the subject of the Original Perfusion
Patents, are the subject of the current litigation. Prior to the issuance of
these patents, the Company had submitted to the patent examiner the District
Court's January 9, 1996 order, and non-confidential portions of related briefs
filed by the parties, and the patents were issued naming only PerSeptive's
scientific founders as the inventors nonetheless.
Since November 1994, the Company has been responding to informal requests for
information from the Securities and Exchange 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 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. There can be no assurance as
to the timeliness of the completion of the 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 is cooperating fully with the investigation, and has responded and will
continue to respond to requests for information in connection with the
investigation.
15. CONTRACT RESEARCH AND CONTRACT DEVELOPMENT
PerSeptive Technologies II Corporation
F-26
<PAGE>
In December 1993, the Company and PerSeptive Technologies II Corporation ("PTC-
II") completed an initial public offering of 2,645,000 units for net proceeds of
approximately $53.2 million (including the underwriters overallotment). Each
unit consisted of one share of callable common stock of PTC-II and one Class E
warrant to purchase one share of the Company's common stock. The Company had an
option exercisable at any time through December 31, 1997 to purchase all (but
not less than all) of the shares of PTC-II common stock that form a part of the
units at a premium over the public offering price per unit; the option price per
share ranged from $33.83 to $57.23 depending on the date of exercise. The
Company also had options to acquire PTC-II's rights under certain development
programs at option prices per share ranging from $5.58 to $15.74 depending both
on the program acquired and the date of exercise. The option prices may be paid
in cash, shares of the company's common stock, or any combination thereof, at
the Company's discretion. The Company had no obligation to exercise the stock
purchase option or any of the program purchase options. Any warrants not
exchanged in the exchange offer discussed below are exercisable at any time from
January 1, 1996 through December 31, 1998. The exercise price of the warrants
is $33.00 per share.
In connection with the unit offering, the Company and PTC-II entered into
various agreements, including a technology license agreement and a research and
development agreement. Pursuant to the technology license agreement, the
Company licensed technology to PTC-II for the development of products for
certain life sciences applications. In this respect, the Company received a
non-refundable license fee of $4.0 million, recorded as deferred revenue, which
was being amortized into income over a 36 month period at a rate of $333,333 per
quarter. In accordance with the research and development agreement, PTC-II
agreed to use the Company's services exclusively to develop the licensed
technology. During the years ended September 30, 1996, 1995, and 1994 the
Company recognized $10.1 million, $19.8 million, and $12.8 million respectively,
in research and development revenue in connection with these agreements,
including the amortization of the license fee. The Company considers the
warrants issued to the investors to have been in exchange for the call option on
PTC-II's stock. Accordingly, such option has been recorded at the $5.3 million
valuation of the warrants in other intangible assets in the accompanying balance
sheet and was being amortized over the 36-month life of the option. The value
of the warrant remaining as of the acquisition date was included in the extra
space in-process research and development charge described below.
Effective March 8, 1996, the Company completed an exchange offer in which PTC-II
unit holders exchanged 2,603,125 of their units for 2,603,125 shares of the
Company's common stock and 2,603,125 new Class I warrants to purchase the
Company's common stock exercisable until August 8, 1997 at an exercise price per
share of $13.50. The total value of common stock and warrants issued in the
exchange offer was approximately $16 million based on the market value of the
common stock on March 8, 1996. The Company recorded an in-process research and
development charge of approximately $6.8 million, which represents the
approximated value of acquired technologies which have not reached
commercialization (Note 16).
PerIsis II Development Corporation
In March 1993, the Company completed a transaction related to the formation of
two research and development corporations. In connection with this transaction,
the Company and Isis Pharmaceuticals, Inc. ("Isis") licensed certain
applications of their technologies to two newly formed research and development
corporations. One of these corporations ("PerIsis I") was pursuing the
development of products for the purification, analysis and synthesis of
oligonucleotides manufactured by Isis and the second corporation ("PerIsis II")
was pursuing the development of such products for commercialization and sale to
all other entities. Under the
F-27
<PAGE>
agreements, the Company was paid for performing contract research and
development services over a period of approximately two years. During the years
ended September 30, 1995 and 1994, the Company recognized research and
development revenue totaling $0.2 million and $0.5 million respectively, in
connection with these agreements.
In exchange for an option to purchase all of the stock of PerIsis II at a price
ranging from approximately $2.7 million to $3.6 million, the Company issued
Class C warrants to purchase 40,000 shares of the Company's common stock at an
exercise price of $25.00 per share, exercisable from the period beginning
September 15, 1993 and ending March 15, 1999, and Class D warrants that, if they
become exercisable, will be exercisable from the period beginning March 15, 1996
and ending September 15, 2000 for a number of shares ranging from 172,914 to
345,829, determined as defined by the agreement.
In April 1995, the Company exercised its option to purchase all of the common
stock of PerIsis II. In consideration for all of the stock of PerIsis II, the
exercise price of the Class C Warrants was amended to $7.31 per share and the
Class D Warrants were amended to be exercisable for 300,573 shares of common
stock at an exercise price of $0.01 per share. The Class D Warrants were
exercised during fiscal 1996. There were no tangible assets of PerIsis II
acquired, therefore, the value of the consideration paid of $1.8 million was
recorded an in-process research and development charge during the quarter ended
June 30, 1995.
16. ACQUISITIONS
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 AMI. In December 1995, the Company issued 373,080
shares of common stock with a value of $3.4 million, to satisfy this obligation.
Perceptive Technologies II Corporation
On November 1, 1995, the Company, PerSeptive Acquisition Corporation ("PAC"), a
wholly owned subsidiary of the Company, and 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 the Company, 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 the Company's common stock and 2,603,125 new Class I
Warrants to purchase the Company's 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. During the
quarter ended June 30, 1996, 36,475 rights were exchanged for an equivalent
number of shares of the Company's common stock. 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.
F-28
<PAGE>
During the six month period ended March 31, 1996, the Company recognized
research and development revenue from PTC-II totaling approximately $10.1
million.
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 2,639,600 at $5.875 $15,508
Shares of Common Stock to be Issued 5,400 at $5.875 32
Warrants Issued 2,603,125 at $0.90 2,343
Warrants Returned 2,603,125 at $0.88 (2,291)
Provision For Purchase Obligations 1,000
Write off of Purchase Option Cost 1,082
Transaction costs (i) 1,620
-------
Total purchase price $19,294
=======
</TABLE>
(i) Amount represents acquisition costs associated with the Transaction which
include professional fees, printing costs and regulatory filing fees.
<TABLE>
<CAPTION>
Allocation of the Purchase Price: March 8,
- -------------------------------- 1996
(000's)
----------
<S> <C>
Net asset values:
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 unaudited pro forma results of operations for the years ended September 30,
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 (in
thousands except for per share data):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Revenue $75,916 $69,613
Net loss ($57,263) ($37,108)
Net loss per share ($3.41) ($2.48)
</TABLE>
ChemGenics Pharmaceuticals Inc.
In June 1996, the Company entered into a transaction with ChemGenics
Pharmaceuticals Inc. ("ChemGenics") (formerly, Myco Pharmaceuticals Inc.), in
which the Company transferred certain assets and employees of the Company's drug
discovery program to ChemGenics and granted a non-exclusive license to GemGenics
to use the Company's technology (including technology developed through PTC-II)
in the field of drug discovery in exchange for shares of
F-29
<PAGE>
ChemGenics' common stock, $.001 par value per share ("ChemGenics Common Stock")
and warrants to purchase additional shares of ChemGenics Common Stock
exercisable until June 28, 2000. The warrants were exercisable at $5.00 per
share ($13.25 per share after a proposed 2.65-for-1 reverse stock split). The
Company was subject to certain contractual restrictions on the sale or
distribution of its holdings of ChemGenics Common Stock. In December 1996, the
Company and ChemGenics executed amendments to their agreements pursuant to which
the Company exchanged a portion of its ChemGenics Common Stock for a promissory
note for $3 million payable on the earlier of the closing of ChemGenics' initial
public offering or December 31, 2002. The Company held at September 30, 1996
approximately 34% of the outstanding capital stock of ChemGenics, and warrants
which, if exercised, would increase the Company's holdings to approximately 47%
(of which, warrants sufficient to increase the Company's holdings to
approximately 40% were currently exercisable prior to the merger with
Millennium).
In January, 1997 ChemGenics and Millennium Pharmaceuticals, Inc. ("Millennium")
entered into an Agreement and Plan of Merger ("Agreement"). Under the terms of
the Agreement, the stockholders of ChemGenics received common stock of
Millennium in exchange for their common stock of ChemGenics. At the closing on
February 10, 1997, the Company received 1,612,582 shares of Millennium common
stock, $.001 par value per share ("Millennium common stock"), in exchange for
its shares of ChemGenics common stock. In addition, the Company received $4
million cash in exchange for the warrants for ChemGenics common stock and in
satisfaction of the above referenced promissory note. The transaction qualified
as a tax-free merger. The Company's shares of Millennium common stock are
subject to restrictions on sale which expired in increments between June and
September 1997. In connection with this event, the Company recorded a gain of
$25.8 million, reflecting the fair market value of the cash received and the
Company's investment in Millennium common stock as of March 29, 1997. During
the quarter ended June 28, 1997, the Company sold approximately 50% of its
investment in Millennium for $12.9 million and realized a gain on the sale of
approximately $800,000. During the fourth quarter of fiscal 1997, the Company
recognized an additional gain for book purposes of $800,000 in connection with
the release of a previously existing contingency on approximately 52,000 shares
of Millennium stock. The taxable gain arising from this transaction will be
offset by available net operating loss carryforwards with the exception of a
portion of the gain potentially subject to the Federal Alternative Minimum Tax.
The total gain included in other income was for the year ended September 30,
1997 $27.4 million.
17. SALES TO SIGNIFICANT CUSTOMERS
The Company recorded sales to one significant customer, PTC-II, of $10.1
million and $19.8 million for the years ended September 30, 1997 and 1996,
respectively. No customer accounted for greater than 10% of revenue for the year
ended September 30, 1997.
18. GEOGRAPHICAL INFORMATION
The Company's areas of operation outside of the North America include Europe and
Asia. Information about the Company's operations in different geographic
locations for the fiscal years 1997 and 1996 is shown below (in thousands). The
Company's operations in geographic locations other than North America for prior
years are not significant.
F-30
<PAGE>
<TABLE>
<CAPTION>
North
America Europe Asia Eliminations Consolidated
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997 Net sales to unaffiliated
customers $ 54,322 $18,052 $24,142 - $ 96,516
Transfer between areas 26,830 9,094 - (35,924) -
-------- ------- ------- ------- --------
Total sales 81,152 27,146 24,142 (35,924) 96,516
Net income (loss) 22,361 (2,820) (4,298) - 15,243
Identifiable assets 122,999 12,004 (1,052)(1) - 133,951
</TABLE>
(1) Identifiable assets information does not exclude intercompany balances.
<TABLE>
<CAPTION>
North
America Europe Asia Eliminations Consolidated
------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
1996 Net sales to unaffiliated customers $56,480 $13,447 $16,091 $ - $86,018
Transfer between areas 17,004 8,942 - (25,946) -
------- ------- ------- ------------ ------------
Total sales 73,484 22,389 16,091 (25,946) 86,018
Net income (loss) (48,176) (552) (1,739) - (50,467)
Identifiable assets 100,906 15,693 5,056 - 121,655
</TABLE>
F-31
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and Stockholders of PerSeptive Biosystems, Inc.:
Our report on other consolidated financial statements of PerSeptive Biosystems,
Inc., is included on page F-2 of this Annual Report on Form 10-K. In connection
with our audits of such financial statements, we have also audited the related
financial statement schedule for each of the three years in the period ending
September 30, 1997, listed in the index of this Annual Report on Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
December 1, 1997
S-1
<PAGE>
PERSEPTIVE BIOSYSTEMS, INC.
FINANCIAL STATEMENT SCHEDULES
SCHEDULE II - VALUATIONS AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance Additions Balance at
beginning charges to costs end of
Classifications of period and expenses Other Deductions period
<S> <C> <C> <C> <C> <C>
Allowance for
doubtful accounts
for the year ended
September 30,
1997 $2,386,000 $ 138,000 ($250,000) ($311,000) $1,963,000
1996 $1,699,000 $1,275,000 $ 0 ($588,000) $2,386,000
1995 $1,778,000 $ 438,000 $ 0 ($517,000) $1,699,000
Inventory reserves
for the year ended
September 30,
1997 $8,877,000 $3,580,000 $ 0 ($6,627,000) $5,829,682
1996 $4,448,000 $6,682,000 $ 0 ($2,253,000) $8,877,000
1995 $4,594,000 $2,327,000 $ 0 ($2,473,000) $4,448,000
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- ------ ----------------------
2.1 Agreement and Plan of Reorganization dated as of October 8, 1993
by and among the Company, PV Merger Corporation and Vestec
Corporation, as amended (filed as Exhibit 2.1 to the Company's
Current Report on Form 8-K dated October 8, 1993, as amended and
incorporated herein by reference).
2.2 Agreement and Plan of Merger by and among the Company, PV Merger
Corporation and Vestec Corporation (filed as Exhibit 2.2 to the
Company's Current Report on Form 8-K dated October 8, 1993, as
amended and incorporated herein by reference).
2.3 Escrow and Exchange Agreement by and among the Company, Vestec
Corporation, Marvin L. Vestal as the representative of the
stockholders of Vestec, American Stock Transfer & Trust Company
and the stockholders of Vestec Corporation whose names appear on
the signature pages thereto (filed as Exhibit 2.3 to the
Company's Current Report on Form 8-K dated October 8, 1993, as
amended and incorporated herein by reference).
2.4 Registration Rights Agreement by and among the Company, PV Merger
Corporation and Vestec Corporation (filed as Exhibit 2.4 to the
Company's Current Report on Form 8-K dated October 8, 1993, as
amended and incorporated herein by reference).
2.5 Asset Purchase Agreement dated as of October 15, 1993 by and
between the Company and Advanced Magnetics, Inc. (filed as
Exhibit 2.1 to the Company's Current Report on Form 8-K dated
October 15, 1993, as amended and incorporated herein by
reference).
2.6 Asset Purchase and Sale Agreement dated as of July 14, 1994 by
and among the Company, Millipore Corporation and Millipore
Investment Holdings Limited (filed as Exhibit 2.1 to the
Company's Current Report on Form 8-K dated August 22, 1994, as
amended and incorporated herein by reference).
2.7 Registration Rights Agreement by and among the Company, Millipore
Corporation and Millipore Investment Holdings Limited dated
August 22, 1994 (filed as Exhibit 2.3 to the Company's Current
Report on Form 8-K dated August 22, 1994, as amended and
incorporated herein by reference).
<PAGE>
2.8 Registration Rights Agreement by and among the Company, Alex.
Brown & Sons Incorporated and Lehman Brothers Inc. dated August
26, 1994 (filed as Exhibit 4.2 to the Company's Registration
Statement No. 33-74600 on Form S-3 and incorporated herein by
reference).
2.9 Agreement and Plan of Merger, dated as of November 1, 1995 among
the Company, PerSeptive Acquisition Corporation and PerSeptive
Technologies II Corporation (filed as Exhibit 10.26 to the
Company's Annual Report on Form 10-K for the year ended September
30, 1995 and incorporated herein by reference).
2.10 Amendment No. 1 to Agreement and Plan of Merger, dated January
29, 1996 among the Company, PerSeptive Acquisition Corporation
and PerSeptive Technologies II Corporation (filed as Exhibit 2.1
to the Company's Registration Statement No. 333-1016 on Form S-4
and incorporated herein by reference).
2.11 Agreement and Plan of Merger dated as of August 23, 1997 among
The Perkin-Elmer Corporation, Seven Acquisition Corp. And
PerSeptive Biosystems, Inc. (filed as Exhibit 2.1 to the
Company's Current Annual Report on Form 8-K dated August 26, 1997
and incorporated herein by reference).
3.1 Amended and Restated Certificate of Incorporation of the Company
(filed as Exhibit 3.2, 4.2 to the Company's Registration
Statement No. 33-46871 on Form S-1 and incorporated herein by
reference).
3.2 Certificate of Amendment of Restated Certificate of Incorporation
of the Company (filed as Exhibit 4.1 to the Company's
Registration Statement No. 33-80856 on Form S-8 and incorporated
herein by reference).
3.3 Amended and Restated By-Laws of the Company (filed as Exhibit
3.4, 4.4 to the Company's Registration Statement No. 33-46871 on
Form S-1 and incorporated herein by reference).
3.4 Certificate of Designations for the Series A Redeemable
Convertible Preferred Stock filed with the Secretary of State of
the State of Delaware on August 19, 1994 (filed as Exhibit 2.2 to
the Company's Current Report on Form 8-K dated August 22, 1994,
as amended, and incorporated herein by reference).
3.5 Certificate of Amendment of the Amended and Restated Certificate
of Incorporation of the Company filed with the Secretary of State
of the State of Delaware on May 8, 1995 (filed as Exhibit 3.1 to
the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1995 and incorporated herein by reference).
<PAGE>
3.6 Certificate of Designations for the Series B Junior Participating
Preferred Stock filed with the Secretary of State of the State of
Delaware on March 2, 1995 (exhibit to Exhibit 4.9) (filed as
Exhibit 3.6 to the Company's Annual Report on Form 10-K for the
year ended September 30, 1995 and incorporated herein by
reference).
3.7 Amended Certificate of Designation for the Series B Junior
Participating Preferred Stock filed with the Secretary of State
of the State of Delaware on October 24, 1995 (filed as Exhibit
3.7 to the Company's Annual Report on Form 10-K for the year
ended September 30, 1995 and incorporated herein by reference).
4.1 Description of Capital Stock contained in the Company's Amended
and Restated Certificate of Incorporation, as amended, filed as
Exhibits 3.1 through 3.7 hereto.
4.2 Form of Class A Warrants for the purchase of the Company's Common
Stock dated as of December 23, 1992 issued to the stockholders of
PTC-I (filed as Exhibit 4.1 to the Company's Quarterly Report on
Form 10-Q for the three-month period ended March 31, 1993 and
incorporated herein by reference).
4.3 Form of Class C Warrants for the purchase of the Company's Common
Stock dated as of March 15, 1993 issued to the stockholders of
PerIsis II (filed as Exhibit 4.3 to the Company's Report on Form
10-Q for the three-month period ended March 31, 1993 and
incorporated herein by reference).
4.4 Warrant Agreement relating to the issuance of Class E Warrants of
the Company dated as of December 29, 1993, as executed
(supersedes Exhibit 4.7 to Amendment No. 1 to the Company's
Registration Statement Nos. 33-71812, 33-71814 on Form S-1/S-3)
(filed as Exhibit 4.2 to the Company's Quarterly Report on Form
10-Q for the Quarterly Period ended March 31, 1994 and
incorporated herein by reference).
4.5 Specimen Class E Warrant Certificate (filed as Exhibit 4.3 to
Amendment No. 1 to the Company's Registration Statement Nos. 33-
71812, 33-71814 on Form S-1/S-3 and incorporated herein by
reference).
4.6 Specimen Unit Certificate (filed as Exhibit 4.1 to Amendment No.
1 to the Company's Registration Statement Nos. 33-71812, 33-71814
on Form S-1/S-3 and incorporated herein by reference).
<PAGE>
4.7 Indenture dated as of August 26, 1994 between the Company and
State Street Bank and Trust Company, as Trustee (filed as Exhibit
4.9 to the Company's Annual Report on Form 10-K for the year
ended September 30, 1994 and incorporated herein by reference).
4.8* Rights Agreement, dated as of March 1, 1995, between the Company
and American Stock Transfer & Trust Company, as amended on August
23, 1997.
4.9 Warrant Purchase Agreement relating to the issuance of Class F
Warrants (filed as Exhibit 4.1 to the Company's Quarterly Report
on Form 10-Q for the period ended March 31, 1995 and incorporated
herein by reference).
4.10 Form of Class F Warrant (filed as Exhibit 4.2 to the Company's
Quarterly Report on Form 10-Q for the period ended March 31, 1995
and incorporated herein by reference).
4.11 Warrant Agreement dated as of September 11, 1995 between the
Company and American Stock Transfer & Trust Company relating to
the Class G Warrants (filed as Exhibit 4.1 to the Company's
Current Report on Form 8-K dated as of September 11, 1995 and
incorporated herein by reference).
4.12 Specimen of Class G Warrant Certificate (filed as Exhibit 4.2 to
the Company's Current Report on Form 8-K dated as of September
11, 1995 and incorporated herein by reference).
4.13 Form of Amendment to Class C Warrants (filed as Exhibit 4.15 to
the Company's Annual Report on Form 10-K for the year ended
September 30, 1995 and incorporated herein by reference).
4.14 Class H Warrant dated as of September 1, 1995 (filed as Exhibit
4.19 to the Company's Annual Report on Form 10-K for the year
ended September 30, 1995 and incorporated herein by reference).
4.15 Amendment No. 1, dated as of September 27, 1995, to the Rights
Agreement, dated as of March 1, 1995, between the Company and
American Stock Transfer & Trust Company (filed as Exhibit 4.20 to
the Company's Annual Report on Form 10-K for the year ended
September 30, 1995 and incorporated herein by reference).
<PAGE>
4.16 Form of Warrant Agreement between the Company and American Stock
Transfer & Trust Company relating to the Company's Class I
Warrants (filed as Exhibit 4.7 to the Company's Registration
Statement No. 333-1016 on Form S-4 and incorporated herein by
reference).
4.17 Specimen of Class I Warrant Certificate (filed as Exhibit 4.8 to
the Company's Registration Statement No. 333-1016 on Form S-4 and
incorporated herein by reference).
4.18 Stock Option Agreement dated August 23, 1997 between PerSeptive
BioSystems, Inc. and the Perkin-Elmer Corporation (filed as
Exhibit 4.1 to the Company's Current Report on Form 8-K dated as
of August 26, 1997).
10.1+ 1989 Stock Plan (filed as Exhibit 10.1 to the Company's
Registration Statement No. 33-46871 on Form S-1 and incorporated
herein by reference).
10.2+ 1992 Stock Plan of the Company, as amended on January 20, 1997
(filed as Exhibit 4.1 to the Company's Quarterly Report on Form
10-Q for the Quarterly Period ended March 29, 1997 and
incorporated herein by reference).
10.3+ 1992 Employee Stock Purchase Plan (filed as Exhibit 10.3 to the
Company's Registration Statement No. 33-46871 on Form S-1 and
incorporated herein by reference).
10.4+ 1992 Non-Employee Director Stock Option Plan, as amended on March
11, 1996 (filed as Exhibit 4.2 to the Company's Quarterly Report
on Form 10-Q for the Quarterly Period ended March 31, 1996 and
incorporated herein by reference).
10.5 Consulting Agreement with Dr. Fred E. Regnier dated June 1, 1988
(filed as Exhibit 10.7 to the Company's Registration Statement
No. 33-46871 on Form S-1 and incorporated herein by reference).
10.6 License Agreement with Purdue Research Foundation dated as of
June 16, 1990 (filed as Exhibit 10.8 to the Company's
Registration Statement No. 33-46871 on Form S-1 and incorporated
herein by reference).
10.7 Sublease Agreement with the Massachusetts Institute of Technology
dated October 1, 1990 (filed as Exhibit 10.10 to the Company's
Registration Statement No. 33-46871 on Form S-1 and incorporated
herein by reference).
<PAGE>
10.8 Form of Indemnity Agreement with directors and officers (filed as
Exhibit 10.15 to the Company's Registration Statement No. 33-
46871 on Form S-1 and incorporated herein by reference).
10.9 Product License and Supply Agreement between Millipore
Corporation and the Company granting the Company an exclusive
worldwide royalty free license within the Life Science market to
use certain patented technology to process membrane products and
to carry out certain processes useful to DNA synthesis operations
and providing for the supply of membrane products (filed as
Exhibit 10.24 to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1994 and incorporated herein by
reference).
10.10 OEM Purchase and Supply Agreement between BioSearch, Inc. and the
Waters Chromatography Division of Millipore Corporation with
respect to the supply of certain high performance liquid
chromatography components, machined parts and other materials to
BioSearch, Inc. (filed as Exhibit 10.25 to the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1994
and incorporated herein by reference).
10.11 Assignment of Settlement Agreement between Millipore Corporation,
University Patents, Inc. and Applied Biosystems, Inc. ("ABI")
involving cross license of certain patents, granting ABI a
license under U.S. Patent No. 4,725,677, "Process for the
Preparation of Oligonucleotides" and Millipore a license under
U.S. Patent Nos. 4,458,066 and 4,415,732 (filed as Exhibit 10.26
to the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1994 and incorporated herein by reference).
10.12 License Agreement dated January 23, 1991 between the University
of Minnesota and Millipore Corporation granting Millipore an
exclusive worldwide license to make, use and sell products under
U.S. Patent Nos. 5,235,028, 5,196,566 and 5,117,009 and related
pending applications covering support structures for peptide
synthesis operations (filed as Exhibit 10.27 to the Company's
Annual Report on Form 10-K for the fiscal year ended September
30, 1994 and incorporated herein by reference).
10.13 License Agreement dated January 1, 1988 between Hoffman-La Roche
Inc. and Millipore Corporation granting Millipore a non-exclusive
license to make, use and sell so-called FMOC chemistries on
laboratory instruments (filed as Exhibit 10.28 to the Company's
Annual Report on Form 10-K for the fiscal year ended September
30, 1994 and incorporated herein by reference).
<PAGE>
10.14 License Agreement dated March 9, 1992 between Novabiochem AG and
Millipore Corporation granting Millipore a non-exclusive license
to make, use and sell instruments for the monitoring of certain
peptide reactions related to the synthesis of peptides (filed as
Exhibit 10.29 to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1994 and incorporated herein by
reference).
10.15 License Agreement dated December 17, 1991 between Ole Burkhardt,
Peter E. Nielsen, Rolf H. Berg, Michael Egholm and Millipore
Corporation granting an exclusive, worldwide license Danish
Patent Application No. 0986/91 "Oligonucleotide Analogs Termed
PNA" and corresponding international counterparts (filed as
Exhibit 10.30 to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1994 and incorporated herein by
reference).
10.16 Lease Agreement between the Company and the Massachusetts
Institute of Technology dated March 19, 1993 for space located at
12 Emily Street, Cambridge, Massachusetts (filed as Exhibit 10.31
to the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1994 and incorporated herein by reference).
10.17 Lease Agreement between the Company and 500 Old Connecticut Path
Limited Partnership for space located at 500 Old Connecticut
Path, Framingham, Massachusetts (filed as Exhibit 10.32 to the
Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1994 and incorporated herein by reference).
10.18 Master Lease Agreement between the Company and Hambrecht & Quist
Guaranty Finance, L.P. dated March 31, 1995 (filed as Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the
period ended March 31, 1995 and incorporated herein by
reference).
10.19 Security Agreement between the Company and Hambrecht & Quist
Guaranty Finance, L.P. dated March 31, 1995 (filed as Exhibit
10.2 to the Company's Quarterly Report on Form 10-Q for the
period ended March 31, 1995 and incorporated herein by
reference).
10.20 Stipulation and Compromise of Settlement dated as of June 14,
1995 relating to the action entitled In re: PerSeptive
Biosystems, Inc. Securities Litigation, Civ. Action No. 94-
12575(PBS), brought in the U.S. District Court for the District
of Massachusetts (filed as Exhibit 10.1 to the Company's Current
Report on Form 8-K dated as of September 11, 1995 and
incorporated herein by reference).
<PAGE>
10.21 Credit Agreements between the Company's subsidiary PerSeptive
Biosystems GmbH - Hamburg (formerly, "BioSearch GmbH") IKB
Deutsche Industriebank and Dresdner Bank (filed as Exhibit 10.27
to Form 10K/A Amendment No. 1 to the Company's Annual Report on
Form 10-K for the year ended September 30, 1995 and incorporated
herein by reference).
10.22 Master Agreement, dated as of May 7, 1996, between the Company
and ChemGenics Pharmaceuticals a d/b/a of Myco Pharmaceuticals
Inc. (filed as Exhibit 2 to the Company's Current Report on Form
8-K dated as of June 28, 1996 and incorporated herein by
reference).
10.23 Omnibus Amendment Agreement dated December 18, 1996 between the
Company and ChemGenics Pharmaceuticals, Inc. (filed as exhibit
10.23 to the Company's Annual Report on Form 10-K for the year
ended September 30, 1996 and incorporated herein by reference).
10.24 1997 Non-Qualified Stock Option Plan, as amended (filed as
Exhibit 4.1 to the Company's Registration Statement No. 333-
38989, on Form S-8 and incorporated herein by reference).
10.25+ Employment Agreement dated as of January 17, 1997 between
PerSeptive Biosystems, Inc. and John F. Smith (filed as Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the
period ended June 28, 1997 and incorporated by reference herein.
10.26+ Employment Agreement dated as of January 17, 1997 between
PerSeptive Biosystems, Inc. and Noubar B. Afeyan (filed as
Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for
the period ended June 28, 1997 and incorporated by reference
herein.
21* Subsidiaries of the Company.
23.1* Consent of Coopers & Lybrand L.L.P.
24 Power of Attorney (included in the signature page to the
Company's Annual Report on Form 10-K for the year ended September
30, 1997).
________________________________
*Indicates exhibits filed herewith. All other exhibits have been
previously filed unless
otherwise indicated.
+Indicates a management contract or compensatory plan or arrangement.
<PAGE>
EXHIBIT 4.8
- --------------------------------------------------------------------------------
PERSEPTIVE BIOSYSTEMS, INC.
AND
AMERICAN STOCK TRANSFER & TRUST COMPANY
AS RIGHTS AGENT
__________
RIGHTS AGREEMENT
DATED AS OF MARCH 1, 1995
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
SECTION PAGE
- ------- ----
1. Certain Definitions........................................... 7
2. Appointment of Rights Agent................................... 12
3. Issue of Rights Certificates.................................. 12
4. Form of Rights Certificates................................... 14
5. Countersignature and Registration............................. 15
6. Transfer, Split Up, Combination and
Exchange of Rights Certificates; Mutilated,
Destroyed, Lost or
Stolen Rights Certificates.................................... 15
7. Exercise of Rights; Purchase Price;
Expiration Date of Rights..................................... 16
8. Cancellation and Destruction of Rights Certificates........... 18
9. Reservation and Availability of Capital Stock................. 18
10. Preferred Stock Record Date................................... 19
11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights............................................. 20
12. Certificate of Adjusted Purchase Price or
Number of Shares.............................................. 28
13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power...................................... 28
14. Fractional Rights and Fractional Shares....................... 30
15. Rights of Action.............................................. 31
16. Agreement of Rights Holders................................... 32
17. Rights Certificate Holder Not Deemed a Stockholder............ 32
18. Concerning the Rights Agent................................... 33
19. Merger or Consolidation or Change of
Name of Rights Agent.......................................... 33
20. Duties of Rights Agent........................................ 34
21. Change of Rights Agent........................................ 35
22. Issuance of New Rights Certificates........................... 36
<PAGE>
23. Redemption and Termination................................... 37
24. Exchange..................................................... 38
25. Notice of Certain Events..................................... 39
26. Notices...................................................... 40
27. Supplements and Amendments................................... 40
28. Successors................................................... 41
29. Determinations and Actions by the Board of Directors, etc.... 41
30. Benefits of this Agreement................................... 42
31. Severability................................................. 42
32. Governing Law................................................ 42
33. Counterparts................................................. 42
34. Descriptive Headings......................................... 42
Exhibit A -- Form of Certificate of Designation of Preferred Stock
Exhibit B -- Form of Rights Certificate
Exhibit C -- Form of Summary of Rights
<PAGE>
RIGHTS AGREEMENT
----------------
RIGHTS AGREEMENT, dated as of March 1, 1995 (the "Agreement"), between
---------
PERSEPTIVE BIOSYSTEMS, INC., a Delaware corporation (the "Company"), and
-------
AMERICAN STOCK TRANSFER & TRUST COMPANY, as Rights Agent (the "Rights Agent").
------------
WITNESSETH
WHEREAS, on February 23, 1995 (the "Rights Dividend Declaration
---------------------------
Date"), the Board of Directors of the Company (the "Board") authorized and
-----
declared a dividend distribution of one Right for each share of Common Stock (as
hereinafter defined) of the Company outstanding at the close of business on
March 2, 1995 (the "Record Date"), and has authorized the issuance of one Right
-----------
(as such number may hereinafter be adjusted pursuant to the provisions of
Section 11(a)(i) hereof) for each share of Common Stock of the Company issued
(whether originally issued or delivered from the Company's treasury) between the
Record Date and the Distribution Date, each Right initially representing the
right to purchase one one-hundredth of a share of Series B Junior Participating
Preferred Stock upon the terms and conditions hereinafter set forth (the
"Rights");
------
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement,
-------------------
the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which,
----------------
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding,
but shall not include the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan. Notwithstanding the foregoing, no Person shall
become an "Acquiring Person" as the result of an acquisition of Common Stock by
the Company which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 15% or more
of the Common Stock of the Company then outstanding; provided, however, that if
-------- -------
a Person shall become the Beneficial Owner of 15% or more of the Common Stock of
the Company then outstanding by reason of share purchases by the Company and
shall, after such share purchases by the Company, become the Beneficial Owner of
any additional Common Stock of the Company, then such Person shall be deemed to
be an "Acquiring Person." Notwithstanding the foregoing, if the Board, with the
consent of a majority of the Continuing Directors, determines in good faith that
a Person who would otherwise be an "Acquiring Person," as defined pursuant to
the foregoing provisions of this paragraph (a), has become such inadvertently,
and such Person divests as promptly as practicable a sufficient number of
shares of Common Stock so that such Person would no longer be an "Acquiring
Person," as defined pursuant to the foregoing provisions of this paragraph (a),
then such Person shall not be deemed to be an "Acquiring Person" for any
purposes of this Agreement. In addition, and notwithstanding the foregoing, any
Person who, together with any Affiliates or Associates of such Person, shall
become the Beneficial Owner of 15% or more of the shares of
<PAGE>
Common Stock then outstandingas a result of a transaction or series of
transactions involving the redemption, conversion, exchange or cancellation of
some or all of the outstanding shares of the Company's Series A Redeemable
Convertible Preferred Stock, $.01 par value per share, shall not be deemed to be
an "Acquiring Person" for any purposes of this Agreement if such transaction or
series of transactions has been approved in advance by a majority of the
Continuing Directors.
(b) "Act" shall mean the Securities Act of 1933, as amended.
---
(c) "Adjustment Shares" shall have the meaning set forth
-----------------
in Section 11(a)(ii)(D) hereof.
(d) "Adverse Person" shall mean any Person declared to be an
--------------
Adverse Person by the Continuing Directors upon determination that the criteria
set forth in Section 11(a)(ii)(D) hereof apply to such Person.
(e) "Adverse Person Event" shall mean the determination by the
--------------------
Continuing Directors (with the concurrence of the Independent Directors),
pursuant to Section 11(a)(ii)(D) hereof, that a Person is an Adverse Person.
(f) "Affiliate" and "Associate" shall have the respective
--------- ---------
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended and in effect
on the date of this Agreement (the "Exchange Act").
------------
(g) "Agreement" shall mean this Rights Agreement as originally
---------
executed or as it may from time to time be supplemented or amended pursuant to
the applicable provisions hereof.
(h) A Person shall be deemed the "Beneficial Owner and shall
----------------
be deemed to "beneficially own", any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to
acquire (whether such right is exercisable immediately or
only after the passage of time) pursuant to any agreement,
arrangement or understanding, whether or not in writing,
or upon the exercise of conversion rights, exchange
rights, other rights, warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the
-------- -------
"Beneficial Owner" of, or to "beneficially own", (A)
securities tendered pursuant to a tender offer or exchange
offer made by such Person or any of such Person's
Affiliates or Associates until such tendered securities
are accepted for purchase or exchange, or (B) securities
issuable upon exercise of Rights at any time prior to the
occurrence of a Triggering Event, or (C) securities
issuable upon exercise of Rights from and after the
occurrence of a Triggering Event which Rights were
acquired by such Person or any of such Person's Affiliates
or Associates prior to the Distribution Date or pursuant
to Section 3(a) or Section 22 hereof (the "Original
--------
Rights") or pursuant to Section 11(a)(i) hereof in
------
connection with an adjustment made with respect to any
Original Rights;
<PAGE>
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote
or dispose of or has "beneficial ownership" of (as
determined pursuant to Rule 13d-3 of the General Rules and
Regulations under the Exchange Act, or any comparable or
successor rule), including pursuant to any agreement,
arrangement or understanding, whether or not in writing;
provided, however, that a Person shall not be deemed the
-------- -------
"Beneficial Owner" of, or to "beneficially own", any
security under this subparagraph (ii) as a result of an
agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding:
(A) arises solely from a revocable proxy given in response
to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable provisions of
the General Rules and Regulations under the Exchange Act,
and (B) is not also then reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof)
with which such Person (or any of such Person's Affiliates
or Associates) has any agreement, arrangement or
understanding, whether or not in writing, for the purpose
of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to
subparagraph (ii) of this paragraph (h)) or disposing of
any voting securities of the Company (a joint filing of a
Schedule 13D under the Exchange Act or any comparable or
successor report being deemed to be conclusive evidence of
such an agreement, arrangement or understanding);
provided, however, that nothing in this paragraph (h)
-------- -------
shall cause a Person engaged in business as an underwriter
of securities to be the "Beneficial Owner" of, or to
"beneficially own", any securities acquired through such
Person's participation in good faith in a firm commitment
underwriting until the expiration of forty days after the
date of such acquisition.
Notwithstanding anything in this definition of Beneficial Ownership to
the contrary, the phrase "then outstanding," when used with reference to a
Person's Beneficial Ownership of securities of the Company, shall mean the
number of such securities then issued and outstanding together with the number
of such securities not then actually issued and outstanding which such Person
would be deemed to own beneficially hereunder.
(i) "Board" means the Board of Directors of the Company.
-----
(j) "Business Day" shall mean any day other than a Saturday,
------------
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
(k) "Close of Business" on any given date shall mean 5:00 P.M.,
------------------
New York time, on such date; provided, however, that if such date is not a
-------- -------
Business Day it shall mean 5:00 P.M., New York time, on the next succeeding
Business Day.
<PAGE>
(l) "Common Stock" shall mean the common stock, $.01 par value
------------
per share, of the Company, except that "Common Stock" when used with reference
to any Person other than the Company shall mean the capital stock of such Person
with the greatest voting power, or the equity securities or other equity
interest having power to control or direct the management, of such Person.
(m) "Common Stock Equivalents" shall have the meaning
------------------------
set forth in Section 11(a)(iii) hereof.
(n) "Company" shall mean the Person named as the "Company" in
-------
the first paragraph of this Agreement until a successor corporation shall have
become such or until a Principal Party shall assume, and thereafter be liable
for, all obligations and duties of the Company hereunder, pursuant to the
applicable provisions of this Agreement, and thereafter "Company" shall mean
such successor corporation or Principal Party.
(o) "Continuing Director" shall mean (i) any member of the
-------------------
Board, while such Person is a member of the Board, who is not an Acquiring
Person or an Adverse Person, or an Affiliate or Associate of such Person, or a
representative of such Person or of any such Affiliate or Associate, and was a
member of the Board on the date of this Agreement, or (ii) any Person who
becomes a member of the Board subsequent to the date of this Agreement, while
such Person is a member of the Board, who is not an Acquiring Person or an
Adverse Person, or an Affiliate or Associate of such Person, or a representative
of an Acquiring Person or an Adverse Person or of any such Affiliate or
Associate, if such Person's nomination for election or election to the Board is
recommended or approved by a majority of the Continuing Directors.
(p) "Current Market Price" shall have the meaning set forth
--------------------
in Section 11(d)(i) hereof.
(q) "Current Value" shall have the meaning set forth
-------------
in Section 11(a)(iii) hereof.
(r) "Distribution Date" shall have the meaning set forth in
-----------------
Section 3(a) hereof.
(s) "Equivalent Preferred Stock" shall have the meaning set
--------------------------
forth in Section 11(b) hereof.
(t) "Exchange Act" shall have the meaning set forth in
------------
Section 1(f) hereof.
(u) "Expiration Date" shall have the meaning set forth
---------------
in Section 7(a) hereof.
(v) "Final Amendment Date" shall mean the earlier of the
--------------------
Distribution Date or the occurrence of an Adverse Person Event.
(w) "Final Expiration Date" shall mean the close of
---------------------
business on March 2, 2005.
(x) "Independent Directors" shall mean the Continuing Directors
---------------------
who are not executive officers of the Company.
<PAGE>
(y) "Initial Exercise Price" shall be $47.00.
----------------------
(z) "Nasdaq" shall mean the National Association of Securities
------
Dealers, Inc. Automated Quotation System.
(aa) "Original Rights" shall have the meaning set forth
---------------
in Section 1(h)(i) hereof.
(bb) "Person" shall mean any natural person, firm, association,
------
corporation, partnership, trust or other entity or organization.
(cc) "Preferred Stock" shall mean the Series B Junior
---------------
Participating Preferred Stock, $.01 par value per share, of the Company having
the terms set forth in the form of certificate of designation attached hereto as
Exhibit A.
- ---------
(dd) "Principal Party" shall have the meaning set forth
---------------
in Section 13(b) hereof.
(ee) "Purchase Price" shall have the meaning set forth
--------------
in Section 4(a) hereof.
(ff) "Record Date" shall have the meaning set forth in the
-----------
preamble of the Agreement.
(gg) "Redemption Price" shall have the meaning set forth
----------------
in Section 23(a) hereof.
(hh) "Rights" shall have the meaning set forth in the
------
preamble of the Agreement.
(ii) "Rights Agent" shall mean the Person named as the "Rights
------------
Agent" in the first paragraph of this Agreement until a successor Rights Agent
shall have become such pursuant to the applicable provisions hereof, and
thereafter "Rights Agent" shall mean such successor Rights Agent. If at any time
there is more than one Person appointed by the Company as Rights Agent pursuant
to the applicable provisions of this Agreement, "Rights Agent" shall mean and
include each such Person.
(jj) "Rights Certificates" shall have the meaning set forth
-------------------
in Section 3(a) hereof.
(kk) "Rights Dividend Declaration Date" shall have the
--------------------------------
meaning set forth in the preamble of this Agreement.
(ll) "Section 11(a)(ii) Event" shall mean any event
-----------------------
described in Section 11(a)(ii)(A), (B), (C) or (D) hereof.
(mm) "Section 11(a)(ii) Trigger Date" shall have the
------------------------------
meaning set forth in Section 11(a)(iii) hereof.
(nn) "Section 13 Event" shall mean any event described
----------------
in clauses (x), (y) or (z) of Section 13(a) hereof.
<PAGE>
(oo) "Spread" shall have the meaning set forth in Section
------
11(a)(iii) hereof.
(pp) "Stock Acquisition Date" shall mean the first date of a
----------------------
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has become
such.
(qq) "Subsidiary" shall mean, with reference to any Person,
----------
including the Company, any corporation of which an amount of voting securities
sufficient to elect at least a majority of the directors of such corporation is
beneficially owned, directly or indirectly, by such Person, or which is
otherwise controlled by such Person.
(rr) "Substitute Consideration" shall have the meaning set
------------------------
forth in Section 11(a)(iii) hereof.
(ss) "Substitution Period" shall have the meaning set forth
-------------------
in Section 11(a)(iii) hereof.
(tt) "Trading Day" shall have the meaning set forth in
-----------
Section 11(d) hereof.
(uu) "Triggering Event" shall mean any Section 11(a)(ii)
----------------
Event or any Section 13 Event.
Section 2. Appointment of Rights Agent. The Company hereby appoints
---------------------------
the Rights Agent to act as agent for the Company and the holders of the Rights
(who, in accordance with Section 3 hereof, shall prior to the Distribution Date
also be the holders of the Common Stock) in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable.
Section 3. Issue of Rights Certificates.
----------------------------
(a) Until the earliest of (i) the Close of Business on the tenth
day after the Stock Acquisition Date (or, if the tenth day after the Stock
Acquisition Date occurs before the Record Date, the Close of Business on the
Record Date), (ii) the Close of Business on the tenth Business Day (or, if such
tenth Business Day occurs before the Record Date, the Close of Business on the
Record Date), or such specified or unspecified later date on or after the Record
Date as may be determined by action of a majority of the Continuing Directors,
after the date that a tender offer or exchange offer by any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms of any such
plan) is first published or sent or given within the meaning of Rule 14d-2(a) of
the General Rules and Regulations under the Exchange Act, if upon consummation
thereof for the maximum number of shares that may be purchased thereunder, such
Person would be the Beneficial Owner of 15% or more of the shares of Common
Stock then outstanding or (iii) the Close of Business on the tenth Business Day
after an Adverse Person Event (the earliest of (i), (ii) and (iii) being herein
referred to as the "Distribution Date"), (x) the Rights will be evidenced
-----------------
(subject to the provisions of paragraph (b) of this Section 3) by the
certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and
<PAGE>
(y) the Rights will be transferable only in connection with the transfer of the
underlying shares of Common Stock (including a transfer to the Company). As soon
as practicable after the Distribution Date, the Rights Agent will send by first-
class, insured, postage prepaid mail, to each record holder of the Common Stock
as of the Close of Business on the Distribution Date, at the address of such
holder shown on the records of the Company, one or more rights certificates, in
the form specified in Section 4 hereof (the "Rights Certificates"), evidencing
-------------------
one Right for each share of Common Stock so held, subject to adjustment as
provided herein. In the event that an adjustment in the number of Rights per
share of Common Stock has been made pursuant to Section 11(a)(i) hereof, at the
time of distribution of the Rights Certificates, the Company shall make the
necessary and appropriate rounding adjustments (in accordance with Section 14(a)
hereof) so that Rights Certificates representing only whole numbers of Rights
are distributed and cash is paid in lieu of any fractional rights. As of and
after the Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.
(b) As promptly as practicable following the Record Date, the Company
will send a copy of a Summary of Rights, in substantially the form attached
hereto as Exhibit C, by first-class, postage prepaid mail, to each record holder
---------
of the Common Stock as of the Close of Business on the Record Date, at the
address of such holder shown on the records of the Company. With respect to
certificates for the Common Stock outstanding as of the Record Date, until the
Distribution Date, the Rights will be evidenced by such certificates for the
Common Stock and the registered holders of the Common Stock shall also be the
registered holders of the associated Rights. Until the earlier of the
Distribution Date or the Expiration Date (as such term is defined in Section 7
hereof), the transfer of any certificates representing shares of Common Stock in
respect of which Rights have been issued shall also constitute the transfer of
the Rights associated with such shares of Common Stock.
(c) Rights shall be issued in respect of all shares of Common Stock
that are issued (whether originally issued or from the Company's treasury) after
the Record Date but prior to the earlier of the Distribution Date or the
Expiration Date. Rights shall also be issued to the extent provided in Section
22 in respect of all shares of Common Stock which are issued (whether originally
issued or from the Company's treasury) after the Distribution Date and prior to
the Expiration Date. Certificates representing such shares of Common Stock in
respect of which Rights are issued pursuant to the first sentence of this
Section 3(c) shall also be deemed to be certificates for Rights, and commencing
as soon as reasonably practicable following the date hereof shall bear the
following legend:
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in the Rights Agreement between PerSeptive
Biosystems, Inc. (the "Company") and American Stock Transfer & Trust
Company (the "Rights Agent") dated as of March 1, 1995 (the "Rights
Agreement"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal offices of the
Company. Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate. The Company will mail
to the holder of this certificate a copy of the Rights Agreement, as in
effect on the date of mailing, without charge promptly after receipt of a
written request therefor. Under certain circumstances set forth in the
Rights Agreement, Rights issued to, or held by, any Person who is, was or
becomes an Acquiring Person, an Adverse Person or any Affiliate or
Associate of an Acquiring Person or an Adverse Person (as such terms are
defined in the
<PAGE>
Rights Agreement), whether currently held by or on behalf of such Person
or by any subsequent holder, may become null and void. The Rights shall
not be exercisable, and shall be void so long as held, by a holder in any
jurisdiction where the requisite qualification to the issuance to such
holder, or the exercise by such holder, of the Rights in such
jurisdiction shall not have been obtained or obtainable.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
Section 4. Form of Rights Certificates.
---------------------------
(a) The Rights Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit B hereto and may have such marks
---------
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange or trading market on which the Rights
may from time to time be listed, or to conform to usage. Subject to the
provisions of Section 11 and Section 22 hereof, the Rights Certificates,
whenever distributed, shall be dated as of the Record Date and on their face
shall entitle the holders thereof to purchase such number of one one-hundredths
of a share of Preferred Stock as shall be set forth therein at the price per
share set forth therein (such exercise price per one one-hundredth of a share
hereinafter referred to as the "Purchase Price"), but the amount and type of
--------------
securities purchasable upon the exercise of each Right and the Purchase Price
thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section
22 hereof that represents Rights beneficially owned by: (i) an Acquiring
Person, an Adverse Person or any Associate or Affiliate of an Acquiring Person
or an Adverse Person, (ii) a transferee of an Acquiring Person or an Adverse
Person (or of any such Associate or Affiliate of an Acquiring Person or an
Adverse Person) who becomes a transferee after the Acquiring Person or Adverse
Person becomes such, or (iii) a transferee of an Acquiring Person or an Adverse
Person (or of any such Associate or Affiliate of an Acquiring Person or an
Adverse Person) who becomes a transferee prior to or concurrently with the
Acquiring Person or the Adverse Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person or the Adverse Person to holders of equity interests in such
Acquiring Person or Adverse Person or to any Person with whom such Acquiring
Person or Adverse Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which a
majority of the Continuing Directors has determined is part of a plan,
arrangement or understanding that has as a primary purpose or effect avoidance
of Section 7(e) hereof, and any Rights Certificate issued pursuant to Section 6
or Section 11 hereof upon transfer, exchange, replacement or adjustment of any
other Rights Certificate referred to in this sentence, shall contain (to the
extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially
<PAGE>
owned by a Person who was or became an Acquiring Person, Adverse Person,
or an Affiliate or Associate of an Acquiring Person or Adverse Person (as
such terms are defined in the Rights Agreement). Accordingly, this Rights
Certificate and the Rights represented hereby may become null and void in
the circumstances specified in Section 7(e) of such Agreement.
Section 5. Countersignature and Registration
---------------------------------
(a) The Rights Certificates shall be executed on behalf of the Company
by its President or any Vice President, either manually or by facsimile
signature, and shall have affixed thereto the Company's seal or a facsimile
thereof which shall be attested by the Secretary or an Assistant Secretary of
the Company, either manually or by facsimile signature. The Rights Certificates
shall be manually countersigned by the Rights Agent and shall not be valid for
any purpose unless so countersigned. In case any officer of the Company who
shall have signed any of the Rights Certificates shall cease to be such officer
of the Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Rights Certificates, nevertheless, may be
countersigned by the Rights Agent and issued and delivered by the Company with
the same force and effect as though the person who signed such Rights
Certificates had not ceased to be such officer of the Company; and any Rights
Certificates may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Rights Certificate, shall be a proper
officer of the Company to sign such Rights Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates, the Rights Certificate number and the date
of each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
------------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
- ----------------------------------------------------------------------
(a) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 hereof, at any time after the Close of Business on the Distribution
Date, and at or prior to the Close of Business on the Expiration Date, any
Rights Certificate or Certificates may be transferred, split up, combined or
exchanged for another Rights Certificate or Certificates, entitling the
registered holder to purchase a like number of one one-hundredths of a share of
Preferred Stock (or, following a Triggering Event, Common Stock, other
securities, cash or other assets, as the case may be) as the Rights Certificate
or Certificates surrendered then entitled such holder (or former holder in the
case of a transfer) to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Rights Certificate or Certificates shall make
such request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Certificates to be transferred, split up, combined or
exchanged at the office of the Rights Agent designated for such purpose.
Neither the Rights Agent nor the Company shall be obligated to take any action
whatsoever with respect to the transfer of any such surrendered Rights
Certificate or Certificates until the registered holder shall have completed and
signed the certificate contained in the form of assignment set forth on the
reverse side of each such Rights Certificate and shall have provided such
additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request. Thereupon
<PAGE>
the Rights Agent shall, subject to Section 4(b), Section 7(e) and Section 14
hereof, countersign and deliver to the Person entitled thereto a Rights
Certificate or Certificates, as the case may be, as so requested. The Company
may require payment of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
------------------------------------------------------
Rights.
- ------
(a) Subject to Section 7(e) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions set
forth in Section 9(c), Section 11(a)(iii) and Section 23(a) hereof) in whole or
in part at any time after the Distribution Date upon surrender of the Rights
Certificate, with the form of election to purchase set forth on the reverse side
thereof and the certificate contained therein completed and duly executed, to
the Rights Agent at the office of the Rights Agent designated for such purpose,
together with payment of the aggregate Purchase Price with respect to the total
number of one one-hundredths of a share of Preferred Stock (or other securities,
cash or other assets, as the case may be) as to which such surrendered Rights
are then exercisable, at or prior to the earlier of (i) the Final Expiration
Date, (ii) the time at which the Rights are redeemed as provided in Section 23
hereof, (iii) the time at which the Rights expire pursuant to Section 13(d)
hereof or (iv) the time at which such Rights are exchanged as provided in
Section 24 hereof (the earliest of (i), (ii), (iii) or (iv) being herein
referred to as the "Expiration Date").
---------------
(b) The Purchase Price for each one one-hundredth of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be the
Initial Exercise Price, and shall be subject to adjustment from time to time as
provided in Sections 11 and 13(a) hereof and shall be payable in accordance with
paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase set forth on the reverse side
thereof and the certificate contained therein completed and duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per one one-hundredth of a share of Preferred Stock (or other securities,
cash or other assets, as the case may be) to be purchased as set forth below and
an amount equal to any applicable transfer tax, the Rights Agent shall, subject
to Section 20(k) hereof, promptly (i) requisition from any
transfer agent of the shares of Preferred Stock (or make available, if the
Rights Agent is the transfer agent for such shares) certificates for the total
number of one one-hundredths of a share of Preferred Stock to be purchased and
the Company hereby irrevocably authorizes its transfer agent to comply with all
such requests, (ii) requisition from the Company the amount of cash, if any, to
be paid in lieu of fractional shares in accordance with Section 14 hereof, (iii)
after receipt of such certificates, cause the same to be delivered to or upon
the order of the registered holder of such Rights Certificate, registered in
such name or names as
<PAGE>
may be designated by such holder, and (iv) after receipt thereof, deliver such
cash, if any, to or upon the order of the registered holder of such Rights
Certificate. The payment of the Purchase Price (as such amount may be reduced
pursuant to Section 11(a)(iii) hereof) shall be made in cash or by certified
check, cashier's check or bank draft payable to the order of the Company. In the
event that the Company is obligated to issue other securities (including Common
Stock) of the Company, pay cash or distribute other property pursuant to Section
11(a) hereof, the Company will make all arrangements necessary so that such
other securities, cash or other property are available for distribution by the
Rights Agent, if and when appropriate. The Company reserves the right to require
prior to the occurrence of a Triggering Event that, upon any exercise of Rights,
such number of Rights be exercised so that only whole shares of Common Stock
would be issued.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing the Rights equivalent to the Rights remaining unexercised shall be
issued by the Rights Agent and delivered to, or upon the order of, the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, subject to the provisions of Section 14
hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of an event described in Section 11(a)(ii)(A) or
(C) and from and after the Close of Business on the tenth day after the
occurrence of an event described in Section 11(a)(ii)(B) or (D), any Rights
beneficially owned by (i) an Acquiring Person, an Adverse Person or an Associate
or Affiliate of an Acquiring Person or Adverse Person, which a majority of the
Continuing Directors, in their sole discretion, determines is or was involved in
or caused or facilitated, directly or indirectly (including through any change
in the Board), such Section 11(a)(ii) Event, (ii) a transferee of any such
Acquiring Person or Adverse Person (or of any such Associate or Affiliate of an
Acquiring Person or an Adverse Person) who becomes a transferee after such
Acquiring Person or Adverse Person becomes such, or (iii) a transferee of any
such Acquiring Person or Adverse Person (or of any such Associate or Affiliate
of an Acquiring Person or an Adverse Person) who becomes a transferee prior to
or concurrently with such Acquiring Person or Adverse Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from such Acquiring Person or Adverse Person to holders of equity
interests in such Acquiring Person or Adverse Person or to any Person with whom
such Acquiring Person or Adverse Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which a majority of the Continuing Directors has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e), shall become null and void without any further
action and no holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to ensure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Rights Certificates or other Person as
a result of its failure to make any determinations with respect to an Acquiring
Person or Adverse Person or any of their Affiliates, Associates or transferees
hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably
<PAGE>
request.
Section 8. Cancellation and Destruction of Rights Certificates.
---------------------------------------------------
All Rights Certificates surrendered for the purpose of exercise, transfer,
split up, combination or exchange shall, if surrendered to the Company or any of
its agents, be delivered to the Rights Agent for cancellation or in canceled
form, or, if surrendered to the Rights Agent, shall be canceled by it, and no
Rights Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Agreement. The Company shall deliver
to the Rights Agent for cancellation and retirement, and the Rights Agent shall
so cancel and retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all canceled Rights Certificates to the Company, or shall, at the
written request of the Company, destroy such canceled Rights Certificates, and
in such case shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock.
---------------------------------------------
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock (and, following the occurrence of a Triggering Event, out of its
authorized and unissued shares of Common Stock or other securities or out of its
authorized and issued shares held in its treasury), the number of shares of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock or other securities) that, as provided in this Agreement including Section
11(a)(iii) hereof, will be sufficient to permit the exercise in full of all
outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock or other securities) issuable and
deliverable upon the exercise of the Rights may be listed on any national
securities exchange, the Company shall use its best efforts to cause all shares
reserved for such issuance to be listed on such exchange upon official notice of
issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon
as practicable following the earliest date after the first occurrence of a
Triggering Event in which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with this Agreement, a
registration statement under the Act, with respect to the Common Stock or other
securities purchasable upon exercise of the Rights on an appropriate form, (ii)
cause such registration statement to become effective as soon as practicable
after such filing, and (iii) cause such registration statement to remain
effective (with a prospectus at all times meeting the requirements of the Act)
until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities, and (B) the Expiration Date. The Company will
also take such action as may be appropriate under, or to ensure compliance with,
the securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a period
of time not to exceed ninety (90) days after the date set forth in clause (i) of
the first sentence of this Section 9(c), the exercisability of the Rights in
order to prepare and file such registration statement and permit it to become
effective. In addition, if the Company shall determine that a registration
statement is required following the Distribution Date, the Company may
temporarily suspend the exercisability of the Rights until such time as a
registration statement has been declared effective. Upon any suspension of the
exercisability of the Rights referred to in this Section 9(c), the Company shall
issue a public announcement stating that the exercisability of the Rights has
been temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. Notwithstanding any
<PAGE>
provision of this Agreement to the contrary, the Rights shall not be exercisable
and shall be void so long as held by a holder in any jurisdiction where the
requisite qualification to the issuance to such holder, or the exercise by such
holder, of the Rights in such jurisdiction shall not have been obtained or be
obtainable, the exercise thereof shall not be permitted under applicable law or
a registration statement shall not have been declared effective.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all one one-hundredths of a share of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock or other securities) delivered upon exercise of Rights shall, at the time
of delivery of the certificates for such shares (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
nonassessable.
(e) The Company further covenants and agrees that it will pay
when due and payable any and all federal and state transfer taxes and charges
that may be payable in respect of the issuance or delivery of the Rights
Certificates and of any certificates for a number of one one-hundredths of a
share of Preferred Stock (or Common Stock or other securities, as the case may
be) upon the exercise of Rights. The Company shall not, however, be required to
pay any transfer tax that may be payable in respect of any transfer or delivery
of Rights Certificates to a Person other than, or the issuance or delivery of a
number of one one-hundredths of a share of Preferred Stock (or Common Stock or
other securities, as the case may be) in respect of a name other than that of,
the registered holder of the Rights Certificates evidencing Rights surrendered
for exercise or to issue or deliver any certificates for a number of one one-
hundredths of a share of Preferred Stock (or Common Stock or other securities,
as the case may be) in a name other than that of the registered holder upon the
exercise of any Rights until such tax shall have been paid (any such tax being
payable by the holder of such Rights Certificates at the time of surrender) or
until it has been established to the Company's satisfaction that no such tax is
due.
Section 10. Preferred Stock Record Date. Each Person in whose name
---------------------------
any certificate for a number of one one-hundredths of a share of Preferred Stock
(or Common Stock or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such Preferred Stock (or Common Stock or other securities, as the case
may be) represented thereby on, and such certificate shall be dated, the date
upon which the Rights Certificate evidencing such Rights was duly surrendered
and payment of the Purchase Price (and all applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a
- -------- -------
date upon which the Preferred Stock (or Common Stock or other securities, as the
case may be) transfer books of the Company are closed, such Person shall be
deemed to have become the record holder of such shares on, and such certificate
shall be dated, the next succeeding Business Day on which the Preferred Stock
(or other securities, as the case may be) transfer books of the Company are
open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
-------------------------------------------------------
or Number of Rights. The Purchase Price, the number and kind of shares covered
- -------------------
by each Right and the number of Rights outstanding are subject to adjustment
from time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the date
of this
<PAGE>
Agreement (A) declare a dividend on the Preferred Stock payable in shares of
Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C) combine the
outstanding Preferred Stock into a smaller number of shares, or (D) issue any
shares of its capital stock in a reclassification of the Preferred Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification, and the
number and kind of shares of Preferred Stock or capital stock, as the case may
be, issuable on such date, shall be proportionately adjusted so that if a holder
of Rights after such time were to exercise that number of Rights (or fraction
thereof) which would result in the aggregate amount of the Purchase Price
payable upon such exercise (at the Purchase Price then in effect) being equal to
the amount of the Purchase Price payable prior to such time upon exercise of a
Right, he would be entitled to receive the aggregate number and kind of shares
of Preferred Stock or other capital stock, as the case may be, which, if a Right
had been exercised immediately prior to such time and at a time when the
Preferred Stock transfer books (or other capital stock transfer books, as the
case may be) of the Company were open, he would have owned upon such exercise
and been entitled to receive by virtue of such dividend, subdivision,
combination or reclassification. If an event occurs that would require an
adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the
adjustment provided for in this Section 11(a)(i) shall be in addition to, and
shall be made prior to, any adjustment required pursuant to Section 11(a)(ii)
hereof.
(ii) In the event:
(A) any Acquiring Person or any Associate or Affiliate of
any Acquiring Person, at any time after the date of this Agreement, directly or
indirectly, (1) shall merge into the Company or otherwise combine with the
Company and the Company shall be the continuing or surviving corporation of such
merger or combination and the Common Stock of the Company shall remain
outstanding and unchanged, (2) shall merge or otherwise combine with any
Subsidiary of the Company, (3) shall, in one transaction or a series of
transactions, transfer any assets to the Company or to any of its Subsidiaries
in exchange (in whole or in part) for shares of Common Stock, for shares of
other equity securities of the Company or any Subsidiary of the Company, or for
securities exercisable for or convertible into shares of equity securities of
the Company or any Subsidiary of the Company (Common Stock or otherwise) or
otherwise obtain from the Company, with or without consideration, any additional
shares of equity securities of the Company or securities exercisable for or
convertible into shares of such equity securities of the Company (other than
pursuant to a pro rata distribution to all holders of Common Stock or upon the
exercise of a convertible security of the Company or any Subsidiary of the
Company in accordance with its terms), (4) shall sell, purchase, lease,
exchange, mortgage, pledge, transfer or otherwise acquire or dispose of, in one
transaction or a series of transactions, to, from or with (as the case may be)
the Company or any of its Subsidiaries, assets on terms and conditions less
favorable to the Company than the Company would be able to obtain in arm's
length negotiations with an unaffiliated third party, other than pursuant to a
transaction set forth in Section 13(a) hereof, (5) shall sell, purchase, lease,
exchange, mortgage, pledge, transfer or otherwise acquire or dispose of in one
transaction or a series of transactions, to, from or with (as the case may be)
the Company or any of its Subsidiaries assets having an aggregate fair market
value of more than $1,000,000, other than pursuant to a transaction set forth in
Section 13(a) hereof and other than pursuant to a transaction or series of
transactions that have been approved by a majority of the Continuing Directors,
(6) shall receive any compensation from the Company or any of the Company's
Subsidiaries other than compensation for full-time employment as a regular
employee at rates in accordance with the Company's (or its Subsidiaries') past
practices, or (7) shall receive the benefit, directly or
<PAGE>
indirectly (except proportionately as a stockholder and except if resulting from
a requirement of law or governmental regulation), of any loans, advances,
guarantees, pledges or other financial assistance or any tax credits or other
tax advantages provided by the Company or any of its Subsidiaries, or
(B) any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or of any Subsidiary of the Company, or
any Person or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan), alone or together with any Affiliates
and Associates of such Person, shall, at any time after the Rights Dividend
Declaration Date, become the Beneficial Owner of 15% or more of the shares of
Common Stock then outstanding, unless (1) the event causing the 15% threshold to
be crossed is a transaction set forth in Section 13(a) hereof, (2) is an
acquisition of shares of Common Stock pursuant to a tender offer or an exchange
offer for all outstanding shares of Common Stock at a price and on terms
determined by a majority of the Independent Directors, after receiving advice
from one or more investment banking firms, to be (a) at a price that is fair to
stockholders (taking into account all factors which such members of the Board
deem relevant including, without limitation, prices which could reasonably be
achieved if the Company or its assets were sold on an orderly basis designed to
realize maximum value) and (b) otherwise in the best interest of the Company and
its stockholders or (3) the event causing the 15% threshold to be crossed is a
transaction involving the issuance of Common Stock to a Person who is has been a
holder of shares of the Company's Series A Redeemable Convertible Preferred
Stock, $.01 par value per share, (the "Series A Preferred Stock") since a date
prior to the date of this Agreement upon the redemption, conversion, exchange or
cancellation of such shares of Series A Preferred Stock, or
(C) during such time as there is an Acquiring Person, there shall be
any reclassification of securities (including any reverse stock split), or
recapitalization of the Company, or any merger or consolidation of the Company
with any of its Subsidiaries or any other transaction or series of transactions
involving the Company or any of its Subsidiaries (whether or not with or into or
otherwise involving an Acquiring Person), other than a transaction or
transactions to which the provisions of Section 13(a) hereof apply (whether or
not with or into or otherwise involving an Acquiring Person), which has the
effect, directly or indirectly, of increasing by more than 1% the proportionate
share of the outstanding shares of any class of equity securities of the Company
or any of its Subsidiaries which is directly or indirectly beneficially owned by
any Acquiring Person or any Associate or Affiliate of any Acquiring Person, or
(D) a majority of the Continuing Directors shall declare any Person to
be an Adverse Person, upon a determination that such Person, alone or together
with its Affiliates and Associates, has, at any time after the Rights Dividend
Declaration Date, become the Beneficial Owner of an amount of Common Stock which
a majority of Continuing Directors determine to be substantial (which amount
shall in no event be less than 15% of the shares of Common Stock then
outstanding) and a majority of the Continuing Directors determines (with the
concurrence of a majority of the Independent Directors), after reasonable
inquiry and investigation, which may include a review of the public record
regarding such Person and any information such directors may request from such
Person and consultation with such persons as such directors shall deem
appropriate, that (1) such Beneficial Ownership by such Person is intended to
cause the Company to repurchase the Common Stock beneficially owned by such
Person or to cause pressure on the Company to take action or enter into a
transaction or series of transactions intended to provide such Person with
short-term financial gain under circumstances where such directors determine
that the best long-term interests of the Company and its stockholders would
<PAGE>
not be served by taking such action or entering into such transactions or series
of transactions at that time or (2) such Beneficial Ownership is causing or is
reasonably likely to cause a material adverse impact (including, but not limited
to, impairment of relationships with customers, impairment of the Company's
ability to maintain its competitive position or impairment of the Company's
business reputation or ability to deal with government agencies) on the business
or prospects of the Company, then, immediately upon the occurrence of any event
described in Section 11(a)(ii)(A) or (C) hereof, and upon the Close of Business
ten (10) days after the occurrence of any event described in Section
11(a)(ii)(B) or (D) hereof, proper provision shall be made so that each holder
of a Right (except as provided below and in Section 7(e) hereof) shall
thereafter have the right to receive, upon exercise thereof at the then current
Purchase Price in accordance with the terms of this Agreement, in lieu of a
number of one one-hundredths of a share of Preferred Stock, such number of
shares of Common Stock of the Company as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the then number of one one-
hundredths of a share of Preferred Stock for which a Right was or would have
been exercisable immediately prior to the first occurrence of a Section
11(a)(ii) Event, whether or not such Right was then exercisable, and (y)
dividing that product (which, following such first occurrence, shall thereafter
be referred to as the "Purchase Price" for each Right and for all purposes of
--------------
this Agreement) by 50% of the Current Market Price per share of Common Stock
(determined pursuant to Section 11(d) hereof) on the date of such first
occurrence (such number of shares being referred to herein as the "Adjustment
----------
Shares").
- ------
(iii) In the event that the number of shares of Common Stock which
are authorized by the Company's Amended and Restated Certificate of
Incorporation, as amended, but not outstanding or reserved for issuance for
purposes other than upon exercise of the Rights are not sufficient to permit the
exercise in full of the Rights in accordance with the foregoing subparagraph
(ii) of this Section 11(a), the Company shall (A) determine the value of the
Adjustment Shares issuable upon the exercise of a Right (the "Current Value"),
-------------
and (B) with respect to each Right (subject to Section 7(e) hereof), make
adequate provision to substitute, upon the exercise of a Right and payment of
the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price,
(3) Common Stock or other equity securities of the Company (including, without
limitation, shares, or units of shares, of preferred stock which the Board has
deemed to have the same value as shares of Common Stock (such shares of
preferred stock being referred to herein as "Common Stock Equivalents")), (4)
------------------------
debt securities of the Company, (5) other assets, or (6) any combination of the
foregoing, having an aggregate value equal to the Current Value, as adjusted
(less the amount of any reduction in the Purchase Price), where such aggregate
value has been determined by the Board based upon the advice of a nationally
recognized investment banking firm selected by the Board; provided, however, if
-------- -------
the Company shall not have made adequate provision to deliver value pursuant to
clause (B) above within thirty (30) days following the later of (x) the first
occurrence of a Section 11(a)(ii) Event and (y) the first date on which the
Company's right of redemption pursuant to Section 23(a) expires (the later of
(x) and (y) being referred to herein as the "Section 11(a)(ii) Trigger Date"),
------------------------------
then the Company shall be obligated to deliver, upon the surrender for exercise
of a Right and without requiring payment of the Purchase Price, shares of Common
Stock (to the extent available) and then, if necessary, cash, which shares or
cash have an aggregate value equal to the Spread. For purposes of the preceding
sentence, the term "Spread" shall mean the excess of (i) the Current Value over
------
(ii) the Purchase Price. If the number of shares of Common Stock that are
authorized by the Company's Amended and Restated Certificate of Incorporation,
as amended, but not outstanding or reserved for issuance for purposes other than
upon exercise of the Rights are not sufficient to permit the exercise in full of
any Rights and the Board with the consent of a majority of the Continuing
Directors determines in good faith that it is likely that sufficient
<PAGE>
additional shares of Common Stock could be authorized for issuance upon exercise
in full of the Rights, the thirty (30) day period set forth above may be
extended to the extent necessary, but not more than ninety (90) days after the
Section 11(a)(ii) Trigger Date, in order that the Company may seek stockholder
approval for the authorization of such additional shares (such thirty (30) day
period, as it may be extended, shall be referred to as the "Substitution
------------
Period"). To the extent that the Company determines that some action need
- ------
be taken pursuant to the preceding provisions of this Section 11(a)(iii), the
Company (x) shall provide, subject to Section 7(e) hereof, that such action
shall apply uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights until the expiration of the Substitution Period in
order to seek any authorization of additional shares or to decide the
appropriate form of distribution to be made pursuant to such provisions and to
determine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of the Rights
has been temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect. For purposes of this Section 11(a)(iii),
the value of each Adjustment Share shall be the Current Market Price per share
of the Common Stock (as determined pursuant to Section 11(d) hereof) on the
Section 11(a)(ii) Trigger Date and the per share or per unit value of any Common
Stock Equivalent shall be deemed to equal the Current Market Price per share of
the Common Stock on such date.
(b) In case the Company shall fix a record date for the issuance of
rights (other than the Rights), options or warrants to all holders of Preferred
Stock entitling them to subscribe for or purchase (for a period expiring within
forty-five (45) calendar days after such record date) Preferred Stock, shares
having the same rights, privileges and preferences as the shares of Preferred
Stock ("Equivalent Preferred Stock") or securities convertible into Preferred
--------------------------
Stock or Equivalent Preferred Stock at a price per share of Preferred Stock or
per share of Equivalent Preferred Stock (or having a conversion price per share,
if a security convertible into Preferred Stock or Equivalent Preferred Stock)
less than the Current Market Price per share of Preferred Stock (as determined
pursuant to Section 11(d) hereof) on such record date, the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Preferred Stock outstanding
on such record date, plus the number of shares of Preferred Stock which the
aggregate offering price of the total number of shares of Preferred Stock or
Equivalent Preferred Stock (or the aggregate initial conversion price of the
convertible securities so to be offered) would purchase at such Current Market
Price, and the denominator of which shall be the number of shares of Preferred
Stock outstanding on such record date, plus the number of additional shares of
Preferred Stock or Equivalent Preferred Stock to be offered for subscription or
purchase (or into which the convertible securities so to be offered are
initially convertible). In case such subscription price may be paid by delivery
of consideration part or all of which may be in a form other than cash, the
value of such noncash consideration shall be as determined in good faith by the
Board, whose determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent and the holders of the
Rights. Shares of Preferred Stock owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any such computation.
Such adjustment shall be made successively whenever such a record date is fixed,
and in the event that such rights, options or warrants are not so issued, the
Purchase Price shall be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution to
all holders of Preferred Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation) of evidences of
<PAGE>
indebtedness, cash (other than a regular quarterly or other periodic cash
dividend out of the earnings or retained earnings of the Company), assets (other
than a dividend payable in Preferred Stock, but including any dividend payable
in stock other than Preferred Stock) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the Current Market Price per share of Preferred
Stock (as determined pursuant to Section 11(d) hereof) on such record date, less
the fair market value (as determined in good faith by the Board whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent) of the portion of the cash, assets or
evidences of indebtedness so to be distributed or of such subscription rights or
warrants applicable to a share of Preferred Stock and the denominator of which
shall be such Current Market Price per share of Preferred Stock (as determined
pursuant to Section 11(d) hereof). Such adjustments shall be made successively
whenever such a record date is fixed, and in the event that such distribution is
not so made, the Purchase Price shall be adjusted to be the Purchase Price which
would have been in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the Current Market
Price per share of Common Stock on any date shall be deemed to be the average of
the daily closing prices per share of such Common Stock for the thirty (30)
consecutive Trading Days immediately prior to such date, and for the purposes of
computations made pursuant to Section 11(a)(iii) hereof, the Current Market
Price per share of Common Stock on any date shall be deemed to be the average of
the daily closing prices per share of such Common Stock for the ten (10)
consecutive Trading Days immediately following such date; provided, however,
-------- -------
that in the event that the Current Market Price per share of the Common Stock is
determined during a period following the announcement by the issuer of such
Common Stock of (A) any dividend or distribution on such Common Stock payable in
shares of such Common Stock or securities convertible into shares of such Common
Stock (other than Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and prior to the expiration of the
requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth
above, after the ex-dividend date for such dividend or distribution, or the
record date for such subdivision, combination or reclassification, then, and in
each such case, the Current Market Price shall be properly adjusted to take into
account ex-dividend trading. The closing price for each day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
shares of Common Stock are listed or admitted to trading or, if the shares of
Common Stock are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by Nasdaq
or such other system then in use, or, if on any such date the shares of Common
Stock are not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a market in
the Common Stock selected by the Board. If on any such date no market maker is
making a market in the Common Stock, the fair value of such shares on such date
as determined in good faith by the Board shall be used. The term "Trading Day"
-----------
shall mean a day on which the principal national securities exchange on which
the shares of Common Stock are listed or admitted to trading is open for the
transaction of business or, if the shares of Common Stock are not listed or
admitted to trading on any national securities exchange, a Business Day. If the
Common Stock is not publicly held or not so listed or traded, Current Market
Price per share shall mean the fair value per share as determined in good faith
by the Board whose determination
<PAGE>
shall be described in a statement filed with the Rights Agent and shall be
conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the Current
Market Price per share of Preferred Stock shall be determined in the same manner
as set forth above for the Common Stock in clause (i) of this Section 11(d)
(other than the last sentence thereof). If the Current Market Price per share of
Preferred Stock cannot be determined in the manner provided above or if the
Preferred Stock is not publicly held or listed or traded in a manner described
in clause (i) of this Section 11(d), the Current Market Price per share of
Preferred Stock shall be conclusively deemed to be an amount equal to 100 (as
such number may be appropriately adjusted for such events as stock splits, stock
dividends and recapitalizations with respect to the Common Stock occurring after
the date of this Agreement) multiplied by the Current Market Price per share of
the Common Stock. If neither the Common Stock nor the Preferred Stock is
publicly held or so listed or traded, Current Market Price per share of the
Preferred Stock shall mean the fair value per share as determined in good faith
by the Board, whose determination shall be described in a statement filed with
the Rights Agent and shall be conclusive for all purposes. For all purposes of
this Agreement, the Current Market Price of one one-hundredth of a share of
Preferred Stock shall be equal to the Current Market Price of one share of
Preferred Stock divided by 100.
(iii) For the purpose of any computation hereunder, the value of
any securities or assets other than Common Stock or Preferred Stock shall be the
fair value as determined in good faith by the Board, or, if at the time of such
determination there is an Acquiring Person, by a majority of the Continuing
Directors then in office, or, if there are no Continuing Directors, by a
nationally recognized investment banking firm selected by the Board, which
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the Purchase Price;
provided, however, that any adjustments which by reason of this Section 11(e)
- -------- -------
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest ten-thousandth of a share of Common Stock
or other share or one-millionth of a share of Preferred Stock, as the case may
be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction which mandates such adjustment, or
(ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii)
or Section 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock other than Preferred
Stock, thereafter the number of such other shares so receivable upon exercise of
any Right and the Purchase Price thereof shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Stock contained in Sections 11(a), (b),
(c), (e), (g), (h), (i), (j), (k) and (m) hereof, and the provisions of Sections
7, 9, 10, 13 and 14 hereof with respect to the Preferred Stock shall apply on
like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
share of Preferred Stock
<PAGE>
purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i) hereof, upon each adjustment of the Purchase Price as a result
of the calculations made in Sections 11(b) and (c) hereof, each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-hundredths of a share of Preferred Stock obtained by (i) multiplying (x)
the number of one one-hundredths of a share covered by a Right immediately prior
to this adjustment, by (y) the Purchase Price in effect immediately prior to
such adjustment of the Purchase Price, and (ii) dividing the product so obtained
by the Purchase Price in effect immediately after such adjustment of the
Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in lieu of any adjustment in
the number of shares of Preferred Stock purchasable upon the exercise of a
Right. Each of the Rights outstanding after the adjustment in the number of
Rights shall be exercisable for the number of one one-hundredths of a share of
Preferred Stock for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest one-ten-
thousandth) obtained by dividing the Purchase Price in effect immediately prior
to adjustment of the Purchase Price by the Purchase Price in effect immediately
after adjustment of the Purchase Price. The Company shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Rights Certificates have
been issued, shall be at least ten (10) days later than the date of the public
announcement. If Rights Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Rights Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company, the adjusted Purchase Price) and shall be registered in the
names of the holders of record of Rights Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-hundredths of a share of Preferred Stock issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per share and the number of
shares which were expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value of the shares of Common Stock
issuable upon exercise of the Rights, the Company shall take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable such number
of one one-hundredths of a share of Preferred Stock at such adjusted Purchase
Price.
<PAGE>
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of one one-hundredths of a share of Preferred Stock and other capital
stock or securities of the Company, if any, issuable upon such exercise over and
above the number of one one-hundredths of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
--------
however, that the Company shall deliver to such holder a due bill or other
- -------
appropriate instrument evidencing such holder's right to receive such additional
shares or securities upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board shall determine to be
advisable in order that any (i) consolidation or subdivision of the Preferred
Stock, (ii) issuance wholly for cash of any shares of Preferred Stock at less
than the Current Market Price, (iii) issuance wholly for cash of shares of
Preferred Stock or securities which by their terms are convertible into or
exchangeable for shares of Preferred Stock, (iv) stock dividends, or (v)
issuance of rights, options or warrants referred to in this Section 11,
hereafter made by the Company to holders of its Preferred Stock shall not be
taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction that complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), if (x) at the time of or immediately after
such consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect that would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger or sale, the stockholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
---------------
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 27 hereof, take
(or permit any Subsidiary to take) any action if at the time such action is
taken it is reasonably foreseeable that such action will diminish substantially
or otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the Rights Dividend Declaration
Date and prior to the Distribution Date (i) declare a dividend on the
outstanding shares of Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding shares of Common Stock, or (iii) combine the
outstanding shares of Common Stock into a smaller number of shares, the number
of Rights associated with each share of Common Stock then outstanding, or issued
or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights
<PAGE>
thereafter associated with each share of Common Stock following any such event
shall equal the result obtained by multiplying the number of Rights associated
with each share of Common Stock immediately prior to such event by a fraction
the numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to the occurrence of the event and the denominator
of which shall be the total number of shares of Common Stock outstanding
immediately following the occurrence of such event.
(q) The failure by the Continuing Directors to declare (or the
Independent Directors to concur therewith) a Person to be an Adverse Person
following such Person becoming the Beneficial Owner of 15% or more of the
outstanding Common Stock shall not imply that such Person is not an Adverse
Person or limit such directors' right at any time in the future to declare such
Person to be an Adverse Person.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
----------------------------------------------------------
Whenever an adjustment is made as provided in Section 11 and Section 13
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Common Stock, a copy of such certificate, and (c) mail a
brief summary thereof to each holder of a Rights Certificate (or, if prior to
the Distribution Date, to each holder of a certificate representing shares of
Common Stock) in accordance with Section 26 hereof. The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment therein
contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
------------------------------------------------------
Earning Power.
- -------------
(a) In the event that, following the Stock Acquisition Date, directly
or indirectly, (x) the Company shall consolidate with, or merge with and into,
any other Person (other than a Subsidiary of the Company in a transaction that
complies with Section 11(o) hereof), and the Company shall not be the continuing
or surviving corporation of such consolidation or merger, (y) any Person (other
than a Subsidiary of the Company in a transaction that complies with Section
11(o) hereof) shall consolidate with, or merge with or into, the Company, and
the Company shall be the continuing or surviving corporation of such
consolidation or merger and, in connection with such consolidation or merger,
all or part of the outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or cash or any other
property, or (z) the Company shall sell or otherwise transfer (or one or more of
its Subsidiaries shall sell or otherwise transfer), in one transaction or a
series of related transactions, assets or earning power aggregating more than
50% of the assets or earning power of the Company and its Subsidiaries (taken as
a whole) to any Person or Persons (other than the Company or any Subsidiary of
the Company in one or more transactions each of which complies with Section
11(o) hereof), then, and in each such case and except as contemplated in Section
13(d) hereof, proper provision shall be made so that: (i) each holder of a
Right, except as provided in Section 7(e) hereof, shall thereafter have the
right to receive, upon the exercise thereof at the then current Purchase Price
in accordance with the terms of this Agreement, such number of validly
authorized and issued, fully paid, nonassessable and freely tradeable shares of
Common Stock of the Principal Party (as such term is hereinafter defined), not
subject to any liens, encumbrances, rights of first refusal or other adverse
claims, as shall be equal to the result obtained by (1) multiplying the then
current Purchase Price by the number of one one-hundredths of a share of
Preferred Stock for which a Right was exercisable immediately prior to the first
occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred
prior to the first occurrence of a Section 13 Event, multiplying the number of
such one one-hundredths of a share for which a Right was exercisable
<PAGE>
immediately prior to the first occurrence of a Section 11(a)(ii) Event by the
Purchase Price in effect immediately prior to such first occurrence), and
dividing that product (which, following the first occurrence of a Section 13
Event, shall be referred to as the "Purchase Price" for each Right and for all
--------------
purposes of this Agreement) by (2) 50% of the Current Market Price (determined
pursuant to Section 11(d)(i) hereof) per share of the Common Stock of such
Principal Party on the date of consummation of such Section 13 Event; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such Section 13 Event, all the obligations and duties of the Company pursuant to
this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to
-------
such Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal Party following the first
occurrence of a Section 13 Event; (iv) such Principal Party shall take such
steps (including, but not limited to, the reservation of a sufficient number of
shares of its Common Stock) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
shares of Common Stock thereafter deliverable upon the exercise of the Rights;
and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect
following the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean
---------------
(i) in the case of any transaction described in clause
(x) or (y) of the first sentence of Section 13(a) hereof, the
Person that is the issuer of any securities into which shares of
Common Stock of the Company are converted in such merger or
consolidation, and if no securities are so issued, the Person
that is the other party to such merger or consolidation; and
(ii) in the case of any transaction described in
clause (z) of the first sentence of Section 13(a) hereof, the
Person that is the party receiving the greatest portion of the
assets or earning power transferred pursuant to such transaction
or transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
- -------- -------
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of authorized shares of its Common Stock which have not been issued or
reserved for issuance to permit the exercise in full of the Rights in accordance
with this Section 13 and unless prior thereto the Company and such Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in paragraphs (a) and (b) of this
Section 13 and further providing that, as soon as practicable after the date of
any Section 13 Event, the Principal Party will:
(i) prepare and file a registration statement under the Act,
with respect to the Rights and the securities purchasable upon exercise of the
Rights on an appropriate
<PAGE>
form, and will use its best efforts to cause such registration statement to (A)
become effective as soon as practicable after such filing and (B) remain
effective (with a prospectus at all times meeting the requirements of the Act)
until the Expiration Date; and
(ii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates that comply in all
respects with the requirements for registration on Form 10 under the Exchange
Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13
Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event,
the Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a) hereof.
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in subparagraphs
(x) and (y) of Section 13(a) if (i) such transaction is consummated with a
Person or Persons who acquired shares of Common Stock pursuant to a tender offer
or exchange offer for all outstanding shares of Common Stock which complies with
the provisions of Section 11(a)(ii)(B) hereof (or a wholly owned subsidiary of
any such Person or Persons), (ii) the price per share of Common Stock offered in
such transaction is not less than the price per share of Common Stock paid to
all holders of shares of Common Stock whose shares were purchased pursuant to
such tender offer or exchange offer, and (iii) the form of consideration being
offered to the remaining holders of shares of Common Stock pursuant to such
transaction is the same as the form of consideration paid pursuant to such
tender offer or exchange offer. Upon consummation of any such transaction
contemplated by this Section 13(d), all Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares
---------------------------------------
(a) The Company shall not be required to issue fractions of
Rights, except prior to the Distribution Date as provided in Section 11(p)
hereof, or to distribute Rights Certificates that evidence fractional Rights. If
the Company determines not to issue fractional Rights, there shall be paid in
lieu thereof to the registered holders of the Rights Certificates with regard to
which such fractional Rights would otherwise be issuable, an amount in cash
equal to the same fraction of the current market value of a whole Right. For
purposes of this Section 14(a), the current market value of a whole Right shall
be the closing price of the Rights for the Trading Day immediately prior to the
date on which such fractional Rights would have been otherwise issuable. The
closing price of the Rights for any day shall be the last sale price, regular
way, or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Rights are
listed or admitted to trading, or if the Rights are not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by Nasdaq or such other system then in use or, if on any
such date the Rights are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the Rights selected by the Board. If on any such date no such market
maker is making a market in the Rights the fair value of the Rights on such date
as determined in good faith by the Board shall be used.
(b) The Company shall not be required to issue fractions of
shares of
<PAGE>
Preferred Stock (other than fractions which are integral multiples of one one-
hundredth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates that evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-hundredth of a
share of Preferred Stock). In lieu of fractional shares of Preferred Stock that
are not integral multiples of one one-hundredth of a share of Preferred Stock,
the Company may pay to the registered holders of Rights Certificates, with
regard to which such fractional shares of Preferred Stock would otherwise be
issuable, at the time such Rights are exercised as herein provided, an amount in
cash equal to the same fraction of the current market value of one one-hundredth
of a share of Preferred Stock. For purposes of this Section 14(b), the current
market value of one one-hundredth share of Preferred Stock shall be one one-
hundredth of the closing price per share of Common Stock (determined pursuant to
Section 11(d)(ii) hereof) on the Trading Day immediately prior to the date of
such exercise.
(c) Following the occurrence of a Triggering Event, the Company
shall not be required to issue fractions of shares of Common Stock upon exercise
of the Rights or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of fractional shares of Common Stock, the Company may pay
to the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one share of Common Stock. For purposes of this Section
14(c), the current market value of one share of Common Stock shall be the
closing price of one share of Common Stock (as determined pursuant to Section
11(d)(i) hereof) for the Trading Day immediately prior to the date of such
exercise.
(d) The holder of a Right by the acceptance of the Right
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of this
----------------
Agreement, other than rights of action vested in the Rights Agent in Section 18
hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right, by
---------------------------
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only
<PAGE>
on the registry books of the Rights Agent if surrendered at the principal office
or offices of the Rights Agent designated for such purposes, duly endorsed or
accompanied by a proper instrument of transfer and with the appropriate forms of
assignment and certificates duly completed and fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company
and the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common Stock
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
-------- -------
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder.
--------------------------------------------------
No holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of one one-
hundredths of a share of Preferred Stock or any other securities of the Company
which may at any time be issuable on the exercise of the Rights represented
thereby, nor shall anything contained herein or in any Rights Certificate be
construed to confer upon the holder of any Rights Certificate, as such, any of
the rights of a stockholder of the Company or any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action, or to receive
notice of meetings or other actions affecting stockholders (except as provided
in Section 25 hereof), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by such Rights Certificate shall
have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
<PAGE>
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Stock or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
---------------------------------------------------------
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust or stock transfer business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto; provided, however, that such corporation
-------- -------
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the counter-signature of a predecessor Rights Agent and
deliver such Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Rights Certificates either in the name of the
predecessor or the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
----------------------
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person or
Adverse Person and the determination of Current Market Price) be proved or
established by the Company prior to taking or suffering any action hereunder,
such fact or matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established
by a certificate
<PAGE>
signed by the President, any Vice President, the Treasurer, any Assistant
Treasurer, the Secretary or any Assistant Secretary of the Company and delivered
to the Rights Agent; and such certificate shall be full authorization to the
Rights Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any adjustment required under the provisions of
Section 11 or Section 13 hereof or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after receipt of a certificate describing any
such adjustment furnished in accordance with Section 12); nor shall it by any
act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock to be issued pursuant
to this Agreement or any Rights Certificate or as to whether any shares of
Common Stock will, when so issued, be validly authorized and issued, fully paid
and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
President, any Vice President, the Secretary, any Assistant Secretary, the
Treasurer or any Assistant Treasurer of the Company, and to apply to such
officers for advice or instructions in connection with its duties, and it shall
not be liable for any action taken or suffered to be taken by it in good faith
in accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents, and the Rights Agent shall not be answerable
or accountable for any act, default, neglect
<PAGE>
or misconduct of any such attorneys or agents or for any loss to the Company
resulting from any such act, default, neglect or misconduct; provided, however,
-------- -------
reasonable care was exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate contained in the form
of assignment or the form of election to purchase set forth on the reverse
thereof, as the case may be, has either not been completed or indicates an
affirmative response to clause 1 or 2 thereof, the Rights Agent shall not take
any further action with respect to such requested exercise of transfer without
first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
----------------------
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common Stock
and Preferred Stock, by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by any registered
holder of a Rights Certificate (who shall, with such notice, submit his Rights
Certificate for inspection by the Company), then any registered holder of any
Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be (a) a corporation organized and
doing business under the laws of the United States or any state thereof in good
standing, which is authorized under such laws to exercise corporate trust or
stock transfer powers and is subject to supervision or examination by federal or
state authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50,000,000 or (b) an affiliate of a
corporation described in clause (a) of this sentence. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Stock and Preferred Stock, and mail a
notice thereof in writing to the registered holders of the Rights Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
<PAGE>
Section 22. Issuance of New Rights Certificates. Notwithstanding any
-----------------------------------
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights in
such form as may be approved by the Board to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Rights Certificates made in accordance with
the provisions of this Agreement. In addition, in connection with the issuance
or sale of shares of Common Stock following the Distribution Date (other than
upon exercise of a Right) and prior to the redemption or expiration of the
Rights, the Company (a) shall, with respect to shares of Common Stock so issued
or sold pursuant to the exercise of stock options or under any employee plan or
arrangement, or upon the exercise, conversion or exchange of securities, notes,
warrants or debentures issued by the Company, and (b) may, in any other case, if
deemed necessary or appropriate by the Board, issue Rights Certificates
representing the appropriate number of Rights in connection with such issuance
or sale; provided, however, that (i) no such Rights Certificate shall be
-------- -------
issued if, and to the extent that, the Company shall be advised by counsel that
such issuance would create a significant risk of material adverse tax
consequences to the Company or the Person to whom such Rights Certificate would
be issued, and (ii) no such Rights Certificate shall be issued if, and to the
extent that, appropriate adjustment shall otherwise have been made in lieu of
the issuance thereof.
Section 23. Redemption and Termination.
--------------------------
(a) The Board may, at its option, at any time prior to the
earlier of (i) the Close of Business on the tenth day following the Stock
Acquisition Date (or, if the Stock Acquisition Date shall have occurred prior to
the Record Date, the close of business on the tenth day following the Record
Date), or (ii) the Final Expiration Date, redeem all but not less than all of
the then outstanding Rights at a redemption price of $.01 per Right, as such
amount may be appropriately adjusted to reflect any stock split, stock dividend
or similar transaction occurring after the date hereof (such redemption price
being hereinafter referred to as the "Redemption Price"); provided, however,
---------------- -------- -------
that the Board may not redeem any Rights following an Adverse Person Event and
provided, further, that if the Board authorizes redemption of the Rights in
- -------- -------
either of the circumstances set forth in clauses (i) and (ii) below, then there
must be Continuing Directors then in office and such authorization shall require
the concurrence of a majority of such Continuing Directors: (i) such
authorization occurs on or after the time a Person becomes an Acquiring Person,
or (ii) such authorization occurs on or after the date of a change (resulting
from a proxy or consent solicitation effected in compliance with applicable law
and the requirements of any national securities exchange or trading market on
which the Common Stock is listed) in a majority of the directors in office at
the commencement of such solicitation if any Person who is a participant in such
solicitation has stated (or, if upon the commencement of such solicitation, a
majority of the Board has determined in good faith) that such Person (or any of
its Affiliates or Associates) intends to take, or may consider taking, any
action which would result in such Person becoming an Acquiring Person or which
would cause the occurrence of a Triggering Event unless, concurrent with such
solicitation, such Person (or one or more of its Affiliates or Associates) is
making a cash tender offer pursuant to a Schedule 14D-1 (or any successor form)
filed with the Securities and Exchange Commission for all outstanding shares of
Common Stock not beneficially owned by such Person (or by its Affiliates or
Associates). If, following the occurrence of a Stock Acquisition Date and
following the expiration of the right of redemption set forth in the preceding
sentence but prior to any Triggering Event, (i) a Person who was an Acquiring
Person shall have transferred or otherwise disposed of a number of shares of
Common Stock in one or more transactions, not directly or indirectly involving
the Company or any of its Subsidiaries, which did not result in the occurrence
of a Triggering Event such that
<PAGE>
such Person is thereafter a Beneficial Owner of 15% or less of the outstanding
shares of Common Stock, and (ii) there are no other Persons, immediately
following the occurrence of the event described in clause (i), who are Acquiring
Persons, and (iii) the Board (with the concurrence of a majority of the
Continuing Directors) shall so approve, then the Company's right of redemption
set forth in the preceding sentence shall be reinstated and thereafter be
subject to the provisions of this Section 23. If following the occurrence of a
Stock Acquisition Date and following the expiration of the right of redemption
set forth in the first sentence hereof, but prior to any Triggering Event, the
Board may, at its option, redeem all but not less than all of the then
outstanding Rights at the Redemption Price, provided that (i) such redemption is
effected in connection with the approval by the Board of Directors of the
Company of, and the execution and delivery by the Company of an agreement
providing for, a merger, consolidation, sale or transfer of all or substantially
all of the assets of the Company or other business combination, in each case
which involves the Company but does not involve an Acquiring Person or an
Affiliate or Associate of an Acquiring Person or any other Person acting
directly or indirectly on behalf of or in association with any such Acquiring
Person, Affiliate or Associate and (ii) such redemption is approved by a
majority of the Continuing Directors. Notwithstanding anything contained in this
Agreement to the contrary, the Rights shall not be exercisable after the first
occurrence of a Section 11(a)(ii) Event until such time as the Company's right
of redemption set forth in the first sentence of this Section 23(a) has expired.
(b) The Company may, at its option, pay the Redemption Price in
cash, shares of Common Stock (based on the Current Market Price as defined in
Section 11(d) hereof, of the Common Stock at the time of redemption) or any
other form of consideration deemed appropriate by the Board.
(c) Immediately upon the action of the Board ordering the
redemption of the Rights, evidence of which shall have been filed with the
Rights Agent and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price for each Right so held.
Promptly after the action of the Board ordering the redemption of the Rights,
the Company shall give notice of such redemption to the Rights Agent and the
holders of the then outstanding Rights by mailing such notice to all such
holders at each holder's last address as it appears upon the registry books of
the Rights Agent or, prior to the Distribution Date, on the registry books of
the Transfer Agent for the Common Stock. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder receives
the notice. Each such notice of the redemption will state the method by which
the payment of the Redemption Price will be made.
Section 24. Exchange. (a) At any time after any Person becomes an
--------
Acquiring Person or an Adverse Person, a majority of the Continuing Directors
may, at their option, exchange all or part of the then outstanding and
exercisable Rights (which (i) shall not include Rights that have become void
pursuant to Section 7(e) and (ii) shall include, without limitation, any Rights
issued after the Distribution Date in connection with the exercise of options
pursuant to any employee benefit plan of the Company or any Subsidiary of the
Company) for shares of Common Stock at an exchange ratio of one share of Common
Stock per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such exchange
ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding
--------------
the foregoing, the Board of Directors shall not be empowered to effect such
exchange at any time after any Person (other than the Company, any of its
Subsidiaries, any employee benefit plan of the Company or any of its
Subsidiaries or any Person organized, appointed or established by the
<PAGE>
Company or any of its Subsidiaries for or pursuant to the terms of any such
plan), together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the shares of Common Stock then outstanding.
(b) Immediately upon the action of the Continuing Directors
electing to exchange any Rights pursuant to Section 24(a) and without any
further action and without any notice, the right to exercise such Rights will
terminate and thereafter the only right of a holder of such Rights shall be to
receive that number of shares of Common Stock equal to the number of such Rights
held by such holder multiplied by the Exchange Ratio. The Company shall promptly
thereafter give notice of such exchange to the Rights Agent and the holders of
the Rights to be exchanged in the manner set forth in Section 26; provided,
--------
however, that the failure to give, or any defect in, such notice shall not
- --------
affect the validity of such exchange. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the exchange
of the shares of Common Stock for Rights will be effected and, in the event of
any partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than
Rights which have become void pursuant to Section 7(e)) held by each holder of
Rights.
(c) In any exchange pursuant to this Section 24, the Company, at
its option, may substitute Common Stock Equivalents (as defined in Section
11(a)(iii)) for shares of Common Stock exchangeable for Rights, at the initial
rate of one Common Stock Equivalent for each share of Common Stock, as
appropriately adjusted to reflect adjustments in dividend, liquidation and
voting rights of Common Stock Equivalents pursuant to the terms thereof, so that
each Common Stock Equivalent delivered in lieu of each share of Common Stock
shall have essentially the same dividend, liquidation and voting rights as one
share of Common Stock.
(d) In the event that the number of shares of Common Stock which
are authorized by the Company's certificate of incorporation but not outstanding
or reserved for issuance are not sufficient to permit an exchange of Rights as
contemplated by this Section 24, the Company shall take all such action as may
be necessary to authorize additional shares of Common Stock for issuance upon
exchange of the Rights.
(e) The Company shall not be required to issue fractions of
shares of Common Stock or to distribute certificates that evidence fractional
shares of Common Stock. In lieu of fractional shares of Common Stock, the
Company may pay to the registered holders of Rights Certificates with regard to
which such fractional shares of Common Stock would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
share of Common Stock. For purposes of this Section 24(e), the current market
value of a whole share of Common Stock shall be the closing price per share of
Common Stock (determined pursuant to Section 11(d)(ii) hereof) on the Trading
Day immediately prior to the date of exchange pursuant to this Section 24.
Section 25. Notice of Certain Events.
------------------------
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of
<PAGE>
Preferred Stock or shares of stock of any class or any other securities, rights
or options, or (iii) to effect any reclassification of its Preferred Stock
(other than a reclassification involving only the subdivision of outstanding
shares of Preferred Stock), or (iv) to effect any consolidation or merger into
or with any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), or to effect any sale or
other transfer (or to permit one or more of its Subsidiaries to effect any sale
or other transfer), in one transaction or a series of related transactions, of
more than 50% of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person or Persons (other than the Company or any
of its Subsidiaries in one or more transactions each of which complies with
Section 11(o) hereof), or (v) to effect the liquidation, dissolution or winding
up of the Company, then, in each such case, the Company shall give to each
holder of a Rights Certificate, to the extent feasible, in accordance with
Section 26 hereof, a notice of such proposed action, which shall specify the
record date for the purposes of such stock dividend or distribution of rights or
warrants, or the date on which such reclassification, consolidation, merger,
sale, transfer, liquidation, dissolution, or winding up is to take place and the
date of participation therein by the holders of the shares of Preferred Stock,
if any such date is to be fixed, and such notice shall be so given in the case
of any action covered by clause (i) or (ii) above at least twenty (20) days
prior to the record date for determining holders of the shares of Preferred
Stock for purposes of such action, and in the case of any such other action, at
least twenty (20) days prior to the date of the taking of such proposed action
or the date of participation therein by the holders of the shares of Preferred
Stock, whichever shall be the earlier.
(b) In case any Section 11(a)(ii) Event shall occur, then, in
any such case, (i) the Company shall as soon as practicable thereafter give to
each holder of a Rights Certificate, to the extent feasible, and in accordance
with Section 26 hereof, a notice of the occurrence of such event, which shall
specify the event and the consequences of the event to holders of Rights under
Section 11(a)(ii) hereof and (ii) all references in the preceding paragraph to
Common Stock shall, to the extent appropriate, also be deemed thereafter to
refer to other securities.
Section 26. Notices. Notices or demands authorized by this Agreement
-------
to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
PerSeptive Biosystems, Inc.
500 Old Connecticut Path
Framingham, MA 01701
Attention: President
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Attention:
Notices or demands authorized by this Agreement to be given or made by the
Company or the
<PAGE>
Rights Agent to the holder of any Rights Certificate (or, if prior to the
Distribution Date, to the holder of certificates representing shares of Common
Stock) shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed to such holder at the address of such holder as shown on the
registry books of the Company.
Section 27. Supplements and Amendments. At any time prior to the Final
--------------------------
Amendment Date, and subject to the penultimate sentence of this Section 27, the
Company and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Agreement without the approval of any holders of
certificates representing shares of Common Stock. From and after the Final
Amendment Date and subject to the penultimate sentence of this Section 27, the
Company and the Rights Agent shall, if the Company so directs, supplement or
amend this Agreement without the approval of any holders of Rights Certificates
in order (i) to cure any ambiguity, (ii) to correct or supplement any provision
contained herein which may be defective or inconsistent with any other
provisions herein, (iii) to shorten or lengthen any time period hereunder or
(iv) to change or supplement the provisions hereunder in any manner which the
Company may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Rights Certificates (other than an Acquiring Person,
an Adverse Person or an Affiliate or Associate of such Person); provided,
--------
however, that this Agreement may not be supplemented or amended, (A) whether
- -------
before or after the Final Amendment Date, to lengthen a time period relating to
when the Rights may be redeemed or to modify the ability (or inability) of the
Continuing Directors to redeem the Rights, in either case at such time as the
Rights are not then redeemable or (B) after the Final Amendment Date, to
lengthen, pursuant to clause (iii) of this sentence, any other time period
unless such lengthening is for the purpose of protecting, enhancing or
clarifying the rights of or the benefits to the holders of Rights (other than
any Acquiring Person, an Adverse Person or an Associate or Affiliate of such
Person). Upon the delivery of a certificate from an appropriate officer of the
Company which states that the proposed supplement or amendment is in compliance
with the terms of this Section 27, the Rights Agent shall execute such
supplement or amendment. Notwithstanding anything contained in this Agreement to
the contrary, no supplement or amendment shall be made which changes the
Redemption Price, the Final Expiration Date, the Purchase Price or the number of
one one-hundredths of a share of Preferred Stock for which a Right is
exercisable. Prior to the Distribution Date, the interests of the holders of
Rights shall be deemed coincident with the interests of the holders of Common
Stock.
Section 28. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors, etc.
---------------------------------------------------------
For all purposes of this Agreement, any calculation of the number of shares
of Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the provisions of the last sentence of Rule 13d-3(d)(l)(i) of the General Rules
and Regulations under the Exchange Act. The Board (with, where specifically
provided for herein, the concurrence of the Continuing Directors) shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board (with, where specifically
provided for herein, the concurrence of the Continuing Directors) or to the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Agreement, and (ii) make all determinations deemed
necessary
<PAGE>
or advisable for the administration of this Agreement (including a determination
to redeem or not redeem the Rights, to declare that a Person is an Adverse
Person or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
(with, where specifically provided for herein, the concurrence of the Continuing
Directors) in good faith, shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights and all other parties, and
(y) not subject any member of the Board of Directors of the Company to any
liability to the holders of the Rights.
Section 30. Benefits of this Agreement. Nothing in this Agreement shall
--------------------------
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).
Section 31. Severability . If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated,
provided, however, that notwithstanding anything in this Agreement to the
- -------- -------
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Continuing
Directors determine in their good faith judgment that severing the invalid
language from this Agreement would materially and adversely affect the purpose
or effect of this Agreement, the right of redemption set forth in Section 23
hereof shall be reinstated and shall not expire until the close of business on
the tenth day following the date of such determination by the Continuing
Directors. Without limiting the foregoing, if any provision requiring that a
determination made by less than the entire Board is held by a court of competent
jurisdiction or other authority to be invalid, void or unenforceable, such
determination shall then be made by the entire Board.
Section 32. Governing Law. This Agreement, each Right and each Rights
-------------
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any number
------------
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
--------------------
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
Attest: PERSEPTIVE BIOSYSTEMS, INC.
By:/s/ Rufus C. King By:/s/ Noubar B. Afeyan
-------------------- -------------------------
Name: Rufus C. King Name: Noubar B. Afeyan
Title: Assistant Secretary Title: President and Chief
Executive Officer
Attest: AMERICAN STOCK TRANSFER &
TRUST COMPANY
By:/s/ Susan Silber By:/s/ Herbert J. Lemmer
---------------------- --------------------------
Name: Susan Silber Name: Herbert J. Lemmer
Title: Assistant Secretary Title: Vice President
<PAGE>
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
-----------------------------------
AMENDMENT NO. 1, dated as of September 27, 1995 (this "Amendment"), to the
---------
RIGHTS AGREEMENT, dated as of March 1, 1995 (the "Agreement"), between
---------
PERSEPTIVE BIOSYSTEMS, INC., a Delaware corporation (the "Company"), and
-------
AMERICAN STOCK TRANSFER & TRUST COMPANY, as Rights Agent.
W I T N E S S E T H:
WHEREAS, on February 23, 1995, the Board of Directors of the Company (the
"Board") authorized the execution of the Agreement pursuant to which certain
- ------
rights to purchase one one-hundredth of a share of the Company's Series B Junior
Participating Preferred Stock have been distributed;
WHEREAS, pursuant to Section 27 of the Agreement, the Company may amend the
Agreement at any time prior to the Final Amendment Date, as defined therein.
WHEREAS, on September 22, 1995 the Board authorized the amendment of the
Agreement to correct certain definitional and typographical errors;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
1. Section 11(a)(ii)(B) of the Agreement is hereby amended to replace the
words "the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding" appearing therein with the words "an Acquiring Person."
2. Section 23(a) is hereby amended by deleting the word "If" before the
word "following" at the beginning of the third sentence thereof.
3. Except as amended hereby, the Agreement shall continue in full force
and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
the Rights Agreement to be duly executed and their respective corporate seals to
be hereunto affixed and attested, all as of the day and year first above
written.
Attest: PERSEPTIVE BIOSYSTEMS, INC.
By:/s/ Rufus C. King By:/s/ Noubar B. Afeyan
------------------------ ---------------------------
Name: Rufus C. King Name: Noubar B. Afeyan
Title: Assistant Secretary Title: President and Chief
Executive Officer
Attest:
AMERICAN STOCK TRANSFER &
TRUST COMPANY
By:/s/ Susan Silber By:/s/ Herbert J. Lemmer
------------------------ ----------------------------
Name: Susan Silber Name: Herbert J. Lemmer
Title: Assistant Secretary Title: Vice President
<PAGE>
AMENDMENT NO. 2 TO RIGHTS AGREEMENT
-----------------------------------
AMENDMENT NO. 2, dated as of August 23, 1997 (this "Amendment"), to the
---------
RIGHTS AGREEMENT, dated as of March 1, 1995, as amended on September 27, 1995
(the "Agreement"), between PERSEPTIVE BIOSYSTEMS, INC., a Delaware corporation
---------
(the "Company"), and AMERICAN STOCK TRANSFER & TRUST COMPANY, as Rights Agent.
-------
W I T N E S S E T H:
WHEREAS, on February 23, 1995, the Board of Directors of the Company (the
"Board") authorized the execution of the Agreement pursuant to which certain
- ------
rights to purchase one one-hundredth of a share of the Company's Series B Junior
Participating Preferred Stock have been distributed;
WHEREAS, pursuant to Section 27 of the Agreement, the Company may amend the
Agreement at any time prior to the Final Amendment Date, as defined therein.
WHEREAS, on August 23, 1997 the Board authorized the Amendment of the
Agreement in anticipation of approving (i) a merger (the "Merger") pursuant to
-----
an Agreement and Plan of Merger with Perkin-Elmer Corporation (the "Parent") and
------
a subsidiary of Parent (the "Sub") (the "Merger") and (ii) a Stock Option
--- ------
Agreement with Parent;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
1. Notwithstanding anything to the contrary in the Agreement, neither
Parent nor Sub will become an "Acquiring Person" or an "Adverse Person" and no
"Triggering Event", "Stock Acquisition Date" or "Distribution Date" (as such
terms are defined in the Agreement) will occur as a result of the approval,
execution or delivery of an Agreement and Plan of Merger (the "Merger
------
Agreement") among the Company, Parent and Sub which has been approved by the
- ---------
Board of Directors or a Stock Option Agreement (the "Stock Option Agreement")
----------------------
granted to Parent by the Board of Directors, or the consummation of a merger
pursuant to the Merger Agreement or the acquisition of shares of Company Common
Stock by Parent pursuant to the Stock Option Agreement.
2. Parent and Sub are third party beneficiaries of this Amendment and the
terms of this Amendment shall not be withdrawn, amended or otherwise modified
without their written consent.
3. Except as amended hereby, the Agreement shall continue in full force
and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to
the Rights Agreement to be duly executed and their respective corporate seals to
be hereunto affixed and attested, all as of the day and year first above
written.
Attest:
PERSEPTIVE BIOSYSTEMS, INC.
By:/s/ Noubar B. Afeyan
By:_______________________ --------------------------
Name: Name: Noubar B. Afeyan
Title: Title: President and Chief
Executive Officer
Attest:
AMERICAN STOCK TRANSFER &
TRUST COMPANY
By:/s/ Gail Domenech By:/s/ Paula Carappoli
------------------------ -------------------------
Name: Gail Domenech Name: Paula Carappoli
Title: Executive Assistant Title: Vice President
<PAGE>
EXHIBIT 21
PERSEPTIVE BIOSYSTEMS, INC.
LIST OF SUBSIDIARIES
State of Jurisdiction
Name of Incorporation
- ---- ---------------------
PerSeptive Biosystems GmbH Germany
PerSeptive Biosystems GmbH-Hamburg Germany
PerSeptive Biosystems (Canada) Ltd. Canada
Nihon PerSeptive KK Japan
PerSeptive International Holdings, Ltd. Delaware
PerSeptive Biosystems (France) Ltd. Delaware
PerSeptive Biosystems (UK) Ltd. England
PerSeptive Technologies II Corporation Delaware
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
PerSeptive Biosystems, Inc. on Form S-8 (File Nos. 333-23773, 333-23775, 333-
8151, 33-94606, 33-80856, 33-49642), Form S-4 (File No. 333-1016) and on Form S-
3 (File Nos. 33-71814, 33-72760, 33-72924, 33-94598, 33-94600, 33-94602, 33-
94604, 33-94608, 33-80421, 333-8149, 333-11229) of our reports dated December 1,
1997, on our audit of the consolidated financial statements and financial
statement schedule of PerSeptive Biosystems, Inc. as of September 30, 1997 and
1996 and for the years ended September 30, 1997, 1996 and 1995 which reports are
included in this Annual Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 29, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> SEP-30-1997 SEP-30-1996
<PERIOD-START> OCT-01-1996 OCT-01-1995
<PERIOD-END> SEP-30-1997 SEP-30-1996
<CASH> 18,283 5,384
<SECURITIES> 16,646 19,273
<RECEIVABLES> 22,777 18,438
<ALLOWANCES> (1,963) (2,886)
<INVENTORY> 22,602 21,074
<CURRENT-ASSETS> 81,945 63,890
<PP&E> 44,093 46,149
<DEPRECIATION> (16,467) (14,132)
<TOTAL-ASSETS> 133,951 121,655
<CURRENT-LIABILITIES> 39,397 37,318
<BONDS> 33,557 36,302
0 0
9,480 18,053
<COMMON> 226 213
<OTHER-SE> 57,692 32,019
<TOTAL-LIABILITY-AND-EQUITY> 133,951 121,655
<SALES> 96,516 75,916
<TOTAL-REVENUES> 96,516 86,018
<CGS> 49,815 37,813
<TOTAL-COSTS> 49,815 56,290
<OTHER-EXPENSES> 56,681 77,257
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 3,534 3,473
<INCOME-PRETAX> 15,243 (50,467)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 15,243 (50,467)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 15,243 (50,467)
<EPS-PRIMARY> 0.63 (3.22)
<EPS-DILUTED> 0.60 (3.22)
</TABLE>
