SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly period ended: June 30, 1998
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 0-19410
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SEPRACOR INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 22-2536587
------------------------------- ---------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification number)
Organization or Incorporation)
111 Locke Drive, Marlborough, Massachusetts 01752
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(Address of Principal Executive Offices) (Zip Code)
(508) 481-6700
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(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $.10 per share 28,194,794
- -------------------------------------- ------------------------------
Class Outstanding at August 10, 1998
<PAGE>
SEPRACOR INC.
INDEX
Part I - Financial Information
Item 1. Consolidated Condensed Financial Statements
<TABLE>
<S> <C>
Consolidated Condensed Balance Sheets as of
June 30, 1998 and December 31, 1997 (Unaudited) 3
Consolidated Statements of Operations for the Three
and Six Month Periods Ended June 30, 1998 and 1997
(Unaudited) 4
Consolidated Statements of Cash Flows for the Six Month
Periods Ended June 30, 1998 and 1997 (Unaudited) 5
Notes to Consolidated Interim Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 10
Condition and Results of Operations
Part II - Other Information 19
Item 1. Legal Proceedings 19
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 22
</TABLE>
2
<PAGE>
SEPRACOR INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
(in thousands) June 30, December 31,
1998 1997
-------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $113,335 $ 82,579
Marketable securities 137,997 9,981
Accounts receivable, net 2,874 2,415
Inventories 3,296 2,722
Other current assets 2,928 1,543
-------- ---------
Total Current Assets 260,430 99,240
Property, plant and equipment, net 16,499 15,126
Deferred Financing Costs, net 7,462 1,917
Excess of investments over net assets acquired, net 5,092 5,288
Investment in affiliates 2,725 3,971
Other assets 3,395 2,965
-------- ---------
Total Assets $295,603 $ 128,507
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 4,243 $ 4,018
Accrued expenses 27,729 17,670
Notes payable and current portion
of capital lease obligation and long-term debt 2,860 861
Deferred revenue 157 21
Convertible redeemable preferred stock - 6,700
-------- ---------
Total Current Liabilities 34,989 29,270
Long-term debt and capital lease obligation 2,803 3,388
Convertible subordinated debentures 270,355 80,880
-------- ---------
Total Liabilities 308,147 113,538
-------- ---------
Minority interest 2,789 2,937
Stockholders' Equity (Deficit):
Common stock 2,823 2,785
Additional paid-in capital 224,514 222,504
Unearned compensation, net (41) (94)
Accumulated deficit (242,330) (213,028)
Equity adjustments (299) (135)
-------- ---------
Total Stockholders' Equity (Deficit) (15,333) 12,032
-------- ---------
Total Liabilities and Stockholders' Equity $295,603 $ 128,507
======== =========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements
3
<PAGE>
SEPRACOR INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTH PERIODS ENDED
JUNE 30,1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
(in thousands, except per share)
Three month periods ended Six month periods ended
June 30, June 30,
------------------------- -----------------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues:
Collaborative research and development $ 545 $ 128 $ 2,408 $ 128
License fees 18 600 5,090 600
Product 1,615 1,606 3,505 4,994
Royalties 60 51 114 102
-------- -------- -------- --------
Total Revenues 2,238 2,385 11,117 5,824
Cost of revenues:
License fees - - 400 -
Product 1,011 994 1,975 2,926
Royalties 18 - 36 -
-------- -------- -------- --------
Total Cost of Revenues 1,029 994 2,411 2,926
Gross Margin 1,209 1,391 8,706 2,898
Operating Expenses:
Research and development 10,636 11,268 24,003 23,003
Sales and marketing 3,679 1,416 6,120 2,477
Administration 2,461 2,794 4,426 5,465
Restructuring recoveries - - (351) -
Patent costs 471 343 935 655
-------- -------- -------- --------
Total Operating Expenses
17,247 15,821 35,133 31,600
-------- -------- -------- --------
(Loss) from operations (16,038) (14,430) (26,427) (28,702)
Other income (expense):
Interest income 3,164 1,807 5,976 3,171
Interest expense (4,530) (1,501) (7,630) (2,990)
Other income (expense) (14) 92 (123) 168
Equity in loss of investees (359) (1,385) (1,246) (2,071)
Gain on sale of ChiRex Inc. - - - 30,069
-------- -------- -------- --------
Total Other Income (Expense) (1,739) (987) (3,023) 28,347
-------- -------- -------- --------
Net income (loss) before minority
interests (17,777) (15,417) (29,450) (355)
Minority interest in subsidiary
193 226 148 395
-------- -------- -------- --------
Net income (loss) (17,584) (15,191) (29,302) 40
======== ======== ======== ========
Dividends on preferred stock - (150) (150) (300)
-------- -------- -------- --------
Net loss applicable to
common shares $(17,584) $(15,341) $(29,452) $ (260)
======== ======== ======== ========
Basic and diluted net loss
per common share $ (0.63) $ (0.56) $ (1.05) $ (0.01)
-------- -------- -------- --------
Shares used in computing basic and
diluted net loss per
common share:
Basic and diluted 28,055 27,499 27,983 27,452
-------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements
4
<PAGE>
SEPRACOR INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(in thousands) Six month periods ended
June 30
------------------------------
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net Income (loss) $ (29,302) $ 40
Adjustments to reconcile net loss to net cash
used in operating activities:
Minority interests in subsidiaries (148) (395)
Gain on sale of equity investee - (30,069)
Depreciation and amortization 2,349 2,284
Provision for doubtful accounts (235) 93
Equity in investee losses 1,246 2,071
Issuance of warrants 31 --
Loss on disposal of property and equipment 14 5
Changes in operating assets and liabilities:
Accounts receivable (265) 621
Inventories (589) (70)
Other current assets (1,355) (497)
Accounts payable 232 (389)
Accrued expenses 10,062 3,168
Deferred revenue 137 (618)
--------- --------
Net cash (used in) operating activities: (17,823) (23,756)
Cash flows from investing activities:
Purchases of marketable securities (128,015) (41,516)
Sales of marketable securities - 20,358
Additions to property and equipment (3,390) (3,540)
Proceeds from sale of equipment 11 -
Net proceeds from sale of equity investee - 30,625
Other assets 123 (376)
--------- --------
Net cash (used in) provided by investing activities: (131,271) 5,551
Cash flows from financing activities:
Proceeds from sale of convertible debentures 189,475 -
Costs associated with sale of Convertible Debentures (6,103) -
Repurchase of Series B Redeemable Exchangeable Preferred Stock (6,850) -
Net proceeds from issuances of common stock 2,047 1,309
Borrowings of long term debt - 150
Repayments of long term debt and capital lease (599) (532)
Borrowings under line of credit agreements 2,020 64
--------- --------
Net cash provided by financing activities 179,990 991
Effect of exchange rates on cash and cash equivalents (140) (140)
--------- --------
Net increase (decrease) in cash and cash equivalents 30,756 (17,354)
Cash and cash equivalents at beginning of period 82,579 83,344
--------- --------
Cash and cash equivalents at end of period $ 113,335 $ 65,990
========= ========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements
5
<PAGE>
ITEM 1.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. Basis of presentation:
The accompanying consolidated interim financial statements are unaudited and
have been prepared on a basis substantially consistent with the audited
financial statements. Certain information and footnote disclosures normally
included in the Company's annual financial statements have been condensed or
omitted. The year-end consolidated condensed balance sheet data was derived from
audited financial statements but does not include all disclosures required by
generally accepted accounting principles. The consolidated interim financial
statements, in the opinion of management, reflect all adjustments (including
normal recurring accruals) necessary for a fair presentation of the results for
the interim periods ended June 30, 1998 and 1997.
The results of operations for the interim periods are not necessarily indicative
of the results of operations to be expected for the fiscal year. These
consolidated interim financial statements should be read in conjunction with the
audited financial statements for the year ended December 31, 1997, which are
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, filed with the Securities and Exchange Commission.
The consolidated interim financial statements include the accounts of Sepracor
Inc. ("Sepracor") and its majority and wholly-owned subsidiaries, including
BioSepra Inc. ("BioSepra"), Sepracor Canada Limited, and Versicor (from May 1995
to December 1997).
Effective December 10, 1997, Sepracor's ownership percentage of Versicor, Inc.
was approximately 22%, thereby making Versicor an affiliate and reportable under
the equity method. At June 30, 1998, Sepracor's investment in HemaSure Inc. was
zero.
2. Inventories:
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---- ----
<S> <C> <C>
Raw materials $807 $600
Work in progress 255 129
Finished goods 2,234 1,993
------ ------
$3,296 $2,722
====== ======
</TABLE>
3. Basic and diluted net (loss) per common share:
In the quarter ended December 31, 1997, the Company adopted Financial Accounting
Standards Board Statement of Financial Accounting Standard No. 128, "Earnings
Per Share", which modifies the way in which earnings per share ("EPS") is
calculated and disclosed. Basic EPS excludes dilution and is computed by
dividing income available to common shareholders by the weighted average number
of common shares outstanding for the period. Diluted EPS is based upon the
weighted average number of common shares outstanding during the period plus the
additional weighted average common equivalent shares during the period. Common
equivalent shares are not included in the per share calculations where the
effect of their inclusion would be anti-dilutive. Common equivalent shares
result from the assumed conversion of preferred stock and convertible debt and
the assumed exercises of outstanding stock options, the proceeds of which are
then assumed to have been used to repurchase outstanding stock options using the
6
<PAGE>
treasury stock method. For the three and six months ended June 30, 1998 and
1997, basic and diluted net loss per common share is computed based on the
weighted-average number of common shares outstanding during the period, because
the effect on common stock equivalents would be anti-dilutive. Included in the
three and six months ended June 30, 1998 and 1997 basic net loss applicable to
common shares is $0 and $150,000, and $150,000 and $300,000, respectively, of
dividends relating to Series B Redeemable Exchangeable Preferred Stock. Certain
securities were not included in the computation of diluted earnings per share
for the three and six months ended June 30, 1998 and 1997, respectively, because
they would have an anti-dilutive effect due to net losses for such periods.
These securities include (i) options to purchase 4,525,559 and 4,525,559 shares,
3,341,258 and 3,341,258 shares, of common stock with a purchase price of $1.00
to $42.50 per share, $1.00 to $42.50 per share, and $1.00 to $24.75 and $1.00 to
$24.75, respectively; (ii) 8,109,735 and 8,109,735 shares and 4,109,756 and
4,109,756 shares of common stock for issuance upon conversion of 7% and 6 1/4%
subordinated convertible debentures, and (iii) 312,500 shares of common stock
for conversion of Series B Redeemable Exchangeable Preferred Stock for the three
and six months ended June 30, 1997.
4. 6 1/4% Convertible Subordinated Debentures
On February 10, 1998, Sepracor issued $189,475,000 of 6 1/4% Convertible
Subordinated Debentures due 2005 (the "6 1/4% Debentures"). The 6 1/4%
Debentures are convertible into Sepracor Common Stock, at the option of the
holder, at a price of $47.369 per share. The 6 1/4% Debentures bear interest at
6 1/4% payable semi-annually, commencing on August 15, 1998. As of June 30,
1998, the Company had accrued interest of $4,575,000 relating to the 6 1/4%
Debentures. The 6 1/4% Debentures are not redeemable by the Company prior to
February 18, 2001. The Company may be required to repurchase the 6 1/4%
Debentures at the option of the holders in certain circumstances. As part of the
sale of the 6 1/4% Debentures, Sepracor has incurred to date approximately
$6,103,000 of offering costs, which are being amortized over seven years, the
term of the 6 1/4% Debentures. The net proceeds to the Company after offering
costs are $183,372,000. The Company intends to use the proceeds from the sale of
the 6 1/4% Debentures for the establishment of the Company's respiratory sales
force, marketing of certain improved chemical entities ("ICEs"), ongoing
preclinical and clinical trials, funding of other research and development
programs, and working capital and other general corporate purposes.
5. Series B Redeemable Exchangeable Preferred Stock:
In March 1995, Beckman Instruments, Inc. acquired 312,500 shares of Sepracor's
Series B Redeemable Exchangeable Preferred Stock for $5,000,000. On March 26,
1998, Sepracor and Beckman terminated their Stock Purchase Agreement under which
Beckman acquired 312,500 shares of Sepracor Series B Redeemable Exchangeable
Preferred Stock. Sepracor paid Beckman the original purchase price of the stock
plus accrued dividends totaling $6,850,000. In addition, BioSepra and Beckman
amended their distribution agreement whereby BioSepra granted a non-exclusive
right to manufacture instruments to Beckman, removed its obligation to
manufacture instruments for Beckman, and sold the discontinued instrument
product inventory to Beckman for $250,000.
7
<PAGE>
6. Comprehensive Income
The Company has adopted Statement of Financial Accounting Standard No. 130
"Reporting Comprehensive Income" ("SFAS 130"), which requires that changes in
comprehensive income be shown in a financial statement that is displayed with
the same prominence as other financial statements. The Company's only
significant item of other comprehensive income relates to foreign currency
translation adjustments, and is presented separately on the balance sheet as
required.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
(in thousands)
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Comprehensive income (loss):
Net loss $(17,584) $(15,341) $(29,452) $(260)
Cumulative translation adjustment (125) (130) (164) (481)
---------- ----------- ---------- --------
Total comprehensive income (loss) $(17,709) $(15,471) $(29,616) $(741)
========== =========== ========== ========
</TABLE>
7. Other
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"). SFAS 131 specifies new
guidelines for determining a company's operating segments and related
requirements for disclosure. Sepracor is in the process of evaluating the impact
of the new standard on the presentation of the financial statements and the
disclosure therein. SFAS 131 is effective for fiscal years beginning after
December 15, 1997, but need not be applied to interim financial statements in
the initial year of application.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments embedded in other contracts
(collectively referred to as derivatives), and for hedging activities. The
statement requires companies to recognize all derivatives as either assets or
liabilities, with the instruments measured at fair value. The accounting for
changes in fair value, gains or losses, depends on the intended use of the
derivative and its resulting designation. The statement is effective for fiscal
years beginning after June 15, 1999. The Company will adopt SFAS 133 by January
1, 2000. The Company is evaluating SFAS 133 to determine its impact on its
consolidated financial statements.
8. Litigation
In July 1997, the United States Patent and Trademark Office (the "PTO") informed
Sepracor that it had declared an interference between Sepracor's previously
issued method-of-use patent on fexofenadine to treat allergic rhinitis and
another similar patent application of Sepracor, and Hoechst Marion Roussel Inc.
("HMRI") method-of-use patent application on the anti-histaminic effects of
fexofenadine on hepatically impaired patents. The primary objective of a patent
interference, which can only be declared by the PTO, is to determine the first
to invent any overlapping subject matter claimed by more than one party. In the
course of an interference, the parties typically present evidence relating to
their inventive activities as to the overlapping subject matter. The PTO then
reviews the evidence to determine which party has the earliest legally
sufficient inventive date, and, therefore, is entitled to a patent claiming the
overlapping subject matter.
If Sepracor prevails in the interference, Sepracor will retain all of its claims
in its issued patent. If, however, Sepracor loses the interference, HMRI will be
issued a U.S. patent containing its claims involved in the interference and may
not be obligated to pay Sepracor milestone or royalty payments pursuant to the
terms of the license agreement whereby Sepracor licensed its U.S.
patent rights covering fexofenadine to HMRI in 1993.
HemaSure is a defendant in two lawsuits brought by Pall Corporation ("Pall"). In
complaints filed in February 1996 and November 1996, Pall alleged that
HemaSure's manufacture, use and/or sale of the LeukoNet product infringes upon
three patents held by Pall.
On October 14, 1996, in connection with the first action concerning U.S. Patent
No. 5,451,321(the "'321 patent"), HemaSure filed for summary judgment of
noninfringement. Pall filed a cross motion for summary judgment of infringement
at the same time.
In October 1997, the U.S. District Court of the Eastern District of New York
("the court") granted in part Pall's summary judgment motion relating to the
'321 patent. HemaSure has agreed to terminate the manufacture, use, sale and
offer for sale of the filter, subject to the court's order. In April 1998, the
court granted to HemaSure its request to appeal the October 1997 decision. The
appeal of the October 1997 decision is currently pending before the U.S. Court
of Appeals for the Federal Circuit.
8
<PAGE>
With respect to the second action concerning U.S. Patent No. 4,952,572 (the
"'572 patent"), HemaSure has answered the complaint stating that it does not
infringe any claim of the asserted patents and has filed for summary judgement
of noninfringement. Pall filed a cross motion for summary judgement of
infringement at the same time. Further, HemaSure has counterclaimed for
declaratory judgment of invalidity, noninfringement and unenforceability of the
'572 patent.
HemaSure believes, based on advice of its patent counsel, that a properly
informed court should conclude that the manufacture, use and/or sale by HemaSure
or its customers of the present LeukoNet product did not infringe any valid
enforceable claim of the two Pall patents. However, there can be no assurance
that HemaSure will prevail in the pending litigations, and an adverse outcome in
a patent infringement action would have a material adverse effect on HemaSure's
future business and operations.
9. Summarized income statement information:
The following is the summarized income statement information for the Company's
subsidiaries HemaSure and Versicor for the three and six month periods ended
June 30, 1998 and 1997:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
(in thousands)
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
HemaSure
Net sales $ - $ 517 $ 25 $ 1,068
Gross profit (loss) - (330) (632) (811)
Loss from continuing
operations (2,895) (3,527) (6,362) (6,306)
Net loss $(2,863) $(3,744) $(6,292) $(6,634)
Versicor
Net sales $ - $ - $ - $ -
Gross profit (loss) - - - -
Loss from continuing
operations (2,038) (1,714) (6,185) (3,466)
Net loss $(1,972) $(1,932) $(6,006) $(3,830)
</TABLE>
The Company recognized 22% of Versicor's net loss as equity in loss of
subsidiary. The Company has recognized none of HemaSure's current year loss
since its investment in subsidiary is zero.
9
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The consolidated interim financial statements include the accounts of Sepracor
Inc. ("Sepracor") and its majority and wholly-owned subsidiaries, including
BioSepra Inc. ("BioSepra"), Sepracor Canada Limited, and Versicor (from May 1995
to December 1997).
Effective December 10, 1997, Sepracor's ownership percentage of Versicor was
approximately 22%, thereby making Versicor an affiliate and reportable under the
equity method. Sepracor has recorded $359,000 and $1,246,000 as its share of
Versicor losses for the three and six month periods ended June 30, 1998. At June
30, 1998, Sepracor had an investment in Versicor of $2,725,000.
At June 30, 1998, Sepracor's investment in HemaSure was zero.
In December 1997, Sepracor signed a licensing agreement with Schering-Plough
Corporation ("Schering") giving Schering exclusive worldwide rights to
Sepracor's patents covering descarboethoxyloratadine ("DCL"), an active
metabolite of loratadine ("the Schering Agreement"). Under the terms of the
Schering Agreement, Sepracor has exclusively licensed its DCL rights to
Schering, which expects to develop and market the DCL product worldwide. Under
the Schering Agreement, Schering would pay Sepracor an upfront license fee of
$5,000,000 and royalties, if any, on DCL sales beginning at first product
launch. Any royalties paid to Sepracor will escalate over time and upon the
achievement of sales volume and other milestones.
In January 1998, Sepracor and Schering were notified that no objection would be
raised under the Hart Scott Rodino Act with respect to the Schering Agreement.
Sepracor received the $5,000,000 upfront license fee (which will be offset
against potential future royalties) and recorded it as license revenue in
January 1998. As a result of the Schering Agreement, Sepracor made a
sub-licensee payment to a third party for $400,000, which is reflected as cost
of revenue.
On February 4, 1998, Sepracor signed a collaboration and license agreement with
Janssen Pharmaceutica, N.V. ("Janssen"), a wholly-owned subsidiary of Johnson &
Johnson, relating to the development and marketing of norastemizole, a third
generation nonsedating antihistamine ("the Janssen Agreement"). Under the terms
of the Janssen Agreement, the companies will jointly fund the development of
norastemizole, and Janssen has an option to acquire certain rights regarding the
product in the U.S. and abroad. When exercised, Janssen and Sepracor will
equally share the costs and profits associated with the further development,
marketing and sale of norastemizole in the United States. Sepracor will also
retain the right to co-promote the product in the U.S. Alternatively, Sepracor
can elect to receive royalties, if any, on Janssen sales of norastemizole in the
U.S. in the event it decides not to co-promote the product. Outside of the U.S.,
Janssen has the right to develop and market norastemizole, and Sepracor will
earn royalties, if any, on product sales. In addition, Janssen has worldwide OTC
rights to norastemizole. In the first quarter of 1998, Sepracor recorded
collaborative research and development revenue of $1,753,000. In the second
quarter of 1998, Sepracor recorded collaborative research and development
revenue of $497,000.
On July 2, 1998, Sepracor Inc. received an approvable letter for Xopenex (TM)
(levalbuterol HCl), inhalation solution, in multidose strengths, from the U.S.
Food and Drug Administration (FDA). Xopenex is the therapeutically active isomer
of racemic albuterol. Final approval by the FDA of the Xopenex New Drug
Application (NDA) is subject to satisfactory completion of the product labeling
discussions and certain other conditions.
On July 20, 1998, Sepracor signed a license agreement (the "Janssen Agreement")
with Janssen Pharmaceutica N.V. ("Janssen"), a wholly owned subsidiary of
Johnson & Johnson, giving Janssen exclusive worldwide rights to Sepracor's
patents covering Norcisapride, an isomer of the active metabolite of Propulsid.
Under the terms of the Janssen Agreement, Sepracor has exclusively licensed its
Norcisapride rights to Janssen, which expects to develop and market the
Norcisapride product worldwide. Under the Janssen Agreement, Janssen would pay
Sepracor royalties, if any, on Norcisapride sales beginning at first product
launch. Any royalties paid to Sepracor will escalate upon the achievement of
sales volume milestones.
In August 1998, HemaSure received a written commitment from a commercial bank
for a $5 million revolving line of credit. Up to $3 million under the line will
be available upon the signing of the definitive loan agreement, with the
remainder available upon the completion of certain events as defined. The
revolving line of credit, which is expected to expire on August 31, 2000, will
be used to help finance HemaSure's working capital requirements. Amounts
borrowed under the line are anticipated to bear interest at the banks prime
lending rate plus 1/2% payable quarterly in arrears. The bank will have a first
lien on all assets of HemaSure including its intellectual property. Sepracor has
agreed in principle to guarantee repayment by HemaSure of amounts borrowed under
the line of credit. In exchange for the guarantee, subject to the approval of
HemaSure's Board of Directors, HemaSure will grant to Sepracor warrants to
purchase up to 1,700,000 shares of HemaSure's common stock at a price of $0.69
per share, of which 1,000,000 warrants will be exercisable upon issuance and
700,000 warrants will be exercisable in the event HemaSure draws down in
excess of $3 million under the line of credit. The warrants will expire in the
year 2003 and have certain registration rights associated with them. The closing
of the line of credit is subject to the satisfaction of customary conditions,
including the negotiation and execution of customary loan documents and related
agreements with Sepracor. Accordingly, there can be no assurance that the line
of credit will close on the terms set forth in the commitment, if at all.
Three and six months ended June 30, 1998 and 1997
License fees were $18,000 and $5,090,000 for the three and six months ended June
30, 1998, respectively, compared to $600,000 for each of the same periods in
1997. The increase for the six month period ended June 30, 1998 compared to the
six month period ended June 30, 1997 is primarily due to the $5,000,000 license
payment which Sepracor received under the Schering Agreement.
10
<PAGE>
Product sales were $1,615,000 and $3,505,000 for the three and six months ended
June 30, 1998, respectively, compared to $1,606,000 and $4,994,000,
respectively, for the same periods in 1997. The decrease in revenue for the six
month period ended June 30, 1998 is attributed to BioSepra's discontinuation of
the instrument product line and to the fluctuation in the timing of large
production scale media orders. BioSepra expects fluctuations in the timing of
large production scale orders to continue to occur in future periods.
Collaborative research and development revenue was $545,000 and $2,408,000 for
the three and six months ended June 30, 1998, respectively, compared to $128,000
in each of the same periods last year. The increases for the three and six
months periods ending June 30, 1998, related primarily to revenue from the
Janssen Agreement of $497,000 and $2,250,000, respectively.
Cost of products sold, as a percentage of product sales, were 63% and 56% for
the three and six months ended June 30, 1998, respectively, compared to 62% and
59% for the same periods in 1997.
Research and development expenses were $10,636,000 and $24,003,000 in the three
and six months ended June 30, 1998, respectively, compared to $11,268,000 and
$23,003,000, respectively, in the same periods last year. The decrease for the
three month period ending June 30, 1998 is primarily due to the Company no
longer consolidating Versicor. The increase for the six month period ending June
30, 1998 is primarily the result of increased expenses related to preclinical
and clinical trials in the Company's pharmaceutical programs offset by the
Company no longer consolidating Versicor.
Sales and marketing expenses were $3,679,000 and $6,120,000 for the three and
six months ended June 30, 1998, respectively, compared to $1,416,000 and
$2,477,000, respectively, for the same periods last year. The increase for the
periods in 1998 as compared to 1997 is due primarily to costs related to
infrastructure development for a specialty sales force. Sepracor is currently
planning to introduce Xopenex commercially in late 1998.
General and administrative expenses were $2,461,000 and $4,426,000 for the three
and six months ended June 30, 1998, respectively, compared to $2,794,000 and
$5,465,000, respectively, for the same periods last year. The decrease for the
periods in 1998 as compared to 1997 is due to personnel reductions and related
costs at BioSepra as well as the Company's no longer consolidating Versicor.
Legal expenses related to patents were $471,000 and $935,000 for the three and
six months ended June 30, 1998, respectively, compared to $343,000 and $655,000
for the same periods last year. The increase for the periods in 1998 as compared
to 1997 is due to costs associated with the increased volume of patent filings
as well as costs related to the patent interference proceedings which commenced
in the second quarter of 1997.
11
<PAGE>
Equity in loss of investees was $359,000 and $1,246,000 for the three and six
months ended June 30, 1998, respectively, compared to $1,385,000 and $2,071,000
in the same periods last year. In the three and six month period ended June 30,
1998, the equity in loss consists of the Company's portion of Versicor's
results. The change in the periods in 1998 as compared to 1997 relates to no
longer recognizing equity losses related to HemaSure, the sale of the Company's
ownership of ChiRex in 1997, and to the recognition of Versicor losses beginning
in December 1997.
Interest income, interest expense and other income (expense) was ($1,380,000)
and ($1,777,000) in the three and six months ended June 30, 1998, respectively,
compared to $398,000 and $349,000 in the same periods in 1997. The increase in
expense in 1998 as compared to 1997 is primarily the result of increased
interest expense related to the 6 1/4% Debentures.
Minority interest in subsidiary resulted in a decrease to consolidated net loss
of $193,000 and $148,000 for the three and six months ended June 30, 1998,
respectively, compared to a decrease in net loss of $226,000 and an increase in
net income of $395,000 for the same periods last year. The change in the periods
in 1998 as compared to 1997 is the result of BioSepra's fluctuation in earnings.
Liquidity and Capital Resources
Cash and cash equivalents plus marketable securities of Sepracor and its
subsidiaries, including BioSepra, totaled $251,332,000 at June 30, 1998,
compared to $92,560,000 at December 31, 1997. Cash and cash equivalents plus
marketable securities of Sepracor, excluding BioSepra, at June 30, 1998 were
$248,167,000.
The net cash used in operating activities for the six months ended June 30, 1998
was $17,822,000. The net cash used in operating activities includes a net loss
of $29,302,000 adjusted by non-cash charges of $3,405,000. The accounts payable
and accrued expense balances increased a total of $10,284,000 from the December
31, 1997 balances, primarily due to increased research and development accruals
and accrued interest at Sepracor.
In 1994, Sepracor, BioSepra and HemaSure entered into an equipment leasing
arrangement that provides for a total of up to $2,000,000 of financing to
Sepracor and its subsidiaries for the purpose of financing capital equipment in
the United States. All outstanding amounts are collateralized by the assets so
financed and are guaranteed by Sepracor. At June 30, 1998, there was $551,000
outstanding under this credit facility relating to Sepracor, BioSepra and
HemaSure of which $114,000, $102,000 and $335,000 represented Sepracor's,
BioSepra's and HemaSure's portion, respectively.
At June 30, 1998, Sepracor had guaranteed $516,000 of outstanding bank
borrowings of BioSepra S.A., BioSepra's wholly owned French subsidiary.
12
<PAGE>
In 1994, Sepracor's wholly owned subsidiary, Sepracor Canada Limited, entered
into two credit agreements with two Canadian provincial and federal business
development agencies for approximately $2,960,000 in term debt, of which
$2,590,000 is at an annual interest rate of 9.25% and $370,000 is interest free.
As of June 30, 1998, Sepracor Canada Limited had received approximately
$2,960,000 of such term debt, of which $1,973,000 was outstanding.
In December 1996, Sepracor and BioSepra amended their revolving credit agreement
with a commercial bank that provides for borrowing of up to an aggregate of
$10,000,000 (the "Revolving Credit Agreement"). The Revolving Credit Agreement
was amended to remove Versicor as a party thereto. Under the amended revolving
credit agreement BioSepra could borrow up to $3,000,000. All borrowings are
collateralized by certain assets of Sepracor and BioSepra. The revolving credit
agreement contains covenants relating to minimum tangible capital base, minimum
cash or cash equivalents, minimum liquidity ratio and maximum leverage for
Sepracor and BioSepra. Sepracor is a guarantor of all outstanding borrowings. At
June 30, 1998, there was $2,000,000 outstanding under this agreement, relating
to BioSepra. The annual interest rate on such borrowings is at the lower of the
prime rate or LIBOR plus 175 basis points.
On December 30, 1997, Sepracor entered into a put agreement with a commercial
bank pursuant to which Sepracor agreed to purchase $2,000,000 of indebtedness of
Versicor, a former wholly owned subsidiary, in the event of a default by
Versicor under its loan agreement with the bank. In the event that the put right
is exercised by the bank, the bank will assign its security interest in the
fixed assets of Versicor to Sepracor. As of June 30, 1998, Versicor is in
compliance with all requirements under this agreement.
On February 10, 1998, Sepracor issued $189,475,000 of 6 1/4% Convertible
Subordinated Debentures due 2005 (the "6 1/4% Debentures"). The 6 1/4%
Debentures are convertible into Sepracor Common Stock, at the option of the
holder, at a price of $47.369 per share. The 6 1/4% Debentures bear interest at
6 1/4% payable semi-annually, commencing on August 15, 1998. The 6 1/4%
Debentures are not redeemable by the Company prior to February 18, 2001. The
Company may be required to repurchase the 6 1/4% Debentures at the option of the
holders in certain circumstances. As part of the sale of the 6 1/4% Debentures,
Sepracor has incurred $6,103,000 of offering costs, which are being amortized
over seven years, the term of the 6 1/4% Debentures. The net proceeds to the
Company after offering costs are $183,372,000. The Company intends to use the
proceeds from the sale of the 6 1/4% Debentures for the establishment of the
Company's respiratory sales force, marketing of certain ICEs, ongoing
preclinical and clinical trials, funding of other research and development
programs, and working capital and other general corporate purposes.
In June 1995, Beckman acquired 312,500 shares of Sepracor's Series B Redeemable
Exchangeable Preferred Stock for $5,000,000. On March 26, 1998, Sepracor and
Beckman terminated their Stock Purchase Agreement. Sepracor paid Beckman the
original purchase price of the stock plus accrued dividends totaling $6,850,000.
In addition, BioSepra and Beckman amended their distribution agreement whereby
BioSepra granted a non-exclusive right to manufacture instruments to Beckman,
removed its obligation to manufacture instruments for Beckman, and sold the
discontinued instrument product inventory to Beckman for $250,000.
13
<PAGE>
Factors Affecting Future Operating Results
Certain of the information contained in this quarterly Report, including
information with respect to the safety, efficacy and potential benefits of the
Company's improved chemical entities ("ICEs") under development and the scope of
patent protection with respect to these products and information with respect to
the other plans and strategy for the Company's business and the business of the
subsidiaries and certain affiliates of the Company, consists of forward-looking
statements. Important factors that could cause actual results to differ
materially from the forward-looking statements include the following:
Since substantially all of Sepracor's ICEs are at the early stages of
development, there can be no assurance that these drugs will have improved
characteristics that provide greater benefits or fewer side effects than the
corresponding parent drugs or that research efforts undertaken by Sepracor will
lead to the discovery of future drugs with such improved characteristics. All of
the drugs under development will require significant additional research,
development, preclinical and/or clinical testing, regulatory approval and an
additional commitment of resources prior to their successful development and
commercialization. Sepracor has limited experience in conducting human clinical
trials and in manufacturing pharmaceutical products and has no experience in
marketing such products.
Proprietary rights relating to the products of Sepracor 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.
Sepracor has filed patent applications covering compositions containing, and
methods of using, single isomer or active-metabolite forms of various compounds
for specific applications. The ability to commercialize successfully any ICE
will depend to a significant degree upon the ability to obtain and maintain use
patents of sufficient scope to prevent third parties from developing similar or
competitive products. Most of the ICEs for which Sepracor has obtained use
patents or filed applications therefor are claimed by composition of matter or
other patents or patent applications held by third parties. In each such case,
unless subject to an existing license agreement, the ICE may not be
commercialized until the expiration of corresponding third party
composition-of-matter or other patents. There can be no assurance that any
pending patent applications relating to the products of Sepracor will result in
patents being issued or that any such patents will afford protection against
competitors with similar technology. There may be pending or issued third-party
patents relating to the product of Sepracor and Sepracor may need to acquire
licenses to, or to contest the validity of, any such patents. It is likely that
significant funds would be required to defend any claim that Sepracor infringes
a third-party patent, and any such claim could adversely affect sales of the
challenged product of Sepracor until the claim is resolved. There can be no
assurance that any license required under any such patent would be made
available. Certain of the technology that may be used in the products of
Sepracor is not covered by any patent or patent application. In the absence of
patent protection, the business of Sepracor may be adversely affected by
competitors who independently develop substantially equivalent technology.
14
<PAGE>
In July 1997, the United States Patent and Trademark Office (the "PTO") informed
Sepracor that it had declared an interference between Sepracor's previously
issued use patent on fexofenadine to treat allergic rhinitis and another similar
patent application of Sepracor, and the use patent application of HMRI on the
anti-histaminic effects of fexofenadine on hepatically impaired patients. The
primary objective of a patent interference, which can only be declared by the
PTO, is to determine which party was the first to invent any overlapping subject
matter claimed by more than one party. In the course of an interference, the
parties typically present evidence relating to their invention of the
overlapping subject matter. The PTO then reviews the evidence to determine which
party has the earliest legally sufficient date of invention, and, therefore, is
entitled to a patent claiming the overlapping subject matter. If Sepracor
prevails in the interference, Sepracor will retain all of its claims in its
issued patent. If, however, Sepracor loses the interference, HMRI will be issued
a U.S. patent containing its claims involved in the interference and may not be
obligated to pay Sepracor milestone or royalty payments pursuant to the terms of
the license agreement whereby Sepracor licensed its U.S. patent rights covering
fexofenadine to HMRI in 1993. Sepracor and HMRI have agreed to resolve the
interference by arbitration. The arbitrator has been selected and the
arbitration proceeding is ongoing. While it is possible that the arbitrator's
decision may be rendered during 1998, there can be no assurance that the
arbitrator's decision will be rendered at that time. Once rendered, the
arbitrator's decision must be submitted to the PTO for final approval. The
interference is ongoing and the Company is unable to predict its outcome.
The marketing and sale of pharmaceutical products developed by Sepracor or its
development partners will require FDA approvals as well as similar approvals in
foreign countries. To obtain such approvals, the safety and efficacy of such
products must be demonstrated through clinical trials. There can be no assurance
that the results of such clinical trials will be consistent with the results
obtained in preclinical studies or that the results obtained in later phases of
clinical trials will be consistent with those obtained in earlier phases. There
also can be no assurance that any such products will be shown to be safe and
efficacious or that regulatory approval for any such products will be obtained
on a timely basis, if at all. The clinical trial and regulatory approval process
can take a number of years and require the expenditure of substantial resources.
With respect to certain of the Company's ICEs, the Company has been able to
shorten the regulatory approval process of its ICEs by relying on preclinical
and clinical toxicology data already on file with the FDA with respect to the
parent drug. Although Sepracor has to date been successful in employing this
strategy in connection with the approval process of certain of its proposed
products, there can be no assurance that the FDA will permit the Company to
utilize this strategy in the future. Accordingly, the Company may be required to
expend significant resources to complete such preclinical and clinical studies
for its other ICEs, thereby significantly delaying the regulatory approval
process. The failure of the Company to obtain regulatory approval on a timely
basis and unanticipated significant expenditures on preclinical and clinical
studies could adversely affect the financial condition of the Company. While the
Company in July 1998 has received an approvable letter for Xopenex, it expects
FDA approval of its NDA for the nebulized form of Xopenex in late 1998, there
can be no assurance that the FDA will approve such NDA by such date, if at all.
15
<PAGE>
The Company currently has very limited sales and marketing experience. If the
Company is successful in developing and obtaining regulatory approval for its
products under development, it expects to license certain products to large
pharmaceutical companies and market and sell certain other products through its
direct specialty sales forces or through other arrangements, including
co-promotion arrangements. In anticipation of expected FDA approval of the
nebulized form of levalbuterol later this year, the Company is beginning to
establish a direct sales force to market the inhalation solution of
levalbuterol. Further, as the Company begins to enter into co-promotion
arrangements or market and sell additional products directly, the Company will
need to significantly expand its sales force. It is expected that the Company
will incur significant expense in establishing its direct sales force. The
ability of the Company to realize significant revenues from its direct marketing
and sales activities is dependent on its ability to attract and retain qualified
sales personnel in the pharmaceutical industry. There can be no assurance,
however, that the Company will be able to attract and retain such qualified
sales personnel, that it will successfully expand its marketing and direct sales
force in the future on a timely basis, that the cost of establishing such
marketing or sales force will not exceed any product revenues, that its sales
and marketing efforts will be successful, or that the need to comply with FDA
limits on drug product marketing, including limits on claims of comparative
safety or efficacy, will not inhibit the effectiveness of such marketing. In
addition, the Company will need to enter into co-promotion arrangements with
third parties where its own direct sales force is neither well situated nor
large enough to achieve maximum penetration in the market. There can be no
assurance that the Company will be successful in entering into any such
arrangements or that the terms of any such arrangements will be favorable to the
Company.
Sepracor's ability to commercialize certain drugs that it develops is likely to
depend in significant part on its ability to enter into collaborative agreements
with pharmaceutical companies to fund all or part of the costs to complete the
development of such drugs and to manufacture and/or market such drugs. To date,
the Company has entered into four such collaborative agreements. The Company has
licensed its U.S. patent rights to Allegra (fexofenadine) to HMRI and is
entitled to receive royalties on all U.S. sales of Allegra when the patent on
the parent drug expires. The Company, however, is currently party to an
interference involving Allegra which, if decided adversely to the Company, could
result in the loss of all or substantially all of the royalties to which the
Company is entitled under the license agreement on future sales of Allegra. The
Company has also licensed its worldwide patent rights in DCL to Schering-Plough,
pursuant to which the Company is entitled to receive royalties from
Schering-Plough upon the initial sale of the product. The Company has entered
into two agreements with Janssen with respect to the joint development and
co-promotion of norastemizole and license of worldwide patent rights for
Norcisapride. In each of these collaborative arrangements and, to the extent the
Company enters into additional collaborative arrangements, the Company is
dependent upon the efforts of the collaboration partners and there can be no
assurance that such efforts will be successful. If any collaborators were to
breach or terminate their agreements with the Company or fail to perform their
obligations thereunder in a timely manner, the development and commercialization
of the products could be delayed or terminated. Any such delay or termination
could have a material, adverse effect on the Company's financial condition and
results of operation. Sepracor's failure or inability to perform certain of its
obligations under a collaborative agreement could result in a reduction or loss
of the benefits to which Sepracor is otherwise entitled under such agreement.
There can be no assurance that Sepracor will be able to enter into any such
agreements for ICEs in the future or that such collaborative agreements, if any,
will be entered into on terms favorable to the Company.
16
<PAGE>
The Company currently operates a current Good Manufacturing Practices ("cGMP")
compliant manufacturing plant which the Company believes has sufficient capacity
to support the production of its drugs in quantities required for its clinical
trials. While the Company believes it has the capability to scale up its
manufacturing processes and manufacture sufficient quantities of certain of the
products which may be approved for sale, without additional expansion, the
Company will not have the capability to manufacture in sufficient quantities all
of the products which may be approved for sale. Accordingly, the Company may be
required to expend additional resources to expand its current facility,
construct an additional facility or contract the production of these drugs to
third party manufacturers. There can be no assurance that the Company will have
the resources to expand its existing or develop additional facilities or
contract with manufacturers to produce its products in commercial quantities or
that any contract with third party manufacturers will be on favorable terms to
the Company. There can be no assurance that the Company will succeed in scaling
up its manufacturing processes or maintaining cGMP compliance. Failure in either
respect can lead to refusal by the FDA to approve marketing applications.
Failure to maintain cGMP compliance may also be the basis for action by the FDA
to withdraw approvals that have been granted and for other regulatory action.
The testing, marketing and sale of human health care products entails an
inherent risk of product liability and there can be no assurance that product
liability claims will not be asserted against Sepracor. Sepracor and its
subsidiaries maintain limited product liability insurance coverage for both the
clinical trials and commercialization of its products. There can be no assurance
that Sepracor will be able to obtain further product liability insurance on
acceptable terms, if at all, or that any current insurance subsequently obtained
will provide adequate coverage against all potential claims.
The Company will require substantial additional funds for its research and
product development programs, operating expenses, the pursuit of regulatory
approvals and expansion of its production, sales and marketing capabilities.
Adequate funds for these purposes, whether through equity or debt financing,
collaborative or other arrangements with corporate partners or from other
sources, may not be available when needed or at terms acceptable to the Company.
Insufficient funds could require the Company to delay, scale back or eliminate
certain of its research and product development programs or to license to third
parties to commercialize products or technologies that the Company would
otherwise develop or commercialize itself. While the Company believes that its
available cash balances will be sufficient to meet its capital requirements into
2000, the Company may need to raise additional funds to support its long-term
product development and commercialization programs. There can be no assurance
that such capital will be available on favorable terms, if at all. The Company's
cash requirements may vary materially from those now planned because of results
of research and development, results of product testing, relationships with
customers, changes in focus and direction of the Company's research and
development programs, competitive and technological advances, patent
developments, the FDA regulatory process, the capital requirements of BioSepra
and Sepracor Canada Limited, and other factors.
The Company is currently evaluating the potential impact of the year 2000 on the
processing of date-sensitive information by the Company's computerized
information systems. The year 2000 problem is the result of computer programs
being written using two digits (rather than four) to define the applicable year.
Any of the Company's programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000, which could result
in miscalculation or system failures. Based on preliminary information, costs of
addressing potential problems are not currently expected to have a material
adverse impact on the Company's financial position, results of operations or
cash flows in the future periods. However, if the Company, its customers or
vendors are unable to resolve such processing issues in a timely manner, it
could result in a material financial risk. Accordingly, the Company plans to
devote the necessary resources to resolve all significant year 2000 issues in a
timely manner.
17
<PAGE>
Other factors that may affect the Company's future operating results include the
Company's fluctuations in quarterly operating results, its ability to meet its
debt service requirements and to compete successfully in the market.
Because of the foregoing factors, past financial results should not be relied
upon as an indication of future performance. The Company believes that
period-to-period comparisons of its financial results are not necessarily
meaningful and it expects that its results of operations may fluctuate from
period to period in the future.
18
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal proceedings
In July 1997, the United States Patent and Trademark Office (the "PTO") informed
Sepracor that it had declared an interference between Sepracor's previously
issued method-of-use patent on fexofenadine to treat allergic rhinitis and
another similar patent application of Sepracor, and Hoechst Marion Roussel Inc.
("HMRI") method-of-use patent application on the anti-histaminic effects of
fexofenadine on hepatically impaired patents. The primary objective of a patent
interference, which can only be declared by the PTO, is to determine the first
to invent any overlapping subject matter claimed by more than one party. In the
course of an interference, the parties typically present evidence relating to
their inventive activities as to the overlapping subject matter. The PTO then
reviews the evidence to determine which party has the earliest legally
sufficient inventive date, and, therefore, is entitled to a patent claiming the
overlapping subject matter.
If Sepracor prevails in the interference, Sepracor will retain all of its claims
in its issued patent. If, however, Sepracor loses the interference, HMRI will be
issued a U.S. patent containing its claims involved in the interference and may
not be obligated to pay Sepracor milestone or royalty payments pursuant to the
terms of the license agreement whereby Sepracor licensed its U.S.
patent rights covering fexofenadine to HMRI in 1993.
HemaSure is a defendant in two lawsuits brought by Pall Corporation ("Pall"). In
complaints filed in February 1996 and November 1996, Pall alleged that
HemaSure's manufacture, use and/or sale of the LeukoNet product infringes upon
three patents held by Pall.
On October 14, 1996, in connection with the first action concerning U.S. Patent
No. 5,451,321(the "'321 patent"), HemaSure filed for summary judgment of
noninfringement. Pall filed a cross motion for summary judgment of infringement
at the same time.
In October 1997, the U.S. District Court of the Eastern District of New York
("the court") granted in part Pall's summary judgment motion relating to the
'321 patent. HemaSure has agreed to terminate the manufacture, use, sale and
offer for sale of the filter, subject to the court's order. In April 1998, the
court granted to HemaSure its request to appeal the October 1997 decision. The
appeal of the October 1997 decision is currently pending before the U.S. Court
of Appeals for the Federal Circuit.
With respect to the second action concerning U.S. Patent No. 4,952,572 (the
"'572 patent"), HemaSure has answered the complaint stating that it does not
infringe any claim of the asserted patents and has filed for summary judgement
of noninfringement. Pall filed a cross motion for summary judgement of
infringement at the same time. Further, HemaSure has counterclaimed for
declaratory judgment of invalidity, noninfringement and unenforceability of the
'572 patent.
HemaSure believes, based on advice of its patent counsel, that a properly
informed court should conclude that the manufacture, use and/or sale by HemaSure
or its customers of the present LeukoNet product did not infringe any valid
enforceable claim of the two Pall patents. However, there can be no assurance
that HemaSure will prevail in the pending litigations, and an adverse outcome in
a patent infringement action would have a material adverse effect on HemaSure's
future business and operations.
19
<PAGE>
Items 2 - 3 None
Item 4 Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of stockholders held on May 27, 1998
the following proposals were approved as further specified below:
<TABLE>
<CAPTION>
Proposal Total For Each Director Withheld From Each Director
- -------- ----------------------- ---------------------------
<S> <C> <C>
Election of Class III
Directors:
Digby W. Barrios 24,160,971 901,361
Alan A. Steigrod 24,159,934 902,398
</TABLE>
<TABLE>
<CAPTION>
For Against Abstain No Vote
--- ------- ------- -------
<S> <C> <C> <C> <C>
Approval of amendment to the Company's
Restated Certificate of Incorporation
increasing from 40,000,000 to 80,000,000
the number of authorized shares of
Common Stock. 24,410,661 584,894 66,777 --
Approval of amendment to the
Company's 1991 Director Stock
Option Plan. 15,163,304 1,975,755 118,919 7,804,354
Approval of amendment to the
Company's 1991 Restated Stock
Option Plan. 9,726,108 7,188,720 119,922 8,027,852
Approval of 1996 Employee
Stock Purchase Plan. 16,785,666 394,012 78,297 7,804,357
</TABLE>
Item 5 Other Information
Stockholder Proposals for 1999 Annual Meeting
As set forth in the Company's Proxy Statement for its 1998 Annual Meeting of
Stockholders, stockholder proposals submitted pursuant to Rule 14a-8 under the
Exchange Act for inclusion in the Company's proxy materials for its 1999 Annual
Meeting of Stockholders must be received by the Secretary of the Company at the
principal offices of the Company no later than December 23, 1998.
In addition, the Company's by-laws require that the Company be given advance
notice of stockholder nominations for election to the Company's Board of
Directors and of other matters which stockholders wish to present for action at
an annual meeting of stockholders (other than matters included in the Company's
proxy statement in accordance with Rule 14a-8). The required notice must be
delivered to the Secretary of the Company at the principal offices of the
Company not later than the close of business on the 10th day following the date
on which notice of the meeting was given to stockholders of record on the record
date for such meeting, provided that such notice need not be provided more than
60 days prior to the annual meeting of stockholders. The advance notice
provisions of the Company's bylaws supersede the notice requirements contained
in recent amendments to Rule 14a-4 under the Exchange Act.
20
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
Exhibit listed in the Exhibit Index which immediately precedes the exhibits
attached thereto.
a) Exhibits:
3.1 Restated Certificate of Incorporation, as amended
27.1 Financial Data Schedule
27.2 Financial Data Schedule Restated
b) Reports on Form 8-K
1. Form 8-K filed with the Securities and Exchange
Commission on July 28, 1998
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEPRACOR INC.
Date: August 14, 1998 /s/ Timothy J. Barberich
------------------------------------
Timothy J. Barberich
President and Chief
Executive Officer
(Principal Executive Officer)
Date: August 14, 1998 /s/ Robert F. Scumaci
------------------------------------
Robert F. Scumaci
Senior Vice President
of Finance and Administration
(Principal Financial and
Accounting Officer)
22
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
SEPRACOR INC.
Victor H. Woolley and Mark G. Borden, being the duly elected Vice
President, Finance and Secretary, respectively, of Sepracor Inc., a corporation
organized and existing under and by virtue of the laws of the State of Delaware,
do hereby certify as follows:
1. The name of the corporation is Sepracor Inc. (hereinafter called the
"Corporation").
The date of filing of its original Certificate of incorporation with the
Secretary of State was January 27, 1984.
2. That by vote of the Board of Directors of the Corporation at a meeting
held on October 29, 1991, and in accordance with Section 245 of the General
Corporation Law of Delaware, the Board of Directors adopted a resolution setting
forth the proposed Restated Certificate of Incorporation of the Corporation.
3. This Restated Certificate of Incorporation only restates and integrates
and does not further amend the Corporation's Restated Certificate of
Incorporation and there is no discrepancy between such provisions and the
provisions of this Restated Certificate of Incorporation.
FIRST: The name of the corporation is Sepracor Inc. (hereinafter called the
"Corporation").
SECOND: The registered office of the Corporation is Corporation Trust
Center, 1209 Orange Street, in the City of Wilmington, in the County of New
Castle, in the State of Delaware. The name of its registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The aggregate number of shares which the Corporation shall have
authority to issue is 26,000,000 of which (i) 25,000,000 shares shall be Common
Stock, $0.10 par value per share ("Common Stock"), and (ii) 1,000,000 shares
shall be
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Preferred Stock, $1.00 par value per share ("Preferred Stock").
A. PREFERRED STOCK
Preferred Stock may be issued from time to time in one or more series, each
of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law. Different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purposes of voting by classes unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing for
the issue of the shares thereof, to determine and fix such voting powers, full
or limited, or no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, including without limitation thereof, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as shall
be stated and expressed in such resolutions, all to the full extent now or
hereafter permitted by the General Corporation Law of Delaware. Without limiting
the generality of the foregoing, the resolutions providing for issuance of any
series of Preferred Stock may provide that such series shall be superior or rank
equally or be junior to the Preferred Stock of any other series to the extent
permitted by law. Except as otherwise provided in this Restated Certificate of
Incorporation, no vote of the holders of the Preferred Stock or Common Stock
shall be a prerequisite to the designation or issuance of any shares of any
series of the Preferred Stock authorized by and complying with the conditions of
this Restated Certificate of Incorporation, the right to have such vote being
expressly waived by all present and future holders of the capital stock of the
Corporation."
B. COMMON STOCK.
1. General. The voting, dividend and liquidation rights of the holders of
the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock.
2. Voting. The holders of the Common stock are entitled to one vote for
each share held at all meetings of stockholders (and written actions in lieu of
meetings). There shall be no cumulative voting.
3. Dividends. Dividends may be declared and paid on the Common Stock from
funds lawfully available therefor as and when determined by the Board of
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Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the Corporation,
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
FIFTH: To the fullest extent permitted by the Delaware General Corporation
Law, as it exists or may be amended, a director of the Corporation shall be not
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director.
SIXTH: The election of directors need not be by written ballot unless the
by- laws so provide.
SEVENTH: The Board of Directors of the Corporation is authorized and
empowered from time to time in its discretion to make, alter, amend or repeal
by-laws of the Corporation, except as such power may be restricted or limited by
the General Corporation Law of the State of Delaware.
EIGHTH: Whenever any compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agrees to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders of this Corporation, as the case may be,
and also on this Corporation.
NINTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation in the manner now
or hereafter prescribed by law, and all rights and powers conferred herein on
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stockholders, directors and officers are subject to this reserved power.
TENTH: This Article is inserted for the management of the business and for
the conduct of the affairs of the Corporation, and it is expressly provided that
it is intended to be in furtherance and not in limitation or exclusion of the
powers conferred by the statutes of the State of Delaware.
1. Number of Directors. The number of directors which shall constitute the
whole Board of Directors shall be determined by resolution of a majority of the
Board of Directors, but in no event shall be less than three. The number of
directors may be decreased at any time and from time to time by a majority of
the directors then in office, but only to eliminate vacancies existing by reason
of the death, resignation, removal or expiration of the term of one or more
directors. The directors shall be elected at the annual meeting of stockholders
by such stockholders as have the right to vote on such election. Directors need
not be stockholders of the Corporation.
2. Classes of Directors. The Board of Directors shall be and is divided
into three classes: Class I, Class II and Class III. No one class shall have
more than one director more than any other class. If a fraction is contained in
the quotient arrived at by dividing the authorized number of directors by three,
then, if such fraction is one-third, the extra director shall be a member of the
Class I and, if such fraction is two-thirds, one of the extra directors shall be
a member of Class I and the other extra director shall be a member of Class II,
unless otherwise provided for from time to time by resolution adopted by a
majority of the Board of Directors.
3. Election of Directors. Elections of directors need not be by written
ballot except as and to the extent provided in the By-laws of the Corporation.
4. Terms of Office. Each director shall serve for a term ending on the date
of the third annual meeting following the annual meeting at which such director
was elected; provided, however, that each initial director in Class I shall
serve for a term ending on the date of the annual meeting next following the end
of the Corporation's fiscal year ending December 31, 1993; each initial director
in Class II shall serve for a term ending on the date of the annual meeting next
following the end of the Corporation's fiscal year ending December 31, 1992; and
each initial director in Class III shall serve for a term ending on the date of
the annual meeting next following the end of the Corporation's fiscal year
ending December 31, 1991.
5. Allocation of Directors Among Classes in the Event of Increases or
Decreases in the Number of Directors. In the event of any increase or decrease
in the authorized number of directors, (i) each director then serving as such
shall nevertheless continue as a director of the class of which he is a member
until the expiration of his current term or his prior death, retirement or
resignation and (ii) the newly created or eliminated directorships resulting
from such increase or decrease shall be apportioned by the Board of Directors
among the three classes of directors so
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as to ensure that no one class has more than one director more than any other
class. To the extent possible, consistent with the foregoing rule, any newly
created directorships shall be added to those classes whose terms of office are
to expire at the latest dates following such allocation, and any newly
eliminated directorships shall be subtracted from those classes whose terms of
office are to expire at the earliest dates following such allocation, unless
otherwise provided for from time to time by resolution adopted by a majority of
the directors then in office, although less than a quorum.
6. Tenure. Notwithstanding any provisions to the contrary contained herein,
each director shall hold office until his successor is elected and qualified, or
until his earlier death, resignation or removal.
7. Vacancies. Any vacancy in the Board of Directors, however occurring,
including a vacancy resulting from an enlargement of the Board, may be filled
only by vote of a majority of the directors then in office, although less than a
quorum, or by a sole remaining director. A director elected to fill a vacancy
shall be elected for the unexpired term of his predecessor in office, if
applicable, and a director chosen to fill a position resulting from an increase
in the number of directors shall hold office until the next election of the
class for which such director shall have been chosen and until his successor is
elected and qualified, or until his earlier death, resignation or removal.
8. Quorum. A majority of the total number of the whole Board of Directors
shall constitute a quorum at all meetings of the Board of Directors. In the
event one or more of the directors shall be disqualified to vote at any meeting,
then the required quorum shall be reduced by one for each such director so
disqualified; provided, however, that in no case shall less than one-third (1/3)
of the number so fixed constitute a quorum. In the absence of a quorum at any
such meeting, a majority of the directors present may adjourn the meeting from
time to time without further notice other than announcement at the meeting,
until a quorum shall be present.
9. Action at Meeting. At any meeting of the Board of Directors at which a
quorum is present, the vote of a majority of those present shall be sufficient
to take any action, unless a different vote is specified by law or the
Corporation's Restated Certificate of Incorporation or By-Laws.
10. Removal. Any one or more or all of the directors may be removed, with
or without cause, by the holders of at least seventy- five percent (75%) of the
shares then entitled to vote at an election of directors.
11. Stockholder Nominations and Introduction of Business, Etc. Advance
notice of stockholder nominations for election of directors and other business
to be brought by stockholders before a meeting of stockholders shall be given in
the
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manner provided in the By-Laws of the Corporation.
12. Amendments to Article. Notwithstanding any other provisions of law,
this Restated Certificate of Incorporation or the Corporation's Amended and
Restated By-Laws, and notwithstanding the fact that a lesser percentage may be
specified by law, the affirmative vote of the holders of at least seventy-five
percent (75%) of the votes which all the stockholders would be entitled to cast
at any annual election of directors or class of directors shall be required to
amend or repeal, or to adopt any provision inconsistent with, this Article
TENTH."
ELEVENTH: Until the closing of a firm commitment, underwritten public
offering of the Corporation's Common Stock (a "Public Offering"), any action
required or permitted to be taken at any annual or special meeting of
stockholders of the Corporation may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, is signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote on such action were present
and voted. Prompt notice of the taking of corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. Effective upon the closing of a Public Offering,
stockholders of the Corporation may not take any action by written consent in
lieu of a meeting. Notwithstanding any other provision of law, this Restated
Certificate of Incorporation or the Corporation's By-laws, as amended, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the
votes which all the stockholders would be entitled to cast at any annual
election of directors or class of directors shall be required to amend or
repeal, or to adopt any provision inconsistent with this Article ELEVENTH.
TWELFTH: Special meetings of stockholders may be called at any time by the
President or by the Chairman of the Board of Directors. Business transacted at
any special meeting of stockholders shall be limited to matters relating to the
purpose or purposes stated in the notice of meeting. Notwithstanding any other
provision of law, this Restated Certificate of Incorporation or the
Corporation's Amended and Restated By-laws, and notwithstanding the fact that a
lesser percentage may be specified by law, the affirmative vote of the holders
of at least seventy-five percent (75%) of the votes which all stockholders would
be entitled to cast at any annual election of directors or class of directors
shall be required to amend or repeal, or to adopt any provision inconsistent
with this Article TWELFTH."
THIRTEENTH: 1. Actions, Suits and Proceedings Other than by or in the Right
of the Corporation. The Corporation shall indemnify each person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative
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(other than an action by or in the right of the Corporation), by reason of the
fact that he is or was, or has agreed to become, a director or officer of the
Corporation, or is or was serving, or has agreed to serve, at the request of the
Corporation, as a director, officer or trustee of, or in a similar capacity
with, another corporation, partnership, joint venture, trust or other enterprise
(including any employee benefit plan) (all such persons being referred to
hereafter as an "Indemnitee"), or by reason of any action alleged to have been
taken or omitted in such capacity, against all expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such action, suit or
proceeding and any appeal therefrom, if he acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. Notwithstanding
anything to the contrary in this Article, except as set forth in Section 6
below, the Corporation shall not indemnify an Indemnitee seeking indemnification
in connection with a proceeding (or part thereof) initiated by the Indemnitee
unless the initiation thereof was approved by the Board of Directors of the
Corporation.
2. Actions or Suits by or in the Right of the Corporation. The Corporation
shall indemnify any Indemnitee who was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was, or has agreed to become, a director or officer of the
Corporation, or is or was serving, or has agreed to serve, at the request of the
Corporation, as a director, officer or trustee of, or in a similar capacity
with, another corporation, partnership, joint venture, trust or other enterprise
(including any employee benefit plan), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees) and amounts paid in settlement actually and reasonably incurred
by him or on his behalf in connection with such action, suit or proceeding and
any appeal therefrom, if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the Corporation,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery of Delaware
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of such liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses (including attorneys' fees) which the Court of
Chancery of Delaware or such other court shall
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deem proper.
3. Indemnification for Expenses of Successful Party. Notwithstanding the
other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of any
claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a disposition without
prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an
adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of
guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the
Indemnitee did not act in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and (v) with
respect to any criminal proceeding, an adjudication that the Indemnitee had
reasonable cause to believe his conduct was unlawful, the Indemnitee shall be
considered for the purposes hereof to have been wholly successful with respect
thereto.
4. Notification and Defense of Claim. As a condition precedent to his right
to be indemnified, the Indemnitee must notify the Corporation in writing as soon
as practicable of any action, suit, proceeding or investigation involving him
for which indemnity will or could be sought. With respect to any action, suit,
proceeding or investigation of which the Corporation is so notified, the
Corporation will be entitled to participate therein at its own expense and/or to
assume the defense thereof at its own expense, with legal counsel reasonably
acceptable to the Indemnitee. After notice from the Corporation to the
Indemnitee of its election so to assume such defense, the Corporation shall not
be liable to the Indemnitee for any legal or other expenses subsequently
incurred by the Indemnitee in connection with such claim, other than as provided
below in this Section 4. The Indemnitee shall have the right to employ his own
counsel in connection with such claim, but the fees and expenses of such counsel
incurred after notice from the Corporation of its assumption of the defense
thereof shall be at the expense of the Indemnitee unless (i) the employment of
counsel by the Indemnitee has been authorized by the Corporation, (ii) counsel
to the Indemnitee shall have reasonably concluded that there may be a conflict
of interest or position on any significant issue between the Corporation and the
Indemnitee in the conduct of the defense of such action or (iii) the Corporation
shall not in fact have employed counsel to assume the defense of such action, in
each of which cases the fees and expenses of counsel for the Indemnitee shall be
at the expense of the Corporation, except as otherwise expressly provided by
this Article. The Corporation shall not be entitled, without the consent of the
Indemnitee, to assume the defense of any claim brought by or in the right of the
Corporation or as to which counsel for the Indemnitee shall have reasonably made
the conclusion provided for in clause (ii) above.
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5. Advance of Expenses. Subject to the provisions of Section 6 below, in
the event that the Corporation does not assume the defense pursuant to Section 4
of this Article of any action, suit, proceeding or investigation of which the
Corporation receives notice under this Article, any expenses (including
attorneys' fees) incurred by an Indemnitee in defending a civil or criminal
action, suit, proceeding or investigation or any appeal therefrom shall be paid
by the Corporation in advance of the final disposition of such matter, provided,
however, that the payment of such expenses incurred by an Indemnitee in advance
of the final disposition of such matter shall be made only upon receipt of an
undertaking by or on behalf of the Indemnitee to repay all amounts so advanced
in the event that it shall ultimately be determined that the Indemnitee is not
entitled to be indemnified by the Corporation as authorized in this Article.
Such undertaking may be accepted without reference to the financial ability of
such person to make such repayment.
6. Procedure for Indemnification. In order to obtain indemnification or
advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article, the
Indemnitee shall submit to the Corporation a written request, including in such
request such documentation and information as is reasonably available to the
Indemnitee and is reasonably necessary to determine whether and to what extent
the Indemnitee is entitled to indemnification or advancement of expenses. Any
such indemnification or advancement of expenses shall be made promptly, and in
any event within 60 days after receipt by the Corporation of the written request
of the Indemnitee, unless with respect to requests under Section 1, 2 or 5 the
Corporation determines, by clear and convincing evidence, within such 60-day
period that the Indemnitee did not meet the applicable standard of conduct set
forth in Section 1 or 2, as the case may be. Such determination shall be made in
each instance by (a) a majority vote of a quorum of the directors of the
Corporation consisting of persons who are not at that time parties to the
action, suit or proceeding in question ("disinterested directors"), (b) if no
such quorum is obtainable, a majority vote of a committee of two or more
disinterested directors, (c) a majority vote of a quorum of the outstanding
shares of stock of all classes entitled to vote for directors, voting as a
single class, which quorum shall consist of stockholders who are not at that
time parties to the action, suit or proceeding in question, (d) independent
legal counsel (who may be regular legal counsel to the Corporation), or (e) a
court of competent jurisdiction.
7. Remedies. The right to indemnification or advances as granted by this
Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 6. Unless otherwise provided by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
this Article shall be on the Corporation. Neither the failure of the Corporation
to have made a determination prior to the commencement of such action that
indemnification is proper in the
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circumstances because the Indemnitee has met the applicable standard of conduct,
nor an actual determination by the Corporation pursuant to Section 6 that the
Indemnitee has not met such applicable standard of conduct, shall be a defense
to the action or create a presumption that the Indemnitee has not met the
applicable standard of conduct. The Indemnitee's expenses (including attorneys'
fees) incurred in connection with successfully establishing his right to
indemnification, in whole or in part, in any such proceeding shall also be
indemnified by the Corporation.
8. Subsequent Amendment. No amendment, termination or repeal of this
Article or of the relevant provisions of the General Corporation Law of Delaware
or any other applicable laws shall affect or diminish in any way the rights of
any Indemnitee to indemnification under the provisions hereof with respect to
any action, suit, proceeding or investigation arising out of or relating to any
actions, transactions or facts occurring prior to the final adoption of such
amendment, termination or repeal.
9. Other Rights. The indemnification and advancement of expenses provided
by this Article shall not be deemed exclusive of any other rights to which an
Indemnitee seeking indemnification or advancement of expenses may be entitled
under any law (common or statutory), agreement or vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in any other capacity while holding office for the Corporation,
and shall continue as to an Indemnitee who has ceased to be a director or
officer, and shall inure to the benefit of the estate, heirs, executors and
administrators of the Indemnitee. Nothing contained in this Article shall be
deemed to prohibit, and the Corporation is specifically authorized to enter
into, agreements with officers and directors providing indemnification rights
and procedures different from those set forth in this Article. In addition, the
Corporation may, to the extent authorized from time to time by its Board of
Directors, grant indemnification rights to other employees or agents of the
Corporation or other persons serving the Corporation and such rights may be
equivalent to, or greater or less than, those set forth in this Article.
10. Partial Indemnification. If an Indemnitee is entitled under any
provision of this Article to indemnification by the Corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
11. Insurance. The Corporation may purchase and maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
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Corporation or another corporation, partnership, joint venture, trust or other
enterprise (including any employee benefit plan) against any expense, liability
or loss incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify such
person against such expense, liability or loss under the General Corporation Law
of Delaware.
12. Merger or Consolidation. If the Corporation is merged into or
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
13. Savings Clause. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest extent permitted by any applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.
14. Definitions. Terms used herein and defined in Section 145(h) and
Section 145(i) of the General Corporation Law of Delaware shall have the
respective meanings assigned to such terms in such Section 145(h) and Section
145(i).
15. Subsequent Legislation. If the General Corporation Law of Delaware is
amended after adoption of this Article to expand further the indemnification
permitted to Indemnitees, then the Corporation shall indemnify such persons to
the fullest extent permitted by the General Corporation Law of Delaware, as so
amended.
This Restated Certificate of Incorporation supersedes and takes the place
of the heretofore existing Restated Certificate of Incorporation of this
Corporation and any and all amendments, certificates and supplements thereto, if
any.
IN WITNESS WHEREOF, said Sepracor Inc. has caused this Restated Certificate
of Incorporation to be signed by Victor H. Woolley, its Vice President, Finance,
and attested by Mark G. Borden, its Secretary, this 17th day of December, 1991.
By: /s/ Victor H. Woolley
---------------------
Victor H. Woolley
Vice President, Finance
ATTEST:
By: /s/ Mark G. Borden
------------------
Mark G. Borden
Secretary
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CERTIFICATE OF OWNERSHIP AND MERGER
merging
IBF Biotechnics Inc.,
a Delaware corporation
into
Sepracor Inc.,
a Delaware corporation
Sepracor Inc., a corporation organized and existing under the laws of the
State of Delaware (the "Corporation"), does hereby certify:
FIRST: That the Corporation was incorporated on the 27th day of January,
1984, pursuant to the General Corporation Law of the State of Delaware.
SECOND: That the Corporation owns all of the outstanding shares of the only
class of authorized capital stock of IBF Biotechnics Inc., a corporation
incorporated on December 8, 1986, pursuant to the General Corporation Law of the
State of Delaware.
THIRD: That the Corporation, by the following resolutions of its Board of
Directors, duly adopted at a Meeting of the Board of Directors on November 24,
1992, determined to merge IBF Biotechnics Inc. into the Corporation:
RESOLVED: That the Corporation, being the holder of 100% of the authorized and
outstanding capital stock of IBF Biotechnics Inc., a Delaware
corporation ("IBF"), hereby approves and authorizes the merger of
IBF with and into the Company (the "IBF Merger") pursuant to Section
253 of the Delaware General Corporation Law, such merger to be
effective upon the filing of a Certificate of Ownership and Merger
with the Secretary of State of Delaware, and that the Company hereby
assumes all of the obligations of IBF which the Company is required
to assume under Delaware law.
FURTHER
RESOLVED: That the Restated Certificate of Incorporation of the Company, as
amended, shall be the Certificate of Incorporation of the Company as
of the effective date of the IBF Merger.
FURTHER
RESOLVED: That the appropriate officers of the Company be, and each of
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them acting singly hereby is, authorized to execute all such
documents and instruments as they or any of them deem necessary or
appropriate to effectuate the purposes of the foregoing resolutions.
IN WITNESS WHEREOF, Sepracor Inc. has caused this Certificate to be signed
by its President and attested by its Secretary, this 21st day of December, 1992.
By: /s/ Timothy J. Barberich
------------------------
Timothy J. Barberich,
President
ATTEST:
By: /s/ Mark G. Borden
------------------
Mark G. Borden
Secretary
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Certificate of Designations of the Preferred Stock
of
Sepracor Inc.
To be Designated
Series A Convertible Preferred Stock
Sepracor, Inc., a Delaware corporation (the "Corporation"), pursuant to
authority conferred on the Board of Directors of the Corporation by the
Certificate of Incorporation and in accordance with the provisions of Section
151 of the General Corporation law of the State of Delaware, certifies that the
Board of Directors of the Corporation, by unanimous written consent in lieu of a
meeting, duly adopted the following resolution:
RESOLVED: That, pursuant to the authority expressly granted to and vested
in the Board of Directors of the Corporation in accordance with
the provisions of its Certificate of Incorporation, a series of
Preferred Stock of the Corporation be and hereby is
established, consisting of 80,000 shares, to be designated
"Series A Convertible Preferred Stock" (hereinafter "Series A
Preferred Stock"); that the Board of Directors be and hereby is
authorized to issue such shares of Series A Preferred Stock
from time to time and for such consideration and on such terms
as the Board of Directors shall determine; and that, subject to
the limitations provided by law and by the Certificate of
Incorporation, the powers, designations, preferences and
relative, participating, optional or other special rights of,
and the qualifications, limitations or restrictions upon, the
Series A Preferred Stock shall be as follows:
Eighty Thousand (80,000) shares of the authorized and unissued
Preferred Stock of the Corporation ("Series Preferred Stock")
are hereby designated "Series A Convertible Preferred Stock"
(the "Series A Preferred Stock") with the following rights,
preferences, powers, privileges and restrictions,
qualifications and limitations.
1. Dividends.
(a) The Corporation shall not declare or pay any distributions (as defined
below) on shares of Common Stock until the holders of the Series A Preferred
Stock then outstanding shall have first received, or simultaneously receive, a
dividend on each
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(b) After the payment of all preferential amounts required to be paid to
the holders of Senior Preferred Stock, Series A Preferred Stock and any other
class or series of stock of the Corporation ranking on liquidation on a parity
with the Series A Preferred Stock, upon the dissolution, liquidation or winding
up of the Corporation, the holders of shares of Junior Stock then outstanding
shall be entitled to receive the remaining assets and funds of the Corporation
available for distribution to its stockholders.
(c) In the event of any merger or consolidation of the Corporation into or
with another corporation (except one in which the holders of capital stock of
the Corporation immediately prior to such merger or consolidation continue to
hold at least 60% by voting power of the capital stock of the surviving
corporation), or the sale of all or substantially all of the assets of the
Corporation where the consideration payable to the holders of Series A Preferred
Stock (in the case of a merger or consolidation), or the consideration payable
to such holders, together with all other available assets of the Corporation (in
the case of an asset sale), is less than $63.00 per share of Series A Preferred
Stock, then, if the holders of at least a majority of the then outstanding
shares of Series A Preferred Stock so elect by giving written notice thereof to
the Corporation at least three days before the effective date of such event,
then such merger, consolidation or asset sale shall be deemed to be a
liquidation of the Corporation, and all consideration payable to the
stockholders of the Corporation (in the case of a merger or consolidation), or
all consideration payable to the Corporation, together with all other available
assets of the Corporation (in the case of an asset sale), shall be distributed
to the holders of capital stock of the Corporation in accordance with
Subsections 2(a) and 2(b) above. The Corporation shall promptly provide to the
holders of shares of Series A Preferred Stock such information concerning the
terms of such merger, consolidation or asset sale and the value of the assets of
the Corporation as may reasonably be requested by the holders of Series A
Preferred Stock in order to assist them in determining whether to make such an
election. The amount deemed distributed to the holders of Series A Preferred
Stock upon any such merger or consolidation shall be the cash or the value of
the property, rights or securities distributed to such holders by the acquiring
person, firm or other entity. The value of such property, rights or other
securities shall be reasonably determined by the Board of Directors of the
Corporation. If no notice of the election permitted by this Subsection (c) is
given, the provisions of Subsection 4(i) shall apply. Any other merger or
consolidation of the Corporation into or with another corporation shall not be
deemed to be a liquidation, dissolution, or winding up of the Corporation for
purposes of this Section 2.
3. Voting.
(a) Each holder of outstanding shares of Series A Preferred Stock shall be
entitled to the number of votes equal to the number of whole shares of Common
Stock into which the shares of Series A Preferred Stock held by such holder are
then
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convertible (as adjusted form time to time pursuant to Section 4 hereof), at
each meeting of stockholders of the Corporation (and written actions of
stockholders in lieu of meetings) with respect to any and all matters presented
to the stockholders of the Corporation for their action or consideration. Except
as provided by law, or by the provisions establishing any other series of Series
Preferred Stock, holders of Series A Preferred Stock and of any other
outstanding series of Series Preferred Stock shall vote together with the
holders of Common Stock as a single class.
(b) Without the consent of the holders of majority of the Series A
Preferred Stock, the Corporation shall not enter into any merger or
consolidation (except one in which the holders of capital stock of the
Corporation immediately prior to such merger or consolidation continue to hold
at least 60% by voting power of the capital stock of the surviving corporation)
or the sale of substantially all the assets of the Corporation where the
consideration payable to the holders of the Series A Preferred Stock shall have
a value less than $63.00 per share, in the same form as the consideration being
given to the majority of shares of Common Stock with the value being determined
by an independent appraiser.
4. Optional Conversion. The holders of the Series A Preferred Stock shall
have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock shall be
convertible, at the option of the holder thereof, at any time and from time to
time, and without the payment of additional consideration by the holder thereof,
into such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing $63.00 by the Conversion Price (as defined below) in
effect at the time of conversion. The "Conversion Price" shall initially be
$6.30. Such initial Conversion Price, and the rate at which shares of Series A
Preferred Stock may be converted into shares of Common Stock, shall be subject
to adjustment as provided below.
(b) Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion of the Series A Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then fair
market value of the Common Stock.
(c) Mechanics of Conversion.
(i) In order for a holder of Series A Preferred Stock to convert
shares of Series A Preferred Stock into shares of Common Stock, such holder
shall surrender the certificate or certificates for such shares of Series A
Preferred Stock, at the office of the transfer agent for the Series A Preferred
Stock (or at the principal office of the Corporation if the Corporation serves
as its own transfer agent), together with written notice that such holder elects
to convert all or any number of the shares
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of the Series A Preferred Stock represented by such certificate or certificates.
Such notice shall state such holder's name or the names of the nominees in which
such holder wishes the certificate or certificates for shares of Common Stock to
be issued. If required by the Corporation, certificates surrendered for
conversion shall be endorsed or accompanied by a written instrument or
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the registered holder or his or its attorney duly authorized in writing. The
date of receipt of such certificates and notice by the transfer agent (or by the
Corporation if the Corporation serves as its own transfer agent) shall be the
conversion date ("Conversion Date"). The Corporation shall, as soon as
practicable after the Conversion Date, issue and deliver at such office to such
holder of Series A Preferred Stock, or to his or its nominees, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled, together with cash in lieu of any fraction of a share.
(ii) The Corporation shall at all times when the Series A Preferred
Stock shall be outstanding, reserve and keep available out of its authorized but
unissued stock, for the purpose of effecting the conversion of the Series A
Preferred Stock, such number of its duly authorized shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding Series A Preferred Stock. Before taking any action which would cause
an adjustment reducing the Conversion Price below the then par value of the
shares of Common Stock issuable upon conversion of the Series A Preferred Stock,
the Corporation will take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Corporation may validly and legally
issue fully paid and nonassessable shares of Common Stock at such adjusted
Conversion Price.
(iii) Upon any such conversion, no adjustment of the Conversion
Price shall be made for any declared or accrued but unpaid dividends on the
Series A Preferred Stock surrendered for conversion or on the Common Stock
delivered upon conversion.
(iv) All shares of Series A Preferred Stock which shall have been
surrendered for conversion as herein provided shall no longer be deemed to be
outstanding and all rights with respect to such shares, including the rights, if
any, to receive notices and to vote, shall immediately cease and terminate on
the Conversion Date, except only the right of the holders thereof to receive
shares of Common Stock in exchange therefor and payment of any dividends
declared but unpaid thereon. Any shares of Series A Preferred Stock so converted
shall be retired and cancelled and shall not be reissued, and the Corporation
(without the need for stockholder action) may from time to time take such
appropriate action as may be necessary to reduce the authorized Series A
Preferred Stock accordingly.
(v) The Corporation shall pay any and all issue and other taxes that
may be payable in respect of any issuance or delivery of shares of
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Common Stock upon conversion of shares of Series A Preferred Stock pursuant to
this Section 4. The Corporation shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of shares of Common Stock in a name other than that in which the shares
of Series A Preferred Stock so converted were registered, and no such issuance
or delivery shall be made unless and until the person or entity requesting such
issuance has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
(d) Adjustments to Conversion Price for Diluting Issues:
(i) Special Definitions. For purposes of this Subsection 4(d), the
following definitions shall apply:
(A) "Option" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire Common Stock or Convertible Securities,
excluding options described in subsection 4(d)(i)(D)(V) below.
(B) "Original Issue Price" shall mean the date on which a share
of Series A Preferred Stock was first issued.
(C) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities directly or indirectly convertible into
or exchangeable for Common Stock.
(D) "Additional Shares of Common Stock" shall mean all shares of
Common Stock issued (or, pursuant to Subsection 4(d)(iii) below, deemed to be
issued) by the Corporation after the Original Issue Date, other than shares
issued or issuable:
(E) "Common Stock" shall be deemed to include equity security
having rights to receive dividends or distributions (including liquidation) not
limited to a fixed sum or percentage of the purchase price therefor. The price
at which such securities are deemed issued for purposes of this Section 4(d)
shall take into account as appropriate the relationship between the terms
thereof and the terms of the Series A Preferred Stock.
(I) upon exercise of any warrants or options or conversion of
any convertible securities of the Corporation outstanding
prior to the Original Issuance Date;
(II) as a dividend or distribution on Series A Preferred Stock;
(III) (by reason of a dividend, stock split, split-up
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or other distribution on shares of Common Stock that is
covered by Subsection 4(e) or 4(f) below;
(IV) in connection with the acquisition by the Corporation of
another corporation of business;
(V) to employees or directors of, or consultants to, the
Corporation or any subsidiary as approved by the Board of
Directors of the Corporation, or
(VI) to pharmaceutical companies or other strategic partners in
connection with a licensing, development, joint venture or
similar arrangement between the Corporation and such
company or partner.
(ii) No Adjustment of Conversion Price. No adjustment in the number
of shares of Common Stock into which the Series A Preferred Stock is convertible
shall be made, by adjustment in the applicable Conversion Price thereof: (a)
unless the consideration per share (determined pursuant to Subsection 4(d)(v))
for an Additional Share of Common Stock issued or deemed to be issued by the
Corporation is less than the applicable Conversion Price in effect on the date
of, and immediately prior to, the issue of such Additional Shares, or (b) if
prior to such issuance, the Corporation receives written notice from the holders
of at least a majority of the then outstanding shares of Series A Preferred
Stock agreeing that no such adjustment shall be made as the result of the
issuance of Additional Shares of Common Stock.
(iii) Issue of Securities Deemed Issue of Additional Shares of
Common Stock. If the Corporation at any time or from time to time after the
Original Issue Date shall issue any Options or Convertible Securities or shall
fix a record date for the determination of holders of any class of securities
entitled to receive any such Options or Convertible Securities, then the maximum
number of shares of Common Stock (as set forth in the instrument relating
thereto without regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issue or, in case such a record date
shall have been fixed, as of the close of business on such record date, provided
that Additional Shares of Common Stock shall not be deemed to have been issued
unless the consideration per share (determined pursuant to Subsection 4(d)(v)
hereof) of such Additional Shares of Common Stock would be less than the
applicable Conversion Price in effect on the date of and immediately prior to
such issue, or such record date, as the case may be, and provided further that
in any
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such case in which Additional Shares of Common Stock are deemed to be issued:
(A) No further adjustment in the Conversion Price shall be made
upon the subsequent issue of Convertible Securities or shares of Common Stock
upon the exercise of such Options or conversion or exchange of such Convertible
Securities;
(B) If such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase or decrease in
the consideration payable to the Corporation, upon the exercise, conversion or
exchange thereof, the Conversion Price computed upon the original issue thereof
(or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase or decrease, as
applicable, insofar as it affects such Options or the rights or conversion or
exchange under such Convertible Securities;
(C) Upon the expiration or termination of any unexercised
Option, the Conversion Price shall not be readjusted; and
(D) No readjustment pursuant to clause (B) above shall have the
effect of increasing the Conversion Price to an amount which exceeds the lower
of (i) the Conversion Price on the original adjustment date, or (ii) the
Conversion Price that would have resulted from any issuances of Additional
Shares of Common Stock between the original adjustment date and such
readjustment date.
(iv) Adjustment of Conversion Price Upon Issuance of Additional
Shares of Common Stock. In the event the Corporation shall at any time after the
Original Issue Date issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Subsection
4(d)(iii), but excluding shares issued as a dividend or distribution as provided
in Subsection 4(f) or upon a stock split or combination as provided in
Subsection 4(e)), without consideration or for a consideration per share less
than the applicable Conversion Price in effect on the date of and immediately
prior to such issue, then and in such event, such Conversion Price shall be
reduced, concurrently with such issue, to a price equal to the consideration per
share received by the Corporation for the issue of the Additional Shares of
Common Stock (determined pursuant to Subsection 4(d)(v)).
(v) Determination of Consideration. For purposes of this Subsection
4(d), the consideration received by the Corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(A) Cash and Property: Such consideration shall:
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(I) insofar as it consists of cash, be computed at the
aggregate of cash received by the Corporation, excluding
amounts paid or payable for accrued interest or accrued
dividends;
(II) insofar as it consists of property other than cash, be
computed at the fair market value thereof at the time of
such issue, as reasonably determined by the Board of
Directors, and
(III) in the event Additional Shares of Common Stock are issued
together with other shares or securities or other assets
of the Corporation for consideration which covers both, be
the proportion of such consideration so received, computed
as provided in clauses (I) and (II) above, as reasonably
determined by the Board of Directors.
(B) Options and Convertible Securities. The consideration per
share received by the Corporation for Additional Shares of Common Stock deemed
to have been issued pursuant to Subsection 4(d)(iii), relating to Options and
Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable by the
Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Corporation upon the exercise of such Options or the conversion or exchange
of such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
(y) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(e) Adjustment for Stock Splits and Combinations. If the Corporation shall
at any time or from time to time after the Original Issue Date effect a
subdivision of the outstanding Common Stock, the Conversion Price then in effect
immediately before that subdivision shall be proportionately decreased. If the
Corporation shall at any time or from time to time after the Original Issue Date
effect
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a subdivision of the Series A Preferred Stock, the Conversion Price then in
effect immediately before that subdivision shall be proportionately increased.
If the Corporation shall at any time or from time to time after the Original
Issue Date combine the outstanding shares of Common Stock, the Conversion Price
then in effect immediately before the combination shall be proportionately
increased. If the Corporation shall at any time or from time to time after the
Original Issue Date combine the outstanding shares of Series A Preferred Stock,
the Conversion Price then in effect immediately before the combination shall be
proportionately decreased. Any adjustment under this paragraph shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
(f) Adjustment for Certain Dividends and Distributions. In the event the
Corporation at any time, or from time to time after the Original Issue Date
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Conversion
Price for the Series A Preferred Stock then in effect shall be decreased as of
the time of such issuance or, in the event such a record date shall have been
fixed, as of the close of business on such record date, by multiplying the
Conversion Price for the Series A Preferred Stock then in effect by a fraction:
(1) the numerator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date, and
(2) the denominator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date plus the number of
shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, if such record date shall have been fixed
and such dividend is not fully paid or if such distribution is not fully
made on the date fixed therefore, the Conversion Price for the Series A
Preferred Stock shall be recomputed accordingly as of the close of business
on such record date and thereafter the Conversion Price for the Series A
Preferred Stock shall be adjusted pursuant to this paragraph as of the time
of actual payment of such dividends or distributions; and provided further,
however, that no such adjustment shall be made if the holders of Series A
Preferred Stock simultaneously receive a dividend or other distribution of
shares of Common Stock in a number equal to the number of shares of Common
Stock as they would have received if all outstanding shares of Series A
Preferred Stock had been converted into Common Stock on the date of such
event.
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(g) Prohibition on Certain Dividends and Distributions. The Corporation
shall not, at any time or from time to time after the Original Issue Date for
the Series A Preferred Stock, make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in securities of the Corporation other than shares of
Common Stock, unless the holders of Series A Preferred Stock simultaneously
receive a dividend or other distribution of such securities in an amount equal
to the amount of such securities as they would have received if all outstanding
shares of Series A Preferred Stock had been converted into Common Stock on the
date of such event.
(h) Adjustment for Reclassification, Exchange or Substitution. If the
Common Stock issuable upon the conversion of the Series A Preferred Stock shall
be changed into the same or a different number of shares of any class or classes
of stock, whether by capital reorganization, reclassification, or otherwise
(other than a subdivision or combination of shares or stock dividend provided
for above, or a reorganization, merger, consolidation, or sale of assets
provided for below), then and in each such event the holder of each such share
of Series A Preferred Stock shall have the right thereafter to convert such
share into the kind and amount of shares of stock and other securities and
property receivable upon such reorganization, reclassification, or other change,
by holders of the number of shares of Common Stock into which such shares of
Series A Preferred Stock might have been converted immediately prior to such
reorganization, reclassification, or change, all subject to further adjustment
as provided herein.
(i) Adjustment for Merger or Reorganization, etc. In case of any
consolidation or merger of the Corporation with or into another corporation or
the sale of all or substantially all of the assets of the Corporation to another
corporation, each share of Series A Preferred Stock shall thereafter be
convertible (or shall be converted into a security which shall be convertible)
into the kind and amount of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock of the Corporation
deliverable upon conversion of such Series A Preferred Stock would have been
entitled upon such consolidation, merger or sale; and, in such case, appropriate
adjustment (as reasonably determined by the Board of Directors) shall be made in
the application of the provisions in this Section 4 set forth with respect to
the rights and interest thereafter of the holders of the Series A Preferred
Stock, to the end that the provisions set forth in this Section 4 (including
provisions with respect to changes in and other adjustments of the Conversion
Price) shall thereafter be applicable, as nearly as reasonably may be, in
relation to any shares of stock or other property thereafter deliverable upon
the conversion of the Series A Preferred Stock.
(j) No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary
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action, avoid or seek to avoid the observance or performance of any of the terms
to be observed or performed hereunder by the Corporation, but will at all times
in good faith assist in the carrying out of all the provisions of this Section 4
and in the taking of all such action as may be necessary or appropriate in order
to protect the Conversion Rights of the holders of the Series A Preferred Stock
against impairment. If any event occurs as to which the provisions of this
Section 4 are not applicable or if applicable would not fairly protect the
rights of the holders of Series A Preferred Stock in accordance with the
essential intent and principles of such provisions, the application of such
provisions will be adjusted in accordance with such essential intent and
principles so as to protect such rights, but in no event shall the Conversion
Price be increased.
(k) Certificate as to Adjustments. Upon the occurrence of each adjustment
or readjustment of the Conversion Price pursuant to this Section 4, the
Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Series A Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock, furnish or cause to be furnished
to such holder a similar certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price then in effect, and (iii) the number of
shares of Common Stock and the amount, if any, of other property which then
would be received upon the conversion of Series A Preferred Stock.
(l) Notice of Record Date. In the event:
(i) that the Corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or
other securities of the Corporation;
(ii) that the Corporation subdivides or combines its outstanding
shares of Common Stock;
(iii) of any reclassification of the Common Stock of the Corporation
(other than a subdivision or combination of its outstanding
shares of Common Stock or a stock dividend or stock distribution
thereon), or of any consolidation or merger of the Corporation
into or with another corporation, or of the sale of all or
substantially all of the assets of the Corporation; or
(iv) of the involuntary or voluntary dissolution, liquidation or
winding upon of the Corporation; then the Corporation
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shall cause to be filed at its principal office or at the office
of the transfer agent of the Series A Preferred Stock, and shall
cause to be mailed to the holders of the Series A Preferred Stock
at their last addresses as shown on the records of the
Corporation or such transfer agent, at least ten days prior to
the date specified in (A) below or twenty days before the date
specified in (B) below, a notice stating
(A) the record date of such dividend, distribution, subdivision
or combination, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be
entitled to such dividend, distribution, subdivision or
combination are to be determined, or
(B) the date on which such reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such
reclassification, consolidation, merger, sale, dissolution or
winding up.
5. Mandatory Conversion.
(a) All outstanding shares of Series A Preferred Stock shall automatically
be converted into shares of Common Stock, at the then effective conversion rate,
upon the earlier of (i) September 30, 2004 or (ii) upon written notice by the
Corporation to the holders of Series A Preferred Stock (which notice may not be
delivered prior to September 30, 1995) following a period of twenty (20)
consecutive trading days in which the lst reported sales price of the Common
Stock on the Nasdaq National Market (or a national securities exchange) equals
or exceeds 160% of the then effective Conversion Price (the "Mandatory
Conversion Date").
(b) All holders of record of shares of Series A Preferred Stock will be
given written notice of the Mandatory Conversion Date and the place designated
for mandatory conversion of all such shares of Series A Preferred Stock pursuant
to this Section 5. Such notice shall be sent by first class or registered mail,
postage prepaid, to each record holder of Series A Preferred Stock at such
holder's address last shown on the records of the transfer agent for the Series
A Preferred Stock (or the records of the Corporation, if it serves as its own
transfer agent). Upon receipt of such notice, each holder of shares of Series A
Preferred Stock shall surrender his or its certificate or certificates for all
such shares to the Corporation at the place designated in such notice, and shall
thereafter receive certificates for the number of shares of Common Stock to
which such holder is entitled pursuant to this Section 5. On the Mandatory
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Conversion Date, all rights with respect to the Series A Preferred Stock so
converted, including the rights, if any, to receive notices and vote, will
terminate, except only the rights of the holders thereof, upon surrender of
their certificate or certificates therefor, to receive certificates for the
number of shares of Common Stock into which such Series A Preferred Stock has
been converted, and payment of any declared but unpaid dividends thereon and any
dividends or distributions required to be declared under Section 1(a). If so
required by the Corporation, certificates surrendered for conversion shall be
endorsed or accompanied by written instrument or instruments of transfer, in
form satisfactory to the Corporation, duly executed by the registered holder or
by his or its attorney duly authorized in writing. As soon as practicable after
the Mandatory Conversion Date and the surrender of the certificate or
certificates for Series A Preferred Stock, the Corporation shall cause to be
issued and delivered to such holder, or on his or its written order, a
certificate or certificates for the number of full shares of Common Stock
issuable on such conversion in accordance with the provisions hereof and cash as
provided in Subsection 4(b) in respect of any fraction of a share of Common
Stock otherwise issuable upon such conversion.
(c) All certificates evidencing shares of Series A Preferred Stock which
are required to be surrendered for conversion in accordance with the provisions
hereof shall, from and after the Mandatory Conversion Date, be deemed to have
been retired and cancelled and the shares of Series A Preferred Stock
represented thereby converted into Common Stock for all purposes,
notwithstanding the failure of the holder or holders thereof to surrender such
certificates on or prior to such date. The Corporation may thereafter take such
appropriate action (without the need for stockholder action) as may be necessary
to reduce the authorized Series A Preferred Stock accordingly.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Amendment to be signed by its President
and attested to by its Assistant Secretary this 30th day of September, 1994.
SEPRACOR, INC.
By: /s/ Timothy J. Barberich
------------------------
ATTEST:
/s/ Victor Woolley
- ------------------
Assistant Secretary
[Corporate Seal]
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CERTIFICATE OF CORRECTION
FILED TO CORRECT CERTAIN ERRORS IN
THE CERTIFICATE OF DESIGNATIONS OF
THE PREFERRED STOCK OF
SEPRACOR INC.
TO BE DESIGNATED
SERIES A CONVERTIBLE PREFERRED STOCK
FILED IN THE OFFICE OF THE SECRETARY OF STATE OF DELAWARE ON
SEPTEMBER 30, 1994.
SEPRACOR INC., a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
1. The name of the corporation is Sepracor Inc.
2. The Certificate of Designations of the Preferred Stock of Sepracor Inc.
to be designated Series A Convertible Preferred Stock was filed with
the Secretary of State of the State of Delaware on September 30, 1994
and that said certificate requires corrections permitted by subsection
(f) of Section 103 of the General Corporation Law of the State of
Delaware.
3. The inaccuracies or defects of said certificate to be corrected are as
follows:
(a) Certain words were inadvertently omitted from Subsection (b) of
Section 3;
(b) A typographical error is included in Subsection (d)(i)(D)(I) of
Section 4;
(c) Subsection (d)(i)(E) of Section 4 was inadvertently located within
subsection (d)(i)(D);
(c) The final page of said certificate was inadvertently numbered as
page 15.
In order to correct said inaccuracies or defects, the following shall
occur:
(a) Subsection (b) of Section 3 shall read in its entirety:
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Without the consent of the holders of a majority of the shares of
Series A Preferred Stock then outstanding, the Corporation shall
not enter into any merger or consolidation (except one in which
the holders of capital stock of the Corporation immediately prior
to such merger or consolidation continue to hold at least 60% by
voting power of the capital stock of the surviving corporation) or
the sale of substantially all the assets of the Corporation where
the consideration payable to the holders of the Series A Preferred
Stock shall have a value less than $63.00 per share in the same
form as the consideration being given to the majority of shares of
Common Stock with the value being determined by an independent
appraiser.";
(b) The words "Original Issuance Date" in Subsection (d)(i)(D)(I) of
Section 4 shall be changed to "Original Issue Date.";
(c) Subsection (d)(i)(E) of Section 4, shall be relocated to
immediately follow subsection (d)(i)(D)(VI) of Section 4;
(d) The final page shall be renumbered as page 16.
IN WITNESS WHEREOF, said Sepracor Inc. has caused this certificate to be
signed by Timothy J. Barberich, its President, and attested by Victor H.
Woolley, its Assistant Secretary, this 28 day of October, 1994.
SEPRACOR INC.
By: /s/ Timothy J. Barberich
------------------------
President
ATTEST:
By: /s/ Victor Woolley
------------------
Assistant Secretary
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CERTIFICATE OF DESIGNATIONS, PREFERENCES,
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF PREFERRED STOCK
AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
OF
SERIES B REDEEMABLE EXCHANGEABLE PREFERRED STOCK
OF
SEPRACOR INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
Sepracor Inc., a Delaware corporation (the "Corporation"), certifies that
pursuant to the authority contained in Article FOURTH of its Restated
Certificate of Incorporation (the "Certificate of Incorporation") and in
accordance with the provisions of Section 151 of the General Corporation Law of
the State of Delaware, the Board of Directors of the Corporation, at a meeting
duly called and held, at which a quorum was present and acting throughout, duly
adopted the following resolution, which resolution remains in full force and
effect on the date hereof:
RESOLVED, that there is hereby established a series of authorized Preferred
Stock having a par value of $1.00 per share, which series shall be designated
"Series B Redeemable Exchangeable Preferred Stock" (hereinafter "Series B
Preferred Stock"), shall consist of 312,500 shares and shall have the following
powers, preferences and relative, participating, optional and other special
rights, and qualifications, limitations and restrictions thereof:
1. Dividends. Holders of shares of Series B Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available therefor, an annual cash dividend of $1.92 per share,
payable on each March 8 after the date of issuance of Series B Preferred Stock
until March 8, 2000. Such dividends shall accrue from day to day and shall be
cumulative from the date of issuance of each share of Series B Preferred Stock,
whether or not declared. After March 8, 2000, no dividends shall accrue on
outstanding shares of Series B Preferred Stock. Dividends will be payable to
holders of record as they appear on the stock records of the Corporation on such
record dates, not more than 60 days preceding the applicable payment date, as
shall be fixed by the Board of Directors of the Corporation. Dividends payable
for any partial period shall be calculated on the basis of a 360-day year, and
accrued but unpaid dividends shall not bear interest.
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2. Liquidation, Dissolution or Winding Up: Certain Mergers and
Consolidations.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series B
Preferred Stock then outstanding shall be entitled to be paid out of the assets
of the Corporation available for distribution to its stockholders, after and
subject to payment in full of all amounts required to be distributed to any
class or series of stock of the Corporation ranking on liquidation prior and in
preference to the Series B Preferred Stock (such stock being collectively
referred to as the "Senior Preferred Stock"), but before any payment shall be
made to the holders of the common stock, par value $0.10 per share, of the
Corporation ("Common Stock") or any other class or series of stock ranking on
liquidation junior to the Series B Preferred Stock (such Common Stock and other
stock being collectively referred to as "Junior Stock") by reason of their
ownership thereof, an amount equal to $16.00 per share (subject to appropriate
adjustment in the event of any stock dividend, stock split, combination or other
similar recapitalization affecting such shares), plus any dividends declared or
accrued but unpaid on such shares. The Series A Convertible Preferred Stock of
the Corporation (the "Series A Preferred Stock") shall rank on liquidation on a
parity with the Series B Preferred Stock. If upon any such liquidation,
dissolution or winding up of the Corporation the remaining assets of the
Corporation available for distribution to the stockholders shall be insufficient
to pay the holders of shares of Series A Preferred Stock and Series B Preferred
Stock the full amount to which they shall be entitled, the holders of shares of
Series A Preferred Stock, Series B Preferred Stock and any class or series of
stock ranking on liquidation on a parity with the Series A Preferred Stock and
the Series B Preferred Stock shall share ratably in any distribution of the
remaining assets and funds of the Corporation in proportion to the respective
amounts which would otherwise be payable in respect of the shares held by them
upon such distribution if all amounts payable on or with respect to such shares
were paid in full.
(b) After the payment of all preferential amounts required to be paid to
the holders of Senior Preferred Stock, Series A Preferred Stock, Series B
Preferred Stock and any other class or series of stock of the Corporation
ranking on liquidation on a parity with the Series B Preferred Stock, upon the
dissolution, liquidation or winding up of the Corporation, the holders of shares
of Junior Stock then outstanding shall be entitled to receive the remaining
assets and funds of the Corporation available for distribution to its
stockholders.
(c) At least 20 days prior to the date of any dissolution, liquidation
or winding up of the Corporation, the Corporation shall give notice thereof in
the manner provided by Section 5(c) hereof in order to permit the holders of
Series B Preferred Stock to exercise their right to exchange such shares before
their Exchange Rights (as defined in Section 5 hereof) terminate.
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<PAGE>
(d) In the event of any merger or consolidation pursuant to which
holders of outstanding shares of Common Stock exchange such shares for cash,
property and/or securities of another corporation or entity (a "Qualified
Merger"), then such merger or consolidation shall be deemed to be a liquidation
of the Corporation for purposes of this Section 2.
3. Voting. Except as otherwise required by law, holders of Series B
Preferred Stock shall not be entitled to any voting rights by virtue of such
ownership.
4. Restriction on Creation of Certain Senior Shares. So long as any Series
B Preferred Stock shall be outstanding, the Corporation shall not, without the
prior written approval of holders of a majority of the Series B Preferred Stock
then outstanding, create any class or series of stock ranking, as to payment of
dividends or liquidation preference, equal or prior to the Series B Preferred
Stock if the terms of such stock in any way restrict the Corporation's ability
to comply with the powers, preferences and special rights of the Series B
Preferred Stock other than in connection with the operation of the preference
upon liquidation, dissolution or winding up (or deemed liquidation) of such
other class or series of stock as set forth in Section 2 hereof.
5. Optional Exchange. The holders of Series B Preferred Stock shall have
exchange rights as follows (the "Exchange Rights"):
(a) Right to Exchange.
(i) At any time after the earlier of (A) 20 days prior to March 8,
2000, (b) the date, prior to March 8, 2000, on which the shares of common stock,
$0.01 par value per share (the "BioSepra Common Stock"), of BioSepra Inc., a
Delaware corporation ("BioSepra") have a closing price as reported by the Wall
Street Journal (or if the Wall Street Journal is not then being published,
publications of similar reliability and repute), greater than 112.5% of the
Exchange Price (as determined in accordance with the provisions of this Section
5), (C) 20 days prior to a BioSepra Event (as defined in Subsection 5(a)(ii)
below), (D) 20 days prior to the date of any redemption made pursuant to Section
6 or 7 hereof or (E) 20 days prior to the date of any dissolution, liquidation
or winding up of the Corporation pursuant to Section 2 hereof, subject to funds
legally available therefor, each share of Series B Preferred Stock shall be
exchangeable, at the option of the holder thereof, and without the payment of
additional consideration by the holder thereof, for such number of outstanding
shares of BioSepra Common Stock held by the Corporation (the "Owned BioSepra
Common Stock") as is determined by dividing $16.00 by the Exchange Price (as
defined below) in effect at the time of exchange. The "Exchange Price" shall
initially be $16.00. Such initial Exchange Price, and the rate at which shares
of Series B Preferred Stock may be exchanged for shares of BioSepra Common
Stock, shall be subject to adjustment as provided below. No declared or accrued
but
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<PAGE>
unpaid dividends shall be paid upon such exchange.
(ii) In the event of a Change of Control of BioSepra, as defined in
Section 7(b) hereof (a "BioSepra Event"), the Exchange Rights may be exercised
at the option of each holder of Series B Preferred Stock prior to the
effectiveness of the BioSepra Event pursuant to the following:
(A) The Corporation shall use its best efforts to provide
written notice to each holder of Series B Preferred Stock at least 20 days prior
to the date on which the BioSepra Event is expected to become effective,
notifying such holder of (I) the date on which the BioSepra Event is expected to
become effective and (II) the date as of which the holders of record of BioSepra
Common Stock shall be entitled to any consideration to be paid to such holders
pursuant to the BioSepra Event; and
(B) Subsequent to the receipt of such written notice pursuant
to clause (A) above by each holder of Series B Preferred Stock, the Corporation
and each holder of such stock shall use their respective best efforts to
effectuate such an optional exchange (pursuant to the provisions of Subsection
5(a)(i) hereof and Section 5(c) hereof) to insure that those holders of Series B
Preferred Stock who exercise their Exchange Rights shall be holders of BioSepra
Common Stock prior to the effectiveness of the BioSepra Event.
(iii) In the event of a notice of any redemption of shares of Series
B Preferred Stock pursuant to Sections 6 or 7 hereof, the Exchange Rights of the
holders of the shares designated for redemption shall terminate at the close of
business on the second full day preceding the date fixed for redemption, unless
the redemption price is not paid when due, in which case the Exchange Rights for
such shares shall continue until such price is paid in full. In the event of a
liquidation of the Corporation pursuant to Section 2 hereof, the Exchange Rights
shall terminate at the close of business on the first full day preceding the
date fixed for the payment of any amounts distributable on liquidation to the
holders of Series B Preferred Stock.
(iv) With respect solely to shares of BioSepra Common Stock obtained
pursuant to an exchange governed by Sections 5(a)(i)(B) or 5(a)(i)(C) above,
holders of such shares of BioSepra Common Stock shall, upon such exchange,
provide a proxy to the Board of Directors of the Corporation or their designees
(expiring on March 8, 2000) for the voting of such shares with respect to any
vote of the stockholders of BioSepra regarding any BioSepra Event.
(b) Fractional Shares. No fractional share of BioSepra Common Stock shall
be issued upon exchange of the Series B Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Exchange Price.
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<PAGE>
(c) Mechanics of an Optional Exchange.
(i) In order for each holder of Series B Preferred Stock to exchange
shares of Series B Preferred Stock for shares of BioSepra Common Stock, such
holder shall surrender the certificate or certificates for such shares of Series
B Preferred Stock at the principal office of the Corporation, together with
written notice to the Corporation that such holder elects to exchange all or any
number of the shares of Series B Preferred Stock represented by such certificate
or certificates. Such notice shall state such holder's name or the names of the
nominees in which such holder wishes the certificate or certificates for shares
of BioSepra Common Stock to be issued. If required by the Corporation,
certificates surrendered for exchange shall be endorsed or accompanied by a
written instrument or instruments of transfer, in form reasonably satisfactory
to the Corporation, duly executed by the registered holder or his or its
attorney duly authorized in writing. The date of receipt of such certificates
and notice by the Corporation shall be the exchange date (the "Exchange Date").
The Corporation shall, as soon as practicable after the Exchange Date, deliver
at such office to such holder of Series B Preferred Stock, or to his or its
nominees, a certificate or certificates for the number of shares of BioSepra
Common Stock to which such holder shall be entitled, together with cash in lieu
of any fraction of a share. On and after the Exchange Date, such holder or his
or its nominees shall be deemed to be the record owner of such shares of
BioSepra Common Stock and have all the rights appertaining thereto.
(ii) The Corporation shall at all times when the Series B Preferred
Stock shall be outstanding, reserve for the purpose of effecting the exchange of
the Series B Preferred Stock, such number of its shares of BioSepra Common Stock
as shall from time to time be sufficient to effect the exchange of all
outstanding Series B Preferred Stock.
(iii) All shares of Series B Preferred Stock which shall have been
surrendered for exchange as herein provided shall no longer be deemed to be
outstanding and all rights with respect to such shares, including the right, if
any, to receive notices and to vote, shall immediately cease and terminate on
the Exchange Date, except only the right of the holders thereof to receive
certificates representing shares of BioSepra Common Stock in exchange therefor.
Any shares of Series B Preferred Stock so exchanged shall be retired and
cancelled and shall not be reissued, and the Corporation (without the need for
stockholder action) may from time to time take such appropriate action as may be
necessary to reduce the authorized Series B Preferred Stock accordingly.
(d) Adjustments to Exchange Price for Diluting Issues:
(i) Special Definitions. For purposes of this Section 5(d), the
following definitions shall apply:
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<PAGE>
(A) "Option" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire BioSepra Common Stock or Exchangeable
Securities (as defined below), excluding options granted to persons described in
Subsection 5(d)(i)(D)(IV) hereof.
(B) "Original Issue Date" shall mean March 8, 1995.
(C) "Exchangeable Securities" shall mean any evidences of
indebtedness, shares or other securities directly or indirectly convertible into
or exchangeable for BioSepra Common Stock.
(D) "Additional Shares of BioSepra Common Stock" shall mean all
shares of BioSepra Common Stock issued (or, pursuant to Subsection 5(d)(iii)
hereof, deemed to be issued) by BioSepra after the Original Issue Date, other
than shares issued or issuable:
(I) upon exercise of any warrants or options or conversion of
any convertible securities of BioSepra outstanding
immediately prior to the Original Issue Date;
(II) by reason of a dividend, stock split, split-up or other
distribution on shares of BioSepra Common Stock that is
covered by Subsection 5(e) or 5(f) hereof;
(III) in connection with the acquisition by BioSepra of another
corporation or business;
(IV) to employees or directors of, or consultants to, BioSepra
or any subsidiary as approved by the Board of Directors
of BioSepra; or
(V) to pharmaceutical companies or other strategic partners
in connection with a licensing, development, joint
venture or similar arrangement between BioSepra and such
company or partner.
(E) The BioSepra Common Stock shall be deemed to include any equity
security having rights to receive dividends or distributions (including
liquidation) not limited to a fixed sum or percentage of the purchase price
therefor.
(F) "Initial Shares Outstanding" shall mean the number of shares of
BioSepra Common Stock issued and outstanding immediately prior to an adjustment
of the Exchange Price pursuant to Subsection 5(d)(iv) hereof.
(ii) No Adjustment of Exchange Price. No adjustment in the number of shares
of BioSepra Common Stock into which the Series B Preferred Stock is
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<PAGE>
exchangeable shall be made, by adjustment in the applicable Exchange Price
thereof: (a) unless the consideration per share (determined pursuant to
Subsection 5(d)(v) hereof) for an Additional Share of BioSepra Common Stock
issued or deemed to be issued by BioSepra is less than the applicable Exchange
Price in effect on the date of, and immediately prior to, the issue of such
Additional Shares, or (b) if prior to such issuance, the Corporation receives
written notice from the holders of at least a majority of the then outstanding
shares of Series B Preferred Stock agreeing that no such adjustment shall be
made as the result of the issuance of Additional Shares of BioSepra Common
Stock.
(iii) Issue of Securities Deemed Issue of Additional Shares of BioSepra
Common Stock.
If BioSepra at any time or from time to time after the Original Issue Date
shall issue any Options or Exchangeable Securities or shall fix a record date
for the determination of holders of any class of securities entitled to receive
any such options or Exchangeable Securities, then the maximum number of shares
of BioSepra Common Stock (as set froth in the instrument relating thereto
without regard to any provision contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such Options or, in the case of
Exchangeable Securities and Options therefor, the conversion or exchange of such
Exchangeable Securities, shall be deemed to be Additional Shares of BioSepra
Common Stock issued as of the time of such issue or, in case such a record date
shall have been fixed, as of the close of business on such record date, provided
that Additional Shares of BioSepra Common Stock shall not be deemed to have been
issued unless the consideration per share (determined pursuant to Subsection
5(d)(v) hereof) of such Additional Shares of BioSepra Common Stock would be less
than the applicable Exchange Price in effect on the date of and immediately
prior to such issue, or such record date, as the case may be, and provided
further that in any such case in which Additional Shares of BioSepra Common
Stock are deemed to be issued:
(A) No further adjustment in the Exchange Price shall be made upon
the subsequent issue of Exchangeable Securities or shares of BioSepra Common
Stock upon the exercise of such Options or conversion or exchange of such
Exchangeable Securities;
(B) If such Options or Exchangeable Securities by their terms
provide, with the passage of time or otherwise, for any increase or decrease in
the consideration payable to the Corporation, upon the exercise, conversion or
exchange thereof, the Exchange Price computed upon the original issue thereof
(or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase or decrease, as
applicable, insofar as it affects such Options or the rights of conversion or
exchange under such Exchangeable
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<PAGE>
Securities;
(C) Upon the expiration or termination of any unexercised Option,
the Exchange Price shall not be readjusted; and
(D) No readjustment pursuant to clause (B) above shall have the
effect of increasing the Exchange Price to an amount which exceeds the lower of
(I) the Exchange Price on the original adjustment date, or (II) the Exchange
Price that would have resulted from any issuances of Additional Shares of
BioSepra Common Stock between the original adjustment date and such readjustment
date.
(iv) Adjustment of Exchange Price Upon Issuance of Additional Shares of
BioSepra Common Stock.
In the event BioSepra shall at any time after the Original Issue Date issue
Additional Shares of BioSepra Common Stock (including Additional Shares of
BioSepra Common Stock deemed to be issued pursuant to Subsection 5(d)(iii)
hereof, but excluding shares issued upon a stock split or combination as
provided in Section 5(e) hereof or as a dividend or distribution as provided in
Section 5(f) hereof), without consideration or for a consideration per share
less than the applicable Exchange Price in effect on the date of and immediately
prior to such issue, then and in such event, such Exchange Price shall be
reduced, concurrently with such issue, to a price equal to the greater of (i)
$12.00 (as proportionately adjusted in the event the Exchange Price is or has
been subject to adjustment pursuant to Sections 5(e) or 5(f) hereof) and (ii)
such Exchange Price multiplied by a fraction, the numerator of which is the
Initial Shares Outstanding and the denominator of which is the Initial Shares
Outstanding plus the number of such Additional Shares of BioSepra Common Stock.
(v) Determination of Consideration. For purposes of this Section 5(d), the
consideration received by BioSepra for the issue of any Additional Shares of
BioSepra Common Stock shall be computed as follows:
(A) Cash and Property: Such consideration shall:
(I) insofar as it consists of cash, be computed at the
aggregate of cash received by BioSepra, excluding amounts
paid or payable for accrued interest or accrued
dividends;
(II) (insofar as it consists of property other than cash, be
computed at the fair market value thereof at the time of
such issue, as reasonably determined by the Board of
Directors of BioSepra; and
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(III) (in the event Additional Shares of BioSepra Common Stock
are issued together with other shares or securities or
other assets of BioSepra for consideration which covers
both, be the proportion of such consideration so
received, computed as provided in clauses (I) and (II)
above, as reasonably determined by the Board of Directors
of BioSepra.
(B) Options and Exchangeable Securities. The consideration per share
received by BioSepra for Additional Shares of BioSepra Common Stock deemed to
have been issued pursuant to Subsection 5(d)(iii) hereof, relating to Options
and Exchangeable Securities, shall be determined by dividing:
(x) the total amount, if any, received or receivable by BioSepra
as consideration for the issue of such Options or Exchangeable Securities, plus
the minimum aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such consideration) payable to BioSepra upon the
exercise of such Options or the conversion or exchange of such Exchangeable
Securities, or in the case of Options for Exchangeable Securities, the exercise
of such Options for Exchangeable Securities and the conversion or exchange of
such Exchangeable Securities, by
(y) the maximum number of shares of BioSepra Common Stock (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Exchangeable
Securities.
(e) Adjustment for Stock Splits and Combinations. If BioSepra shall at any
time or from time to time after the Original Issue Date effect a subdivision of
the outstanding BioSepra Common Stock, the Exchange Price then in effect
immediately before that subdivision shall be proportionately decreased. If
BioSepra shall at any time or from time to time after the Original Issue Date
combine the outstanding shares of BioSepra Common Stock, the Exchange Price then
in effect immediately before the combination shall be proportionately increased.
Any adjustment under this Section 5(e) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(f) Adjustment for Certain Dividends and Distributions. In the event
BioSepra at any time, or from time to time after the Original Issue Date shall
make or issue, or fix a record date for the determination of holders of BioSepra
Common Stock entitled to receive, a dividend or other distribution payable in
additional shares
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<PAGE>
of BioSepra Common Stock, then and in each such event the Exchange Price for the
Series B Preferred Stock then in effect shall be decreased as of the time of
such issuance or, in the event such a record date shall have been fixed, as of
the close of business on such record date, by multiplying the Exchange Price for
the Series B Preferred Stock then in effect by a fraction:
(x) the numerator of which shall be the total number
of shares of BioSepra Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of
business on such record date; and
(y) the denominator of which shall be the total
number of shares of BioSepra Common Stock issued and
outstanding immediately prior to the time of such issuance or
the close of business on such record date plus the number of
shares of BioSepra Common Stock issuable in payment of such
dividend or distribution;
provided, however, that if such record date shall have been fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Exchange Price for the Series B Preferred Stock shall be
recomputed accordingly as of the close of business on such record date and
thereafter the Exchange Price for the Series B Preferred Stock shall be adjusted
pursuant to this Section 5(f) as of the time of actual payment of such dividends
or distributions.
(g) Adjustments for Other Dividends and Distributions. In the event
BioSepra at any time after the Original Issue Date shall make or issue, or fix a
record date for the determination of holders of BioSepra Common stock entitled
to receive, a dividend or other distribution payable in securities of BioSepra
other than shares of BioSepra Common Stock, then and in each such event the
Corporation shall make provision so that the holders of the Series B Preferred
Stock shall receive upon exchange thereof in addition to the number of shares of
BioSepra Common Stock receivable thereupon, the amount of securities of BioSepra
that they would have received had the Series B Preferred Stock been exchanged
for BioSepra Common Stock immediately prior to the date of such event and had
they thereafter, during the period from the date of such event to and including
the Exchange Date, retained such securities receivable by them as aforesaid
during such period, giving application to all adjustments called for during such
period under this Section 5(g) with respect to the rights of the holders of
Series B Preferred Stock.
(h) Adjustment for Reclassification, Exchange or Substitution. If the
BioSepra Common Stock issuable upon the exchange of the Series B Preferred Stock
shall be changed into the same or a different number of shares of any class or
classes of stock, whether by capital reorganization, reclassification, or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for above, or a
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reorganization, merger, consolidation, or sale of assets provided for below),
then and in each such event the holder of each such share of Series B Preferred
Stock shall have the right thereafter to exchange such share into the kind and
amount of shares of stock and other securities and property receivable upon such
reorganization, reclassification, or other change, by holders of the number of
shares of BioSepra Common Stock for which such shares of Series B Preferred
Stock might have been exchanged immediately prior to such reorganization,
reclassification, or change, all subject to further adjustment as provided
herein.
(i) Adjustment for Merger or Reorganization, etc. In case of any
consolidation or merger of BioSepra with or into another corporation or the sale
of all or substantially all of the assets of BioSepra to another corporation,
each share of Series B Preferred Stock shall thereafter be exchangeable (or
shall be exchanged for a security which shall be exchangeable) for the kind and
amount of shares of stock or other securities or property to which a holder of
the number of shares of BioSepra Common Stock deliverable upon exchange of such
Series B Preferred Stock would have been entitled upon such consolidation,
merger or sale.
(j) No Impairment. Without limiting the foregoing, the Corporation shall
use its best efforts to cause BioSepra to carry out all the provisions of this
Section 5 and to cause BioSepra to take all such action as may be necessary or
appropriate in order to protect the Exchange Rights of the holders of Series B
Preferred Stock against impairment.
(k) Certificate as to Adjustments. Upon the occurrence of each adjustment
or readjustment of the Exchange Price pursuant to this Section 5, the
Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Series B Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based.
6. Optional Redemption.
(a) Qualified Merger. At any time after the date on which the
Corporation has entered into a definitive agreement relating to a Qualified
Merger (as defined in Section 2(d) hereof), the Corporation may redeem all, but
not less than all, of the Series B Preferred Stock by paying a redemption price
of $16.00 plus any declared or accrued but unpaid dividends in cash, for each
share of Series B Preferred Stock then redeemed.
(b) Notice of Section 6(a) Redemption. At least 10 days prior to the
date fixed for any redemption of Series B Preferred Stock pursuant to Section
6(a) hereof, the Corporation shall provide written notice of the redemption of
Series B Preferred Stock to each holder of record of Series B Preferred Stock to
be redeemed,
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<PAGE>
notifying such holder of the election of the Corporation to redeem such shares,
specifying the redemption date, the time and date at which such holder's
Exchange Rights (pursuant to Section 5 hereof), if any, as to such shares
terminate (which shall be the close of business on the second full day preceding
the redemption date) and the section of this resolution pursuant to which such
redemption is being made and calling upon such holder to surrender to the
Corporation, in the manner and at the place designated, his or its certificate
or certificates representing the shares to be redeemed (such notice is
hereinafter referred to as the "Redemption Notice"). On or prior to the
redemption date, each holder of Series B Preferred Stock to be redeemed shall
surrender his or its certificate or certificates representing such shares to the
Corporation, in the manner and at the place designated in the Redemption Notice,
and thereupon the redemption price of such shares shall be payable to the order
of the person whose name appears on such certificate or certificates as the
owner thereof and each surrendered certificate or certificates as the owner
thereof and each surrendered certificate shall be cancelled. From and after such
redemption date, unless there shall have been a default in payment of the
redemption price, all rights of the holders of Series B Preferred Stock
designated for redemption in the Redemption Notice as holders of Series B
Preferred Stock (except the right to receive the redemption price, and interest
thereon at the rate of 10% per annum if the redemption price is not paid when
due, upon surrender of their certificate or certificates) shall cease with
respect to such shares, and such shares shall not thereafter be transferred on
the books of the Corporation or be deemed to be outstanding for any purpose
whatsoever. Notwithstanding the foregoing, if said 10% rate of interest is in
excess of the rate permitted under applicable usury laws, said rate shall be
reduced to the maximum interest rate permissible under said usury laws.
7. Mandatory Redemption.
(a) March 8, 2000 and Notice Thereof. The Corporation shall, on March 8,
2000, redeem for cash all outstanding shares of Series B Preferred Stock at a
redemption price equal to $16.00 per share, plus any dividends declared or
accrued but unpaid thereon. The notice provisions of Section 6(b) hereof shall
apply to a mandatory redemption pursuant to this Section 7(a).
(b) Change of Control of BioSepra Inc. If, at any time on or prior to
March 8, 2000, there is a Change of Control (as defined below) of BioSepra, the
Corporation (or any successor in interest to the Corporation) shall, no later
than five business days after such Change of Control, redeem for cash all
outstanding shares of Series B Preferred Stock at a redemption price equal to
one of the following:
(i) $25.60 per share of Series B Preferred Stock if the BioSepra
Market Capitalization (as defined below) is $120,031,950 or less;
14
<PAGE>
(ii) $32.00 per share of Series B Preferred Stock if the BioSepra
Market Capitalization is between $120,031,950 and $168,044,730; or
(iii) $48.00 per share of Series B Preferred Stock if the BioSepra
Market Capitalization is $168,044,730 or more.
No declared or accrued but unpaid dividends with respect to the Series
B Preferred Stock shall be paid upon a redemption made pursuant to this Section
7(b).
A "Change of Control" of BioSepra shall occur or be deemed to have occurred
if any of the following events occur: (A) any "person," as such term is used in
Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (other than the Corporation (or its successor), Beckman Instruments, Inc.
(or its affiliate) or a holder of Series B Preferred Stock (or an affiliate of
such holder), any trustee or other fiduciary holding securities under an
employee benefit plan of BioSepra, or any corporation owned directly or
indirectly by the stockholders of BioSepra in substantially the same proportion
as their ownership of stock of BioSepra) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of BioSepra representing 30% or more of the combined voting power of
BioSepra's then outstanding securities and the Corporation is not or ceases to
be the beneficial owner of securities of BioSepra representing a greater
percentage of such combined voting power than held by such person; (B)
individuals who, as of March 8, 1995, constitute at least a majority of the
Board of Directors of BioSepra (as of the date hereof, the "Incumbent Board")
cease for any reason to constitute at least a majority of the Board of Directors
of BioSepra, provided that any person becoming a director subsequent to March 8,
1995 whose election, or nomination for election by BioSepra's stockholders, was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board (other than an election or nomination of an individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the directors of BioSepra, as such
terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act) shall
be, for purposes hereof, considered as though such person were a member of the
Incumbent Board; (C) the stockholders of BioSepra approve a merger or
consolidation of BioSepra with any other corporation (other than Beckman
Instruments, Inc. (or its affiliate) or a holder of Series B Preferred Stock (or
an affiliate of such holder)), other than (I) a merger or consolidation which
would result in the voting securities of BioSepra outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than a majority
of the combined voting power of the voting securities of BioSepra or such
surviving entity outstanding immediately after such merger or consolidation or
(II) a merger or consolidation effected to implement a recapitalization of
BioSepra (or similar transaction) in which no "person" (as hereinabove defined)
acquires more than 30% of the combined voting power of BioSepra's then
outstanding securities; or (D) the stockholders of BioSepra approve a
15
<PAGE>
plan of complete liquidation of BioSepra or an agreement for the sale or
disposition by BioSepra of all or any substantial portion of BioSepra's assets;
provided, however, that unless one or more of the events or conditions specified
above shall have occurred, a change of control of the Corporation pursuant to a
merger, consolidation, sale of stock or assets, or otherwise, without more shall
not be deemed to be a Change of Control of BioSepra.
"BioSepra Market Capitalization" shall mean, for the purpose of this
Section 7(b), the product of (A) the BioSepra Share Price (as defined below) and
(B) the number of shares issued and outstanding of BioSepra Common Stock plus
the number of shares issuable upon the exercise, conversion or exchange of
outstanding options, warrants, convertible or exchangeable securities or other
rights to acquire shares of BioSepra Common Stock, whether vested or unvested.
The "BioSepra Share Price" shall mean the average closing price per share
of BioSepra Common Stock, as reported by the Wall Street Journal (or if the Wall
Street Journal is not then being published, publications of similar reliability
and repute), for the three consecutive trading days immediately preceding a
Change of Control.
(c) Notice of Section 7(b) Redemption. The Corporation shall provide
written notice of the redemption of the Series B Preferred Stock pursuant to
Section 7(b) hereof to each holder of record of Series B Preferred Stock to be
redeemed as soon as possible, but no less than three calendar days, prior to the
date on which such redemption is to be made. Except as provided in the preceding
sentence, the notice provisions of Section 6(b) hereof shall apply to a
mandatory redemption pursuant to Section 7(b) hereof.
8. Early Redemption at Election of Holders.
(a) Upon the written request of the holders of a majority of the then
outstanding shares of Series B Preferred Stock (the "Majority Requesting
Holder(s)") received by the Corporation at least 90 days prior to Monday, March
10, 1997, on March 10, 1997 and on each of the first, second and third
anniversaries thereof (each such date being referred to hereinafter as an "Early
Redemption Date", the Corporation will redeem from each holder of shares of
Series B Preferred Stock, at a price per share as set forth below, subject to
appropriate adjustment in the event of any stock dividend, stock split,
combination or other similar recapitalization affecting such shares (the "Early
Redemption Price"), the following respective portions of the number of shares of
Series B Preferred Stock held by each such holder on the applicable Early
Redemption Date:
16
<PAGE>
<TABLE>
<CAPTION>
Portion of the Then
Outstanding
Shares of
Series B Preferred Per Share
Redemption Date Stock to be Redeemed Redemption Price
--------------- -------------------- ----------------
<S> <C> <C>
March 10, 1997 25% $17.98
March 10, 1998 33 1/3% $19.06
March 10, 1999 50% $20.20
March 10, 2000 All then outstanding $21.41
shares of Series B
Preferred Stock
</TABLE>
No declared or accrued but unpaid dividends with respect to the Series B
Preferred Stock shall be paid upon a redemption made pursuant to this Section
8(a).
(b) No later than 20 days after receipt of the written notice from the
Majority Requesting Holder(s) pursuant to Section 8(a) hereof, the Corporation
shall provide written notice of the applicable early redemption of Series B
Preferred Stock to each other holder of record of such stock, notifying such
holder of the election of the Majority Requesting Holder(s) to redeem such
shares, the Early Redemption Price and the applicable Early Redemption Date.
(c) From and after such applicable Early Redemption Date, unless there
shall have been a default in payment of the applicable Early Redemption Price,
all rights of each holder (except the right to receive the applicable Early
Redemption Price, and interest thereon at the rate of 10% per annum if the
applicable Early Redemption Price is not paid when due, upon presentation and
surrender of their certificate or certificates) shall cease with respect to such
shares, and such shares shall not thereafter be transferred on the books of the
Corporation or be deemed to be outstanding for any purpose whatsoever.
Notwithstanding the foregoing, if said 10% rate of interest is in excess of the
rate permitted under applicable usury laws, said rate shall be reduced to the
maximum interest rate permissible under said usury laws.
9. Deposit of Redemption Price. With respect to any redemption made
pursuant to Sections 6, 7 or 8 hereof, on or prior to the applicable redemption
date, the Corporation shall deposit the redemption price of all applicable
shares of Series B Preferred Stock with a bank or trust company having aggregate
capital and surplus in excess of $500,000,000 as a trust fund for the benefit of
the holders of Series B Preferred Stock, with irrevocable instructions and
authority to the bank or trust
17
<PAGE>
company to pay the redemption price for such shares to their respective holders
on or after the redemption date upon receipt of notification from the
Corporation that such holder has surrendered his or its share certificate to the
Corporation. The balance of any monies deposited by the Corporation pursuant to
this Section 9 remaining unclaimed at the expiration of one year following the
redemption date shall thereafter be returned to the Corporation upon its request
expressed in a resolution of its Board of Directors.
10. Purchase of Series B Preferred Stock. Nothing herein contained shall
prevent or restrict the purchase by the Corporation, from time to time either at
public or private sale, of the whole or any part of the Series B Preferred Stock
at such price or prices as the holders of Series B Preferred Stock and the
Corporation may mutually agree upon, subject to the provisions of applicable
law.
11. Funds Legally Available. If the funds of the Corporation legally
available for redemption of Series B Preferred Stock on a redemption date are
insufficient to redeem the shares of Series B Preferred Stock required to be
redeemed on such date, those funds which are legally available will be used to
redeem the maximum possible number of such shares of Series B Preferred Stock
ratably on the basis of the number of shares of Series B Preferred Stock which
would be redeemed on such date if the funds of the Corporation legally available
therefor had been sufficient to redeem all shares of Series B Preferred Stock.
At any time thereafter when additional funds of the Corporation become legally
available for the redemption of Series B Preferred Stock, such funds will be
used, at the end of the next succeeding fiscal quarter, to redeem the balance of
the shares which the Corporation was theretofore obligated to redeem, ratably on
the basis set forth in the preceding sentence. Without limiting the foregoing,
the Corporation shall be in default when any amounts due to be paid on a
redemption date are not legally available. Holders of such unredeemed shares of
Series B Preferred Stock shall have the right to receive the applicable
redemption price and interest thereon at the rate of 10% per annum for the
period in which the Corporation is obligated to redeem such shares. If said 10%
rate of interest is in excess of the rate permitted under applicable usury laws,
said rate shall be reduced to the maximum interest rate permissible under said
usury laws.
12. Cancellation and Subsequent Reduction of Authorized Series B Preferred
Stock. Any Series B Preferred Stock redeemed pursuant to this resolution will be
cancelled and will not under any circumstances be reissued, sold or transferred
and the Corporation may from time to time take such appropriate action as may be
necessary to reduce the authorized Series B Preferred Stock accordingly.
13. Notices. All notices, requests, consents and other communications made
pursuant to this resolution shall be in writing and shall be delivered by hand,
telecopy (if confirmed) or mailed by first-class certified or registered mail,
return
18
<PAGE>
receipt requested, postage prepaid. Such notices shall be deemed to have been
made upon dispatch to the appropriate addressee, except for such notices that
are delivered by first-class certified or registered mail, in which case such
notices shall be deemed to have been made upon receipt by the appropriate
addressee. Notice to each holder of Series B Preferred Stock shall be sent in
each case to the telecopy number or address last shown on the records of the
Corporation for such holder. Notice to the Corporation shall be sent in each
case to the telecopy number or address of an appropriate addressee located at
the Corporation's principal office.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate to be duly executed by Timothy J. Barberich,
its President, this day of March, 1995.
SEPRACOR INC.,
a Delaware corporation
By: /s/ Timothy J. Barberich
------------------------
Timothy J. Barberich
President
19
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
SEPRACOR INC.
Sepracor Inc., a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware (the "Corporation"), DOES
HEREBY CERTIFY:
FIRST: That the Board of Directors of said Corporation, at a meeting duly
called and held on February 14, 1995, as filed with the minutes of the Board of
Directors, duly adopted a resolution pursuant to Section 242 of the General
Corporation Law of the State of Delaware proposing and declaring advisable the
following amendment to the Restated Certificate of Incorporation of the
Corporation:
RESOLVED: That the first paragraph of Article FOURTH of the Corporation's
Restated Certificate of Incorporation be amended to read in its
entirety as follows:
FOURTH: The total number of shares of all classes of stock which the
Corporation has authority to issue is thirty-six million
shares (36,000,000) consisting of thirty-five million
(35,000,000) shares of common stock, $.10 par value per
share ("Common Stock"), and one million (1,000,000) shares
of Preferred Stock, $1.00 par value per share ("Preferred
Stock").
SECOND: That the foregoing Amendment to the Corporation's Restated
Certificate of Incorporation was adopted by the holders of a
majority of the outstanding shares of Common Stock and
Series A Convertible Preferred Stock at the Corporation's
Annual Meeting of Stockholders held on May 17, 1995 pursuant
to notice duly given.
IN WITNESS WHEREOF, Sepracor Inc. has caused this Certificate to be signed
by Timothy J. Barberich, its President, and attested by Victor H. Woolley, its
Secretary, this 17th day of May, 1995.
1
<PAGE>
SEPRACOR INC.
By: /s/ Timothy J. Barberich
------------------------
Timothy J. Barberich
Its: President
ATTEST:
BY: /s/ Victor Woolley
------------------
2
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
SEPRACOR INC.
Sepracor Inc., a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware (the "Corporation"),
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said Corporation, in a
Written Action in Lieu of Meeting dated as of March 27,
1996, duly adopted a resolution pursuant to Section 242 of
the General Corporation Law of the State of Delaware
("Delaware Law") proposing and declaring advisable the
following amendment to the Restated Certificate of
Incorporation of the Corporation:
RESOLVED: That the first paragraph of Article FOURTH of the Restated Certificate
of Incorporation, as amended, be amended to read in its entirety as
follows:
FOURTH: The total number of shares of all classes of stock which the
Corporation has authority to issue is forty-one million
shares (41,000,000) consisting of forty million (40,000,000)
shares of common stock, $.10 par value per share ("Common
Stock"), and one million (1,000,000) shares of Preferred
Stock, $1.00 par value per share ("Preferred Stock").
SECOND: That the foregoing Amendment to the Corporation's Restated
Certificate of Incorporation, as amended, was adopted by the
holders of a majority of the outstanding shares of Common
Stock at the Corporation's Annual Meeting of Stockholders
held on May 15, 1996 pursuant to notice duly given.
IN WITNESS WHEREOF, Sepracor Inc. has caused this Certificate to be signed
by Robert F. Scumaci, its Senior Vice President this 16th day of May, 1996.
3
<PAGE>
SEPRACOR INC.
By: /s/ Robert F. Scumaci
---------------------
Robert F. Scumaci
Its: Senior Vice President
4
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
SEPRACOR INC.
Sepracor Inc., a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware (the "Corporation"), DOES
HEREBY CERTIFY:
FIRST: That the Board of Directors of said Corporation, at a Meeting duly
called and held on February 26, 1998, as filed with the minutes of the Board of
Directors, duly adopted a resolution pursuant to Section 242 of the General
Corporation Law of the State of Delaware ("Delaware Law") proposing and
declaring advisable the following amendment to the Restated Certificate of
Incorporation, as amended, of the Corporation:
RESOLVED: That the first paragraph of Article FOURTH of the Restated Certificate
of Incorporation, as amended, be amended to read in its entirety as
follows:
FOURTH: The total number of shares of all classes of stock which the
Corporation has authority to issue is eighty-one million shares
(81,000,000) consisting of eighty million (80,000,000) shares of
Common Stock, $.10 par value per share ("Common Stock"), and one
million (1,000,000) shares of Preferred Stock, $1.00 par value per
share ("Preferred Stock").
5
<PAGE>
SECOND: That the foregoing amendment to the Corporation's Restated
Certificate of Incorporation, as amended, was adopted by the holders of a
majority of the outstanding shares of Common Stock at the Corporation's Annual
Meeting of Stockholders held on May 27, 1998 pursuant to notice duly given.
IN WITNESS WHEREOF, Sepracor Inc. has caused this Certificate to be signed
by Robert F. Scumaci, its Senior Vice President this 3rd day of June, 1998.
SEPRACOR INC.
By: /s/ Robert F. Scumaci
---------------------
Robert F. Scumaci
Its: Senior Vice President
6
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000877357
<NAME> SEPRACOR, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 113,335,000
<SECURITIES> 137,997,000
<RECEIVABLES> 3,030,000
<ALLOWANCES> 156,000
<INVENTORY> 3,296,000
<CURRENT-ASSETS> 260,430,000
<PP&E> 25,495,000
<DEPRECIATION> 8,996,000
<TOTAL-ASSETS> 295,603,000
<CURRENT-LIABILITIES> 34,989,000
<BONDS> 270,355,000
0
0
<COMMON> 2,823,000
<OTHER-SE> (18,156,000)
<TOTAL-LIABILITY-AND-EQUITY> 295,603,000
<SALES> 3,505,000
<TOTAL-REVENUES> 11,117,000
<CGS> 2,411,000
<TOTAL-COSTS> 35,133,000
<OTHER-EXPENSES> 1,369,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,630,000
<INCOME-PRETAX> (29,452,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (29,452,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (29,452,000)
<EPS-PRIMARY> (1.05)
<EPS-DILUTED> (1.05)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000877357
<NAME> SEPRACOR, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 65,990,000
<SECURITIES> 41,463,000
<RECEIVABLES> 2,662,000
<ALLOWANCES> 320,000
<INVENTORY> 3,271,000
<CURRENT-ASSETS> 115,081,000
<PP&E> 26,101,000
<DEPRECIATION> 7,312,000
<TOTAL-ASSETS> 149,007,000
<CURRENT-LIABILITIES> 23,119,000
<BONDS> 80,880,000
0
0
<COMMON> 2,752,000
<OTHER-SE> 28,207,000
<TOTAL-LIABILITY-AND-EQUITY> 149,007,000
<SALES> 4,994,000
<TOTAL-REVENUES> 5,824,000
<CGS> 2,926,000
<TOTAL-COSTS> 28,347,000
<OTHER-EXPENSES> 1,903,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,990,000
<INCOME-PRETAX> (260,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (260,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (260,000)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
