<PAGE>
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, 1999
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
SEPRACOR INC.
-------------
(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
-------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(508) 481-6700
--------------
(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, 32,918,917 SHARES OUTSTANDING AT AUGUST
9,1999.
<PAGE>
SEPRACOR INC.
INDEX
<TABLE>
<S> <C>
Part I - Financial Information
Item 1. Consolidated Condensed Financial Statements
Consolidated Condensed Balance Sheets as of
June 30, 1999 and December 31, 1998 (Unaudited) 3
Consolidated Statements of Operations for the Three and Six
Month Periods Ended June 30, 1999 and 1998
(Unaudited) 4
Consolidated Statements of Cash Flows for the Six Month
Periods Ended June 30, 1999 and 1998 (Unaudited) 5
Notes to Consolidated Interim Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosure About Market Risk 22
Part II - Other Information 22
Item 1. Legal Proceedings 22
Item 4. Submission of Matters to a Vote of Security Holders 25
Item 6. Exhibits and Reports on Form 8-K 26
Signatures 27
</TABLE>
2
<PAGE>
SEPRACOR INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
ASSETS --------- ---------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 137,848 $ 295,323
Marketable securities 295,875 204,274
Accounts receivable, net 4,613 --
Inventories, net 4,285 --
Other current assets 4,568 3,386
--------- ---------
Total Current Assets 447,189 502,983
Property, plant and equipment, net 18,570 16,508
Deferred financing costs, net 13,852 15,119
Patents, net 3,104 2,677
Investment in affiliates 2,058 1,490
Net assets from discontinued operations -- 10,325
Other assets 1,135 158
--------- ---------
Total Assets $ 485,908 $ 549,260
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable $ 7,113 $ 9,290
Accrued expenses 34,601 31,275
Notes payable and current portion of capital
lease obligation and long-term debt 604 2,410
Deferred revenue and other current liabilities 2,800 2,502
--------- ---------
Total Current Liabilities 45,118 45,477
Loan guarantee of affiliate 5,000 5,000
Long-term debt and capital lease obligation 2,461 2,435
Convertible subordinated debentures 489,475 489,475
--------- ---------
Total Liabilities 542,054 542,387
--------- ---------
Minority interest 1,817 2,445
Stockholders' Equity (Deficit):
Preferred stock -- --
Common stock 3,290 3,266
Additional paid-in capital 312,349 307,668
Unearned compensation, net (126) (144)
Accumulated deficit (373,238) (306,311)
Accumulated other comprehensive income (loss) (238) (51)
--------- ---------
Total Stockholders' Equity (Deficit) (57,963) 4,428
Total Liabilities and Stockholders' Equity (Deficit) $ 485,908 $ 549,260
--------- ---------
--------- ---------
</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, 1999 AND 1998
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three month periods ended Six month periods ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Product $ 4,947 $ 32 $ 5,227 $ 90
Collaborative research and development 13 497 2,390 2,250
License fees 3 6 11 5,030
Royalties 51 60 110 114
-------- -------- -------- --------
Total Revenues 5,014 595 7,738 7,484
Cost of revenues:
Product 1,135 23 1,280 55
License fees -- -- -- 400
Royalties 20 18 41 36
-------- -------- -------- --------
Total Cost of Revenues 1,155 41 1,321 491
Gross Margin 3,859 554 6,417 6,993
Operating Expenses:
Research and development 24,122 10,299 42,562 23,339
Sales and marketing 8,791 3,384 15,375 5,360
General and administrative 3,796 2,150 6,745 3,803
Patent costs 655 471 1,530 936
-------- -------- -------- --------
Total Operating Expenses 37,364 16,304 66,212 33,438
-------- -------- -------- --------
Loss from operations (33,505) (15,750) (59,795) (26,445)
Other income (expense):
Interest income 5,617 3,164 11,671 5,976
Interest expense (8,269) (4,530) (16,558) (7,630)
Other income (expense) 82 22 62 (130)
Equity in loss of investees (825) (359) (2,509) (1,246)
-------- -------- -------- --------
Total Other Income (Expense) (3,395) (1,703) (7,334) (3,030)
-------- -------- -------- --------
Net loss before minority interests (36,900) (17,453) (67,129) (29,475)
Minority interest in subsidiary 366 76 548 157
-------- -------- -------- --------
Net loss from continuing operations $(36,534) $(17,377) $(66,581) $(29,318)
-------- -------- -------- --------
Discontinued Operations:
Income (loss) from discontinued operations
(net of minority interests) (69) (207) (345) 16
-------- -------- -------- --------
Net loss $(36,603) $(17,584) $(66,926) $(29,302)
-------- -------- -------- --------
-------- -------- -------- --------
Basic and diluted net loss per common share
from continuing operations $ (1.11) $ (0.62) $ (2.03) $ (1.05)
-------- -------- -------- --------
Basic and diluted net loss per common share
from discontinued operations $ 0.00 $ (0.01) $ (0.01) $ 0.00
-------- -------- -------- --------
Basic and diluted net loss per common share $ (1.11) $ (0.63) $ (2.04) $ (1.05)
-------- -------- -------- --------
Shares used in computing basic and diluted net loss
per common share:
Basic and diluted 32,855 28,055 32,791 27,983
-------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements
4
<PAGE>
SEPRACOR INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six month periods ended
June 30, June 30,
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (66,926) $ (29,302)
Less: Net income (loss) from discontinued operations
(net of minority interests) (345) 16
Net loss from continuing operations (66,581) (29,318)
Adjustments to reconcile net loss to net cash
used in operating activities:
Minority interests in subsidiaries (548) (157)
Depreciation and amortization 3,198 1,820
Provision for discounts and allowances 1,091 --
Issuance of warrants -- 31
Equity in investee losses 2,509 1,246
Loss on disposal of property and equipment 6 7
Changes in operating assets and liabilities:
Accounts receivable (4,937) 146
Inventories (3,891) --
Other current assets and liabilities (1,807) (42)
Accounts payable (2,549) 338
Accrued expenses 2,947 7,821
--------- ---------
Net cash used in operating activities: (70,562) (18,108)
--------- ---------
Cash flows from investing activities:
Purchases of marketable securities (325,906) (128,016)
Sales of marketable securities 234,305 --
Increase in restricted cash (1,000) --
Additions to property and equipment (4,000) (3,129)
Investment in affiliate (2,000) --
Decrease in other assets 863 50
--------- ---------
Net cash used in investing activities: (97,738) (131,095)
--------- ---------
Cash flows from financing activities:
Net proceeds from issuance of common stock 3,628 2,047
Repurchase of redeemable preferred stock -- (6,850)
Proceeds from sale of 6 1/4% debentures due 2005 -- 189,475
Costs associated with 6 1/4% debentures due 2005 -- (6,103)
Costs associated with 7% debentures due 2005 (276) --
Net repayments of long term debt and capital leases (263) (763)
Net borrowings (repayments) under line of credit agreements (2,017) 1,917
--------- ---------
Net cash provided by financing activities 1,072 179,723
--------- ---------
Effect of exchange rates on cash and cash equivalents (187) (130)
--------- ---------
Net increase (decrease) in cash and cash equivalents (167,415) 30,390
Net cash provided by discontinued operations 9,940 366
Cash and cash equivalents at beginning of period 295,323 82,579
--------- ---------
Cash and cash equivalents at end of period $ 137,848 $ 113,335
--------- ---------
--------- ---------
Non cash activities:
Acquisition of BioSphere Medical:
Liabilities assumed $ (1,493) $ --
Fair value of assets acquired 1,493 --
</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 Sepracor'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, 1999 and 1998.
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, 1998, which are
contained in Sepracor's Annual Report on Form 10-K for the year ended December
31, 1998, 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
BioSphere Medical Inc. ("BioSphere"), formerly BioSepra Inc., and Sepracor
Canada Limited.
2. Discontinued Operations:
On May 17, 1999, BioSphere completed the sale of substantially all its assets
related to its biopharmaceutical drug purification and research consumable
business to Life Technologies for net cash proceeds of approximately
$11,158,000.
Sepracor's results of operations and the related footnote information for the
three and six months ended June 30, 1999 and 1998 exclude the results of the
BioSphere biopharmaceutical drug purification and research consumable
business from continuing operations, revenues and other components of income
and expense. The discontinued segment results are presented separately in a
single caption entitled "Income (loss) from discontinued operations, net of
minority interests". The loss for the three month period ended June 30, 1999
includes a $69,000 loss on the sale of the discontinued assets. Revenues from
the discontinued segments were $164,000 and $2,521,000 for the three and six
months ended 1999 and $1,643,000 and $3,633,000 for the three and six months
ended 1998. The loss from discontinued operations, net of minority interests
was $69,000 and $345,000 for the three and six months ended June 30, 1999 and
a loss of $207,000 and income of $16,000 for the three and six months ended
June 30, 1998. The minority interest income (loss) from discontinued
operations was $34,000 and $194,000 for the three and six months ended June
30, 1999 and $117,000 and ($9000) for the three and six months ended June 30,
1998.
The consolidated statements of cash flows for the six months ended June 30, 1999
and 1998 have been restated to reflect the discontinued operation. The cash
flows from discontinued operations have been summarized into a single line
entitled "cash provided from discontinued operations."
3. Inventories:
Inventories consist of the following:
<TABLE>
<CAPTION>
(in thousands)
June 30, December 31,
1999 1998
------ ------
<S> <C> <C>
Raw materials $1,082 $ -
Work in progress 839 -
Finished goods 2,364 -
------ ------
$4,285 $ -
------ ------
------ ------
</TABLE>
At December 31, 1998, the net assets of BioSphere's discontinued operations
included inventory of $3,572,000.
6
<PAGE>
4. Basic and diluted net (loss) per common share:
Basic earnings (loss) per share ("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 common stock using the
treasury stock method. For the three and six months ended June 30, 1999 and
1998, 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 of common stock equivalents would be anti-dilutive.
Included in the three and six months ended June 30, 1999 and 1998 net loss
applicable to common shares is $0 and $0,and $0 and $150,000, respectively,
of dividends relating to Series B Redeemable Exchangeable Preferred Stock
(see table below). Certain securities were not included in the computation of
diluted earnings per share for the three and six months ended June 30, 1999
and 1998, because they would have an anti-dilutive effect due to net losses
for such periods. These securities include: (i) options to purchase 5,386,055
shares of common stock with purchase prices of $2.00 to $118.25 per share for
the three and six months ended June 30, 1999 and options to purchase
4,525,559 shares of common stock with purchase prices of $1.00 to $42.50 per
share for the three and six months ended June 30, 1998; and (ii) 6,402,381
shares of common stock for issuance upon conversion of the 7% convertible
subordinated debentures due 2005 and the 6 1/4% convertible subordinated
debentures due 2005 for the three and six months ended June 30, 1999 and
8,109,735 shares of common stock for issuance upon conversion of the 7%
convertible subordinated debentures due 2002 and the 6 1/4% convertible
subordinated debentures due 2005 for the three and six months ended June 30,
1998.
<TABLE>
<CAPTION>
Three months periods ended Six month periods ended
June 30, June 30, June 30, June 30,
(in thousands) 1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net loss applicable to common shares:
Net loss $ 36,603 $ 17,584 $ 66,926 $ 29,302
Dividends on preferred stock -- -- -- 150
-------- -------- -------- --------
Net loss applicable to common shares $ 36,603 $ 17,584 $ 66,926 $ 29,452
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
5. Comprehensive Income:
Total comprehensive income (loss) is comprised of net income (loss) and net
currency translation adjustments.
<TABLE>
<CAPTION>
(in thousands) Three month periods ended Six month periods ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Comprehensive income (loss):
Net loss $(36,603) $(17,584) $(66,926) $(29,302)
Cumulative translation
Adjustment 269 (212) (187) (130)
-------- -------- -------- --------
Total comprehensive income (loss) $(36,334) $(17,796) $(67,113) $(29,432)
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
7
<PAGE>
6. Business Segments:
Sepracor assesses performance and makes operating decisions primarily based
on its own pharmaceutical business, which excludes BioSphere and equity
investments in HemaSure Inc. ("HemaSure") and Versicor Inc. ("Versicor")
through April 1999. Financial information by segment is presented below with
other adjustments and elimination's, which primarily consist of equity in
investee losses and minority interests.
(in thousands)
<TABLE>
<CAPTION>
Three months ended June 30, 1999 Sepracor BioSphere Other Total
- ------------------------------------- ---------- ---------- ------------ --------
<S> <C> <C> <C> <C>
Revenue from unaffiliated customers $ 4,301 $ 713 $ -- $ 5,014
Equity in investee losses -- -- 825 825
Net loss 35,049 1,128 426 36,603
</TABLE>
<TABLE>
<CAPTION>
Six months ended June 30, 1999 Sepracor BioSphere Other Total
- ------------------------------------- ---------- ---------- ------------ --------
<S> <C> <C> <C> <C>
Revenue from unaffiliated customers $ 6,745 $ 993 $ -- $ 7,738
Equity in investee losses -- -- 2,509 2,509
Net loss 63,055 2,103 1,768 66,926
</TABLE>
<TABLE>
<CAPTION>
Three months ended June 30, 1998 Sepracor BioSphere Other Total
- -------------------------------- -------- --------- ----- -----
<S> <C> <C> <C> <C>
Revenue from unafilliated customers $ 548 $ 47 $ -- $ 595
Equity in investee losses -- -- 359 359
Net loss 16,869 535 180 17,584
Six months ended June 30, 1998 Sepracor BioSphere Other Total
- ------------------------------ -------- --------- ----- -----
Revenue from unafilliated customers $ 7,367 $ 117 $ -- $ 7,484
Equity in investee losses -- -- 1,246 1,246
Net loss 27,929 411 962 29,302
</TABLE>
7. Summarized financial information regarding affiliates:
HEMASURE
On February 25, 1999, Sepracor entered into an agreement with HemaSure Inc.
("HemaSure") pursuant to which Sepracor invested $2,000,000 in HemaSure in
exchange for 1,333,334 shares of HemaSure common stock and for warrants to
purchase 667,000 of additional shares of HemaSure common stock.
On May 4, 1999, HemaSure completed a private placement financing with COBE
Laboratories, Inc. ("COBE"), which is wholly-owned by Gambo AB. COBE purchased
4.5 million shares of HemaSure common stock for an aggregate purchase price of
$9.0 million. As a result of this investment, COBE owns 30.2 percent of
HemaSure's outstanding common stock. The agreement also provides COBE with an
option to purchase an additional $3 million of HemaSure common stock at any time
between August 3, 1999 and May 3, 2000. Should COBE exercise its option, the
number of shares to be issued will be based upon the average closing price of
HemaSure's common stock for the 30-day period prior to the exercise. As a result
of the transaction, Sepracor's ownership of HemaSure was reduced to 29%.
For the six-month period ended June 30, 1999, Sepracor recognized $2,000,000 of
its ownership share of HemaSure losses, which reduced Sepracor's investment in
HemaSure to zero at June 30, 1999.
VERSICOR
On March 31, 1999, Versicor sold 500,000 shares of preferred stock to
Novartis Pharma AG, as part of a joint collaboration to discover certain new
antibacterials.
On April 2, 1999, Versicor sold 500,000 shares of preferred stock to
Pharmacia & Upjohn, as part of a joint collaboration to discover certain new
antibacterials.
As a result of the Novartis and Pharmacia & Upjohn equity investments in
Versicor, Sepracor recorded a gain of $1,077,000 which was recorded through
additional paid-in-capital and Sepracor's ownership percentage of Versicor
was reduced to approximately 18%. Effective April 1999, Sepracor has changed
its accounting for its investment in Versicor to the cost method of
accounting from the equity method. Sepracor recorded $508,741 as its share of
Versicor losses through April 1999. At June 30, 1999, Sepracor's investment
in Versicor was approximately $2,058,000.
8
<PAGE>
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, 1999 and 1998:
<TABLE>
<CAPTION>
(in thousands) Three-month periods ended Six-month periods ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
HemaSure:
Net sales $ 9 $ -- $ 13 $ 25
Gross profit (loss) (439) -- (770) (632)
Loss from continuing operations (2,173) (2,895) (4,717) (6,362)
Net loss $ (2,473) $(2,863) $ (5,391) $(6,292)
Versicor:
Net sales $ 1,550 $ -- $ 1,650 $ --
Gross profit (loss) 1,550 -- 1,650 --
Loss from continuing operations (11,791) (2,038) (13,852) (6,185)
Net loss $(11,791) $(1,972) $(13,873) $(6,006)
</TABLE>
8. Litigation:
On February 12, 1999, the Federal Trade Commission ("FTC") issued a request for
additional information or documentary materials relating to the Company's
exclusive license agreement with Eli Lilly and Company (the "Lilly Agreement").
The purpose of the request was to investigate whether or not the Lilly Agreement
constitutes a violation of Section 5 of the Federal Trade Commission Act and
Section 7 of the Clayton Act. The Company is in the process of responding to the
request. At the conclusion of its investigation, the FTC could institute
proceedings seeking to modify the Lilly Agreement or to prevent it from becoming
effective. While the Company believes that the Lilly Agreement does not
constitute a violation of the above-mentioned laws, the Company is unable to
predict the outcome of the proceeding.
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.'s ("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. Sepracor and HMRI have agreed to resolve
the interference by arbitration. The arbitration is ongoing and a decision, once
rendered, must be submitted to the PTO for final approval. The proceedings are
ongoing and the Company is unable to predict the outcome.
In May 1998, HMRI filed an action in Belgium alleging that Sepracor's European
patent relating to fexofenadine is invalid in Belgium, or is not infringed by
HMRI's sales of fexofenadine in Belgium and Germany. In September 1998, Sepracor
commenced infringement proceedings in the United Kingdom against HMRI and
related companies for infringement of Sepracor's European patent relating to
fexofenadine.
9
<PAGE>
On June 30, 1999, the PTO declared an interference between certain claims of
Sepracor's issued method-of-use patent relating to (+)-zopiclone, and a claim
in a Rhone-Poulenc Rorer S.A. ("RPR") patent application relating to a method
of improving sleep quality or time in a human by the administration of
(+)-zopiclone. If Sepracor prevails in the interference, Sepracor will retain
all of its claims in its issued patent. If, however, Sepracor loses the
interference, RPR will be issued a U.S. patent containing its claim involved
in the interference, and Sepracor will lose its claims involved in the
interference but retain the claims in its issued patents that are not
involved in the interference. The interference proceeding is in the early
stages. While the Company is unable to predict the outcome, it believes that
the interference will have no effect on its development of (+)-zopiclone
metabolites.
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 a motion 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
granted in part Pall's summary judgment motion and held that the LeukoNet
product infringes a single claim from the '321 Patent. HemaSure has terminated
the manufacture, use, sale and offer for sale of the filter subject to the
court's order. HemaSure appealed the October 1997 decision to the Court of
Appeals for the Federal Circuit. In June 1999, the Court of Appeals for the
Federal Circuit determined that the LeukoNet product did not infringe the claim
of the '321 patent.
With respect to the second action concerning U.S. Patent No's. 4,952,572 (the
"'572 Patent") and 4,340,479 (the "'479 patent"), HemaSure has answered the
complaint stating that it does not infringe any claim of the asserted patents.
Further, HemaSure has counterclaimed for declaratory judgment of invalidity,
noninfringement and unenforceability of the '572 Patent. Pall has amended its
complaint to add Lydall, Inc. ("Lydall"), whose subsidiary supplied filter media
for the LeukoNet product, as a co-defendant and has dropped its claim that the
LeukoNet product infringes the '479 patent. HemaSure has filed for summary
judgment of noninfringement, and Pall has cross-filed for summary judgment of
infringement at the same time. Lydall supported HemaSure's motion for summary
judgment of noninfringement, and has served a motion for summary judgment that
the asserted claims of the '572 Patent are invalid as a matter of law. Discovery
has been completed in the action.
On April 5, 1999, HemaSure and COBE BCT, Inc. ("COBE") filed a complaint for
declaratory relief against Pall in the U.S. District Court of Colorado. HemaSure
and COBE seek declaratory relief that Pall's U.S. patent No's. 4,925,572,
5,229,012, 5,344,561, 5,451,321, 5,501,795 and 5,863,436 are invalid and not
infringed by HemaSure's r\LS filter and methods of using the r\LS filter. Pall
moved to dismiss, to transfer, or, in the alternative, to stay this action and
HemaSure and COBE opposed Pall's motion. On July 16, 1999 the U.S. District
Court of Colorado denied Pall's motion.
On April 23, 1999, Pall filed a complaint against HemaSure and COBE in the
Eastern District of New York ("EDNY") alleging that HemaSure's r\LS filter
infringes Pall's '572 patent, tortiously interfered and unfairly competed
with Pall's business. HemaSure was served with the complaint on April 30,
1999. On May 19, 1999, Pall filed an amended complaint in the EDNY adding
Sepracor Inc., COBE Laboratories, Inc. and Gambro, A.B. as defendants and
alleging that Sepracor induced and contributed to HemaSure's alleged
infringement of Pall's '572 patent, and allegedly tortiously interfered and
unfairly competed with Pall's business. Sepracor was served with the amended
complaint on June 1, 1999. HemaSure and COBE have moved to dismiss, transfer,
or stay the action, and Pall has opposed the motion.
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HemaSure believes, based on advice of its legal counsel, that a properly
informed court should conclude that the manufacture, use and/or sale by HemaSure
or its customers of the LeukoNet product and the r\LS product did not infringe
any valid enforceable claim of the Pall patents. However, there can be no
assurance that HemaSure will prevail in the pending litigation, and an adverse
outcome in a patent infringement action would have a material adverse effect on
HemaSure's financial condition and future business and operations.
Sepracor believes, based on advice of its legal counsel, that a properly
informed court should conclude that Pall's suit against Sepracor should be
dismissed. However, there can be no assurance that this suit will be dismissed
or that Sepracor will prevail in the pending litigation.
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains, in addition to historical
information, forward-looking statements, which involve risk and uncertainties.
Sepracor's actual results could differ significantly from the results discussed
in such forward-looking statements. See "Factors Affecting Future Operating
Results" below.
OVERVIEW
The consolidated interim financial statements include the accounts of
Sepracor Inc. ("Sepracor") and its majority and wholly-owned subsidiaries,
including BioSphere Medical Inc. ("BioSphere"), formerly BioSepra Inc. and
Sepracor Canada Limited.
On February 25, 1999, Sepracor entered into an agreement with HemaSure Inc.
("HemaSure") pursuant to which Sepracor invested $2,000,000 in HemaSure in
exchange for 1,333,334 shares of HemaSure common stock and for warrants to
purchase 667,000 of additional shares of HemaSure common stock.
On February 25, 1999, BioSepra acquired 51% of the outstanding common stock of
BioSphere Medical, S.A. ("BioSphere"). BioSepra acquired the 51% ownership by
granting an exclusive license pertaining to certain patents and technology and
the transfer of certain other technology to BioSphere. BioSepra has the option
to acquire the remaining 49% of the outstanding common stock of BioSphere
through December 31, 2004. The results of operations for BioSphere are included
in BioSepra's operations from the date of acquisition. The historical results of
operations of BioSphere are not material to BioSepra's financial statements.
On March 26, 1999, Sepracor announced it had received final approval from the
U.S. Food and Drug Administration to market Xopenex(TM) (levalbuterol HCl)
inhalation solution in two dosage strengths for use with a nebulizer for the
treatment and prevention of bronchospasm. In April 1999, commercial sales of
Xopenex commenced.
On May 14, 1999, Sepracor announced that Johnson & Johnson elected not to
exercise its option to co-promote norastemizole. Sepracor will continue to fund
clinical development and marketing of the drug, which is currently in Phase III
clinical trials.
Under the terms of the agreement between Sepracor and Johnson & Johnson,
Sepracor has worldwide rights to all Johnson & Johnson intellectual property
covering norastemizole, including the right to reference data from the
astemizole New Drug Application ("NDA"), for manufacture, development, and
marketing of prescription norastemizole products. In exchange, Johnson & Johnson
will receive a royalty on Sepracor's product sales.
On May 17, 1999, BioSphere sold substantially all its assets related to its
biopharmaceutical drug purification and research consumable business to Life
Technologies for net cash proceeds of approximately $11,158,000. As a result of
the sale, the Company has restated prior year and prior quarter consolidated
financial statement amounts to reflect this business as a discontinued
operation.
On June 1, 1999, Sepracor announced a licensing agreement with UCB Farchim SA,
an affiliate of UCB, relating to levocetirizine, an isomer of ZYRTEC (racemic
cetirizine). Under terms of the agreement, Sepracor has exclusively licensed to
UCB all of Sepracor's issued patents and pending patent applications regarding
levocetirizine in Europe and all other countries, except the United States and
Japan. UCB will begin to pay Sepracor royalties upon first product sales, if
any, and royalties will escalate upon achievement of sales volume milestones.
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THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1999 AND 1998
Product revenues were $4,947,000 and $5,227,000 for the three and six-months
ended June 30, 1999, respectively, compared to $32,000 and $90,000,
respectively, for the same periods in 1998. The increase for the three and six
month periods ended June 30, 1999 over 1998 is primarily due to sales of
Xopenex, for which commercial launch was April 1999. Product revenues in 1998
resulted from BioSphere activity.
Collaborative research and development revenue was $13,000 and $2,390,000 for
the three and six months ended June 30,1999, respectively, compared to $497,000
and $2,250,000, respectively, for the same periods in 1998. The decrease for the
three month period ended June 30, 1999 as compared to the same period in 1998,
and the increase for the six month period ended June 30, 1999 as compared to the
same period in 1998 is primarily due to timing of research and development
studies relating to norastemizole agreement with Janssen.
License fees were $3,000 and $11,000 for the three and six months ended June 30,
1999, respectively, compared to $6,000 and $5,030,000, respectively, for the
same periods in 1998. The decrease for the six month period ended June 30, 1999
is primarily due to the $5,000,000 one-time license payment, which Sepracor
received under a 1998 agreement with Schering Plough Corporation.
Cost of product revenues, as a percentage of product revenues, were 23% and
24% for the three and six months ended June 30, 1999, respectively, compared
to 72% and 61%, respectively, for the same periods in 1998. The decrease for
the three and six month periods ended June 30, 1999 over 1998 is primarily
due to Xopenex product cost being significantly less as a percentage of
product sales than the BioSphere product cost to product sales.
Research and development expenses were $24,122,000 and $42,562,000 for the three
and six months ended June 30, 1999, respectively, compared to $10,299,000 and
$23,339,000, respectively, for the same periods in 1998. The increase for the
three and six month periods ended June 30, 1999 is primarily due to costs
related to several anticipated clinical studies being conducted and increased
personnel costs related to the quality assurance, quality control and
regulatory infrastructure development.
Sales and marketing expenses were $8,791,000 and $15,375,000 for the three and
six months ended June 30, 1999, respectively, compared to $3,384,000 and
$5,360,000, respectively, for the same periods in 1998. The increase for the
three and six month periods ended June 30, 1999 over the same periods in 1998 is
primarily due to the hiring, training and salary expense of the Company's
specialty sales force and the introduction of various marketing programs for the
commercial launch of Xopenex, which occurred in April 1999.
General and administrative expenses were $3,796,000 and $6,745,000 for the
three and six months ended June 30, 1999, respectively, compared to
$2,150,000 and $3,803,000, respectively, for the same periods in 1998. The
increase for the three and six month periods ended June 30, 1999 is primarily
due to increased personnel costs, higher costs associated with amortization
of deferred financing costs and increased legal costs principally related to
the Federal Trade Commission's review of the Lilly (R)- Fluoxetine Agreement.
Legal expenses related to patents were $655,000 and $1,530,000 for the three and
six months ended June 30, 1999, respectively, compared to $471,000 and $936,000,
respectively, for the same periods in 1998. The increase for the three and six
month periods ended June 30, 1999 primarily consists of costs related to patent
filings of Sepracor and to the patent interference and litigation with HMRI. See
"Legal proceedings".
Net interest income, interest (expense) and other income (expense) was
($2,570,000) and ($4,825,000) for the three and six months ended June 30,
1999, respectively, compared to ($1,344,000) and ($1,784,000), respectively,
for the same periods in 1998. The increase in expense for the three and six
month periods ended June 30, 1999 over the same period in 1998 is primarily
the result of increased interest expense related to the Company's 6 1/4%
Convertible Subordinated Debentures due 2005 issued in February 1998 and the
7% Convertible Subordinated Debentures due 2005, issued in December 1998,
offset in part by an increase in interest income due to a higher average
daily cash balance available for investment in 1999.
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Equity in loss of investees was $825,000 and $2,509,000 for the three and six
months ended June 30, 1999, respectively, compared to $359,000 and $1,246,000,
respectively, for the same periods in 1998. The increase for the three month
period ended June 30, 1999 over the same period in 1998 is primarily due to
Sepracor's recognition of HemaSure losses in 1999. The increase for the six
month period ended June 30, 1999 over the same period in 1998 is primarily due
to Sepracor's recognition of HemaSure losses in 1999 partially offset by the
recognition by Sepracor of less Versicor losses as a result of the Company's
change from the equity method of accounting to the cost method of accounting in
April 1999. (See Note 7.)
Minority interest in subsidiary from continuing operations resulted in a
decrease to consolidated net loss of $366,000 and $548,000 for the three and six
months ended June 30, 1999, respectively, compared to $76,000 and $157,000,
respectively, for the same periods in 1998. The fluctuation in minority interest
is the result of BioSphere's fluctuation in earnings.
Net income (loss) from discontinued operations (net of minority interests) was
($69,000) and ($345,000) for the three and six months ended June 30, 1999,
respectively, compared to ($207,000) and $16,000, respectively, for the same
period in 1998.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents plus marketable securities of Sepracor and its
subsidiaries, including BioSphere, totaled $433,723,000 at June 30,1999,
compared to $499,598,000 at December 31, 1998. Cash and cash equivalents plus
marketable securities of Sepracor, excluding BioSphere, at June 30, 1999 were
$426,778,000.
The net cash used in operating activities for the six months ended June 30,
1999 was $70,562,000. The net cash used in operating activities includes a
net loss of $66,926,000 adjusted by non-cash charges of $6,062,000. Inventory
balances at June 30, 1999 increased a total of $3,891,000 from the December
31, 1998 balances, due to Xopenex inventories. Accounts receivable increased
by $4,937,000 primarily due to Xopenex product revenues, and accounts payable
decreased by $2,549,000 due to the timing of cash disbursements made.
The net cash used in investing activities for the six months ended June 30, 1999
was $97,738,000. Cash was invested primarily in net purchases of marketable
securities of $91,601,000, in purchases of property and equipment of $4,000,000,
an investment of $2,000,000 in HemaSure and $1,000,000 of restricted cash of
BioSphere.
The net cash provided by financing activities for the six months ended June 30,
1999 was $1,072,000. The Company received $3,628,000 in net proceeds from the
issuance of stock. BioSphere used $2,180,000 primarily to repay its bank loans.
The Company anticipates that its existing capital resources and available bank
borrowings will be sufficient to finance operations through at least the next
three years.
In December 1998, Sepracor signed a license agreement (the "Lilly (R)-fluoxetine
Agreement") with Eli Lilly and Company ("Lilly") giving Lilly exclusive
worldwide rights to Sepracor's patents covering (R)-fluoxetine, which is a
modified form of an active ingredient found in Prozac(R). Under the terms of the
Lilly (R)-fluoxetine Agreement, and subject to approval under the Hart Scott
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), Sepracor
will receive an initial milestone payment and license fee of $20,000,000, which
will be recorded as revenue in accordance with the terms of the Agreement.
Additional milestone payments of up to $70,000,000 will be made based on the
progression of (R)-fluoxetine through development. In addition, Sepracor will
receive royalties on (R)-fluoxetine worldwide sales, if any, beginning at
product launch. Under the HSR Act, Sepracor has received a request from the
Federal Trade Commission for additional information in connection with the Lilly
(R)-fluoxetine Agreement. Sepracor plans to fully respond to the request. (See
Note 8)
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New Accounting Pronouncements
During 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 133 "Accounting for
Derivative Instruments and Hedging Activities." In July 1999, the FASB issued
SFAS No. 137, which defers the effective date of SFAS No. 133 until the start
of fiscal years beginning after June 15, 2000. The Company will continue to
evaluate any potential impact this standard may have on its consolidated
financial statements.
FACTORS AFFECTING FUTURE OPERATING RESULTS
Certain of the information contained in this Quarterly Report on Form 10-Q,
including information with respect to the safety, efficacy and potential
benefits of Sepracor's improved chemical entities, or 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 Sepracor's business
and the business of the subsidiaries and certain affiliates of Sepracor,
consists of forward-looking statements. Important factors that could cause
actual results to differ materially from the forward-looking statements include
the following:
SEPRACOR HAS NEVER BEEN PROFITABLE AND MAY NOT BE ABLE TO GENERATE REVENUES
SUFFICIENT TO ACHIEVE PROFITABILITY. Sepracor has not been profitable since
inception, and it is possible that it will not achieve profitability. Sepracor
incurred net losses applicable to common shares on a consolidated basis of
approximately $66,926,000 for the six month period ended June 30, 1999 and
$93,433,000 for the year ended December 31, 1998. Sepracor expects to continue
to incur operating and capital expenditures. As a result, it will need to
generate significant revenues to achieve and maintain profitability. Sepracor
cannot assure you that it will achieve significant revenues or that it will ever
achieve profitability. Even if Sepracor does achieve profitability, it cannot
assure you that it can sustain or increase profitability on a quarterly or
annual basis in the future. If revenues grow more slowly than Sepracor
anticipates or if operating expenses exceed Sepracor's expectations or cannot be
adjusted accordingly, Sepracor's business, results of operations and financial
conditions will be materially and adversely affected.
SEPRACOR WILL BE REQUIRED TO EXPEND SIGNIFICANT RESOURCES FOR RESEARCH,
DEVELOPMENT, TESTING AND REGULATORY APPROVAL OF ITS DRUGS UNDER DEVELOPMENT AND
THESE DRUGS MAY NOT BE DEVELOPED SUCCESSFULLY. Sepracor is focused on the
development of ICEs. Most of Sepracor's ICEs are still undergoing clinical
trials or are at the early stages of development. Sepracor's drugs may not
provide greater benefits or fewer side effects than the original versions of
these drugs and its research efforts may not lead to the discovery of new drugs
with improved characteristics. All of Sepracor's drugs under development will
require significant additional research, development, preclinical and/or
clinical testing, regulatory approval and a commitment of significant additional
resources prior to their commercialization. Sepracor's potential products may
not:
- be developed successfully;
- be proven safe and efficacious in clinical trials;
- offer therapeutic or other improvements over comparable drugs;
- meet applicable regulatory standards;
- be capable of being produced in commercial quantities at acceptable
costs; or
- be successfully marketed.
IF SEPRACOR FAILS TO ADEQUATELY PROTECT ITS INTELLECTUAL PROPERTY RIGHTS OR
FACES A CLAIM OF INTELLECTUAL PROPERTY INFRINGEMENT BY A THIRD PARTY, THEN IT
COULD LOSE VALUABLE INTELLECTUAL PROPERTY RIGHTS OR BE LIABLE FOR SIGNIFICANT
DAMAGES. Sepracor's success depends in part on its ability to obtain and
maintain patents, protect trade secrets and operate without infringing upon the
proprietary rights of others. In the absence of patent and trade secret
protection, competitors may adversely affect Sepracor's business by
independently developing and marketing substantially equivalent products and
technology and preventing Sepracor from marketing its products. It is also
possible that Sepracor could incur substantial costs in litigation if it is
required to defend itself in patent suits brought by third parties, or if
Sepracor is required to initiate litigation against others to protect its
intellectual property rights.
Sepracor has filed various patent applications covering the composition of, and
the methods of using, single-isomer or active-metabolite forms of various
compounds for specific applications. However, Sepracor may not be issued patents
in respect of the patent applications already filed or that it may file in the
future. Moreover, the patent position of companies in the pharmaceutical
industry generally involves complex legal and factual questions, and recently
has been the subject of much litigation. No consistent policy has emerged from
the U.S. Patent and Trademark Office, or the PTO, or the courts regarding the
breadth of claims allowed or the degree of protection afforded under patents and
other proprietary rights. Therefore, any patents Sepracor has obtained, or
obtains in the future, may be challenged, invalidated or circumvented.
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Sepracor's ability to commercialize successfully any ICE will largely depend
upon its ability to obtain and maintain use patents of sufficient scope to
prevent third parties from developing similar or competitive products. Third
parties, typically drug companies, hold patents or patent applications covering
the composition of matter for most of the ICEs for which Sepracor has use
patents or patent applications. In each such case, unless Sepracor has or
obtains a license agreement, Sepracor generally may not commercialize the ICE
until the expiration of these third-party patents. Licenses may not be available
to Sepracor on acceptable terms, if at all. In addition, it would be costly to
contest the validity of a third-party patent or defend any claim that Sepracor
infringes a third-party patent. Moreover, litigation involving third-party
patents may not be resolved in Sepracor's favor.
SEPRACOR MAY NOT RECEIVE MILESTONE OR ROYALTY PAYMENTS IF A PATENT INTERFERENCE
IN WHICH IT IS INVOLVED IS RESOLVED AGAINST IT. In July 1997, the PTO informed
Sepracor that it had declared an interference between Sepracor's use patent on a
compound known as fexofenadine which is used to treat allergic rhinitis, or hay
fever, and another similar use patent application filed by Sepracor, and a use
patent application of Hoechst Marion Roussell, Inc. The primary objective of a
patent interference, which only the PTO can declare, is to determine which party
first invented the overlapping subject matter claimed by more than one party.
The process to resolve an interference can take many years and the outcome of
interferences varies considerably. If Sepracor loses the interference, Hoechst
Marion Roussel will be issued a U.S. patent and may not be obligated to pay the
milestone or royalty payments called for in the existing agreement in which
Sepracor licenses its U.S. patent rights covering fexofenadine to Hoechst Marion
Roussel.
Sepracor is using arbitration to resolve the interference, and the arbitration
proceeding is ongoing.
IF SEPRACOR'S PRODUCTS DO NOT RECEIVE GOVERNMENT APPROVAL, THEN SEPRACOR WILL
NOT BE ABLE TO COMMERCIALIZE THEM. The U.S. Food and Drug Administration, or
FDA, and similar foreign agencies must approve the marketing and sale of
pharmaceutical products developed by Sepracor or its development partners.
These agencies impose substantial requirements on the manufacture and marketing
of drugs. Sepracor's failure to obtain regulatory approval on a timely basis and
any unanticipated significant expenditures on preclinical and clinical studies
could adversely affect the funds Sepracor will require to advance its products
to commercialization and the timing of the commercial introduction of, or its
ability to market and sell, its products.
The regulatory process to obtain marketing approval requires clinical trials of
a product to establish its safety and efficacy. Problems that may arise during
clinical trials include:
- results of clinical trials may not be consistent with pre-clinical
study results;
- results from later phases of clinical trials may not be consistent with
the results from earlier phases; and
- products may not be shown to be safe and efficacious.
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The clinical trial and regulatory approval process can take many years and
require substantial expenditures. Sepracor may not obtain regulatory approval
for products on a timely basis, if at all. With respect to certain of Sepracor's
ICEs, Sepracor has been able to shorten the regulatory approval process by
relying on the parent drug's preclinical and clinical toxicology data already on
file with the FDA. However, it is possible that the FDA will not permit Sepracor
to use this strategy in the future. Accordingly, Sepracor may be required to
expend significant resources to complete preclinical and clinical studies for
its other ICEs which would significantly delay the regulatory approval process.
Even if the FDA or similar foreign agency grants Sepracor regulatory approval of
a product, the approval may be subject to limitations on the indicated uses for
which the product may be marketed or contain requirements for costly
post-marketing follow-up studies. Moreover, if Sepracor fails to comply with
applicable regulatory requirements, it may be subject to fines, suspension or
withdrawal of regulatory approvals, product recalls, seizure of products,
operating restrictions and criminal prosecution.
SEPRACOR HAS LIMITED SALES AND MARKETING EXPERIENCE AND EXPECTS TO INCUR
SIGNIFICANT EXPENSES IN DEVELOPING A SALES FORCE. IN ADDITION, SEPRACOR'S
LIMITED SALES AND MARKETING EXPERIENCE MAY RESTRICT ITS SUCCESS IN
COMMERCIALIZING ITS PRODUCTS. Sepracor currently has very limited sales and
marketing experience. If Sepracor successfully develops and obtains regulatory
approval for the products it is currently developing, Sepracor expects to
license some of them to large pharmaceutical companies and market and sell
others through its direct specialty sales forces or through other arrangements,
including co-promotion arrangements. Sepracor has established a direct sales
force to market its single isomer form of albuterol, Xopenex. As Sepracor begins
to enter into co-promotion arrangements or market and sell additional products
directly, Sepracor will need to significantly expand its sales force. Sepracor
expects to incur significant expense in expanding its direct sales force and
Sepracor's limited experience may restrict its success in commercializing its
products.
Sepracor's ability to realize significant revenues from direct marketing and
sales activities depends on its ability to attract and retain qualified sales
personnel in the pharmaceutical industry and competition for these people is
intense. If Sepracor is unable to attract and retain qualified sales personnel,
Sepracor will not be able to successfully expand its marketing and direct sales
force on a timely or cost effective basis. Further, Sepracor's sales and
marketing efforts may not be successful, and the need to comply with FDA limits
on drug product marketing, including limits on claims of comparative safety or
efficacy, may inhibit the effectiveness of its marketing efforts. In addition,
Sepracor 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. Sepracor may not be successful in
entering into any co-promotion arrangements, and the terms of any co-promotion
arrangements may not be favorable to it.
IF SEPRACOR DOES NOT MAINTAIN CURRENT GOOD MANUFACTURING PRACTICES, THEN THE FDA
COULD REFUSE TO APPROVE MARKETING APPLICATIONS. SEPRACOR DOES NOT HAVE THE
CAPABILITY TO MANUFACTURE IN SUFFICIENT QUANTITIES ALL OF THE PRODUCTS WHICH MAY
BE APPROVED FOR SALE, AND DEVELOPING AND OBTAINING THIS CAPABILITY WILL BE TIME
CONSUMING AND EXPENSIVE. The FDA and other regulatory authorities require that
Sepracor's products be manufactured according to their Good Manufacturing
Practices standards. Sepracor's failure to maintain current Good Manufacturing
Practices compliance and/or scale up its manufacturing processes could lead to
refusal by the FDA to approve marketing applications. Failure in either respect
could also be the basis for action by the FDA to withdraw approvals previously
granted and for other regulatory action.
Sepracor's failure to increase its manufacturing capabilities may mean that even
if it develops new products, it may not be able to produce them. Sepracor
currently operates a manufacturing plant that is compliant with current Good
Manufacturing Practices that Sepracor believes can produce commercial quantities
of Xoponex and support the production of Sepracor's other possible products in
amounts needed for its clinical trials. However, Sepracor will not have the
capability to manufacture in sufficient quantities all of the products which may
be approved for sale. Accordingly, Sepracor may be required to spend money to
expand its current manufacturing facility, build an additional manufacturing
facility or contract the production of these drugs to third-party manufacturers.
Sepracor currently has a supply contract with ChiRex that commits Sepracor to
purchase through December 31, 2001 all of its annual requirements of those drugs
that it will market directly through its specialty sales force, provided ChiRex
meets certain pricing, supply and quality control conditions. If ChiRex
experiences delays or difficulties in producing, packaging or delivering the
drugs, market introduction and subsequent sales of the drugs that Sepracor
markets through its specialty sales force could be adversely affected. Under
this supply agreement, however, Sepracor retains the right to manufacture
commercial quantities of its drugs in its Nova Scotia manufacturing plant.
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SEPRACOR COULD BE EXPOSED TO SIGNIFICANT LIABILITY CLAIMS IF IT IS UNABLE TO
OBTAIN INSURANCE AT ACCEPTABLE COSTS OR OTHERWISE PROTECT AGAINST POTENTIAL
LIABILITY CLAIMS. Sepracor may be subjected to product liability claims that are
inherent in the testing, manufacturing, marketing and sale of human health care
products. These claims could expose Sepracor to significant liabilities that
could prevent or interfere with its product commercialization efforts. Product
liability claims could require Sepracor to spend significant time and money in
litigation or to pay significant damages. Although Sepracor maintains limited
product liability insurance coverage for both the clinical trials and
commercialization of Sepracor's products, it is possible that Sepracor will not
be able to obtain further product liability insurance on acceptable terms, if at
all, and that insurance subsequently obtained will not provide adequate coverage
against all potential claims.
THE DEVELOPMENT AND COMMERCIALIZATION OF SEPRACOR'S PRODUCTS COULD BE DELAYED OR
TERMINATED IF SEPRACOR'S COLLABORATIVE PARTNERS TERMINATE, OR FAIL TO PERFORM
THEIR OBLIGATIONS UNDER, THEIR AGREEMENTS WITH SEPRACOR. Sepracor's ability to
commercialize certain drugs that Sepracor develops is likely to depend
significantly on its continued ability to enter into collaborative agreements
with pharmaceutical companies to fund all or part of the costs to complete the
development of these drugs and to manufacture and/or market these drugs. In each
of Sepracor's collaborative arrangements and, to the extent that it enters into
additional collaborative arrangements, Sepracor depends upon the efforts of its
collaboration partners, and these efforts may not be successful. If any of
Sepracor's collaboration partners were to breach or terminate their agreements
with Sepracor or fail to perform their obligations to Sepracor in a timely
manner, the development and commercialization of the products could be delayed
or terminated. Any delay or termination of this type could have a material,
adverse effect on Sepracor's financial condition and results of operations
because Sepracor may be required to expend additional funds to bring its
products to commercialization, and milestone or royalty payments from
collaborative partners or revenue from product sales, if any, could be delayed
or terminated. Any failure or inability by Sepracor to perform some of its
obligations under a collaborative agreement could reduce or extinguish the
benefits to which Sepracor is otherwise entitled under the agreement.
Currently, Sepracor has five collaboration agreements. Sepracor has licensed
to Hoechst Marion Roussell its U.S. patent rights to fexofenadine, which is
marketed by Hoechst Marion Roussell as Allegra(R), and is entitled to receive
royalties on all U.S. sales of Allegra when the patent on the parent drug
expires. Sepracor, however, is currently party to an interference involving
Allegra which, if decided against Sepracor, could result in the loss of all
or substantially all of the royalties to which it is entitled under the
license agreement on future sales of Allegra. See " - Sepracor may not
receive milestone or royalty payments if a patent interference in which it is
involved is resolved against it." Sepracor has also licensed its worldwide
patent rights in desloratadine to Schering-Plough, Ltd., pursuant to which it
is entitled to receive royalties from Schering-Plough, Ltd. upon the initial
sale of the product. Sepracor has entered into an agreement with Janssen
Pharmaceutica N.V., a wholly owned subsidiary of Johnson & Johnson, with
respect to norastemizole. On May 14, 1999, Sepracor announced that Janssen
had elected not to exercise its option to co-promote norastemizole. Sepracor
has exclusively licensed its rights in a compound known as norcisapride to
Janssen, and is entitled to receive royalties on product sales beginning upon
the first commercial sale. These royalties will escalate upon achievement of
sales volume milestones. Sepracor has exclusively licensed its (R)-fluoxetine
rights to Eli Lilly and Company, and, in addition to up front license and
development milestone payments, is entitled to receive royalties on product
sales beginning upon the first commercial sale. This agreement will be
effective on the next business day following the expiration or earlier
termination of the notice and waiting period under the Hart Scott Rodino Act
of 1976. Under the Hart Scott Rodino Act of 1976, Sepracor has received a
request from the Federal Trade Commission for additional information in
connection with the (R)-fluoxetine agreement.
Sepracor cannot assure you that it will be able to enter into collaborative
agreements for ICEs in the future or that the terms of the collaborative
agreements, if any will be favorable to Sepracor. The inability to enter into
collaborative agreements in the future could delay or preclude the development,
manufacture and/or marketing of some of Sepracor's drugs and could have a
material adverse effect on Sepracor's financial condition and results of
operations because
- Sepracor may be required to expend additional funds to advance the
drugs to commercialization;
- revenue from product sales could be delayed; or
- Sepracor may elect not to commercialize the drugs.
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SEPRACOR HAS SIGNIFICANT LONG-TERM DEBT AND IT MAY NOT BE ABLE TO MAKE INTEREST
OR PRINCIPAL PAYMENTS WHEN DUE. As of June 30, 1999, Sepracor's total long-term
debt was approximately $491,936,000 and its stockholders' deficit was
approximately $57,963,000. Neither the debentures issued in February 1998 nor
the debentures issued in December 1998 restrict Sepracor's ability, or its
subsidiaries' ability, to incur additional indebtedness, including debt that
ranks senior to these debentures. Additional indebtedness of Sepracor may rank
senior to or on parity with these debentures in certain circumstances.
Sepracor's ability to satisfy its obligations will depend upon Sepracor's future
performance, which is subject to many factors, including factors beyond its
control. It is possible that Sepracor will be unable to meet its debt service
requirements on any of its outstanding debentures. Moreover, Sepracor may be
unable to repay the 6-1/4% debentures or 7% debentures at maturity or otherwise
in accordance with the debt instruments.
IF SUFFICIENT FUNDS TO FINANCE SEPRACOR'S BUSINESS ARE NOT AVAILABLE TO SEPRACOR
WHEN NEEDED OR ON ACCEPTABLE TERMS, THEN SEPRACOR MAY BE REQUIRED TO DELAY,
SCALE BACK, ELIMINATE OR ALTER ITS STRATEGY FOR ITS PROGRAMS. Sepracor may
require additional funds for its research and product development programs,
operating expenses, the pursuit of regulatory approvals and the expansion of
Sepracor's production, sales and marketing capabilities. Historically Sepracor
has satisfied its funding needs through collaborative arrangements with
corporate partners, equity or debt financing. Sepracor cannot assure you that
these funding sources will be available to it when needed in the future, or, if
available, will be on terms acceptable to Sepracor. Insufficient funds could
require Sepracor to delay, scale back or eliminate certain of its research and
product development programs or to license third parties to commercialize
products or technologies that Sepracor would otherwise develop or commercialize
itself. Sepracor's cash requirements may vary materially from those now planned
because of factors including:
- increased research and development expenses;
- patent developments;
- relationships with collaborative partners;
- the FDA regulatory process; and
- Sepracor's capital requirements.
SEPRACOR EXPECTS TO FACE INTENSE COMPETITION AND ITS COMPETITORS HAVE GREATER
RESOURCES AND CAPABILITIES THAN SEPRACOR HAS. DEVELOPMENTS BY OTHERS MAY RENDER
SEPRACOR'S PRODUCTS OR TECHNOLOGIES OBSOLETE OR NONCOMPETITIVE. Sepracor expects
to encounter intense competition in the sale of its future products. If Sepracor
is unable to compete effectively, its financial condition and results of
operations could be materially adversely affected because Sepracor may use its
financial resources to seek to differentiate itself from its competition and
because Sepracor may not achieve its product revenue objectives. Many of
Sepracor's competitors and potential competitors, which include pharmaceutical
companies, biotechnology firms, universities and other research institutions,
have substantially greater resources, manufacturing and marketing capabilities,
research and development staff and production facilities than Sepracor has. The
fields in which Sepracor competes are subject to rapid and substantial
technological change. Sepracor's competitors may be able to respond more quickly
to new or emerging technologies or to devote greater resources to the
development, manufacture and marketing of new products and/or technologies than
Sepracor can. As a result, any products and/or technologies that Sepracor may
develop may become obsolete or non-competitive before Sepracor can recover
expenses incurred in connection with their development.
FLUCTUATIONS IN THE DEMAND FOR PRODUCTS, THE TIMING OF COLLABORATIVE
ARRANGEMENTS, EXPENSES AND THE RESULTS OF OPERATIONS OF SEPRACOR'S SUBSIDIARIES
WILL CAUSE FLUCTUATIONS IN SEPRACOR'S QUARTERLY OPERATING RESULTS, WHICH COULD
CAUSE VOLATILITY IN ITS STOCK PRICE. Sepracor's quarterly operating results are
likely to fluctuate significantly which could cause our stock price to be
volatile. These fluctuations will depend on factors which include:
- the timing of collaborative agreements for Sepracor's pharmaceutical
development candidates and development costs for those pharmaceuticals;
- the timing of product sales and market penetration;
- the timing of operating expenses, including marketing expenses and the
costs of expanding and maintaining a direct sales force;
- the timing of significant orders for the products of BioSphere; and
- the losses of HemaSure and Versicor, to the extent Sepracor is required
to recognize these losses.
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YEAR 2000 ISSUE
The year 2000 issue is the result of computer programs being written using two
digits (rather than four) to define the applicable year. Any of Sepracor'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. In 1996, Sepracor began a comprehensive project, fully
supported by senior management, to determine the risks and impacts of the Year
2000, or Y2K, computer problem on Sepracor's ability to operate into the next
century. This plan took into account Sepracor's status as a pharmaceutical
research and development company, and its transition to a fully-developed
pharmaceutical company, with research and development, manufacturing,
distribution and sales functions. The project relates to the following areas:
(i) Sepracor's internal systems (including information technology systems, such
as financial systems, and non-information technology systems, such as telephones
and facilities); and (ii) the readiness of Sepracor's vendors.
Department managers in every business area participated in the project, under
the leadership of a Y2K Project Manager. Sepracor began this project in 1996 so
as to incorporate Y2K readiness into its business strategy, and to identify and
replace non-compliant systems and procedures as part of its normal operating
plan and budget.
Y2K State of Readiness: Sepracor has completed its assessment of the impact of
Y2K on its present and future operations, and has identified computer and
micro-processor based systems, both hardware and software driven, which could
potentially be affected by the turnover to the next century. These components
and systems have been tested for Y2K compliance. Those systems which required
replacement or modification have been addressed and re-tested. At this point all
systems are fully compliant.
Sepracor's goal of achieving full compliance on its internal systems was
achieved in July, 1999. The term "Y2K compliant" as used herein means that all
Sepracor systems, procedures, and products will correctly identify and process
without error all dates, including those calculations which reference leap
years, and one or more centuries.
We are now in the process of reviewing Y2K Compliance certifications that were
requested from our customers and vendors last quarter. To date, most companies
are either fully compliant, or plan to be within our timeframe for the
completion of this project. In addition to written requests for Y2K
certification, Sepracor continues to contact key suppliers who provide power,
telecommunications, or other critical resources to the Company, to review their
Y2K status. We have also completed a review of the outsourcing companies who
package, test and distribute our products and found them to be in compliance
with all Y2K issues.
Completion of this phase of our Y2K readiness project has been delayed, as we
are still waiting for some vendors to answer our certification requests. Once we
receive all the information requested, we will review our contingency planning
needs. We hope to have this activity completed by October 1, 1999.
Y2K Costs: Costs related to Year 2000 issues are funded through the information
technology operating budget and represent an immaterial portion of this IT
budget. Spending associated with Y2K issues has not caused us to defer any other
IT projects.
To date, Sepracor has spent approximately $365,000 to retrofit or replace
computer-based systems, which were identified as lacking compliance. This
included the migration of all of Sepracor's desktop computers to an operating
status Sepracor considers to be Y2K certified, through software upgrades or full
system replacements. Sepracor's key telecommunications systems were also
upgraded and/or replaced. These costs have been minimal due to the fact that Y2K
compliance has been a prerequisite to all new systems acquisitions and
maintenance upgrades.
Sepracor estimates that it will incur approximately $100,000 in additional
direct costs to complete its Y2K certification efforts. These costs include a
contract with an independent auditor to perform a review of its compliance
efforts, including contingency planning. The additional funding will also be
used to address any system or process replacement requirements that may be
identified as these reviews progress.
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Y2K Risks: Sepracor relies on third-party suppliers and service providers. If
these or other parties experience Y2K failures or malfunctions there could be an
adverse impact on the Company's ability to conduct operations, including
conducting continued pharmaceutical development efforts and manufacturing
pharmaceutical products. At this time, the Company does not anticipate this
worst case scenario to occur, nor does Sepracor anticipate any major
interruptions in its ability to provide products and services to our customers.
Y2K Contingency Plans: The Company has not formalized a contingency plan to date
because there are almost no legacy systems at Sepracor and our systems review
did not identify any major issues which would require contingency planning. This
requirement will be addressed after the vendor certification process is
completed. This contingency plan will include alternate vendor selection if
necessary and also address potential manual procedures in areas where systems
will not operate properly.
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ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market Risk
The Company is exposed to market risk from changes in interest rates and equity
prices, which could affect its future results of operations and financial
condition. The Company manages its exposure to these risks through its regular
operating and financing activities.
Interest Rates: The Company's available for sale investments and subordinated
convertible debentures are sensitive to changes in interest rates. Interest rate
changes would result in a change in the fair value of these financial
instruments due to the difference between the market interest rate and the rate
at the date of purchase of the financial instrument. A 10% decrease in year-end
1998 market interest rates would result in no material impact on the net fair
value of the Company's interest-sensitive financial instruments.
Equity Prices: The Company's subordinated convertible debentures are sensitive
to fluctuations in the price of the Company's common stock into which the
debentures are convertible. Changes in equity prices would result in changes in
the fair value of the Company's subordinated convertible debentures due to the
difference between the current market price and the market price at the date of
issuance of debentures. A 10% increase in the year-end 1998 market equity prices
would result in an increase of $38,600,000 on the net fair value of the
Company's subordinated convertible debentures.
PART II
OTHER INFORMATION
Item 1. Legal proceedings.
On February 12, 1999, the Federal Trade Commission ("FTC") issued a request for
additional information or documentary materials relating to the Company's
exclusive license agreement with Eli Lilly and Company (the "Lilly Agreement").
The purpose of the request was to investigate whether or not the Lilly Agreement
constitutes a violation of Section 5 of the Federal Trade Commission Act and
Section 7 of the Clayton Act. The Company is in the process of responding to the
request. At the conclusion of its investigation, the FTC could institute
proceedings seeking to modify the Lilly Agreement or to prevent it from becoming
effective. While the Company believes that the Lilly Agreement does not
constitute a violation of the above-mentioned laws, the Company is unable to
predict the outcome of the proceeding.
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.'s ("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. Sepracor and HMRI have agreed to resolve
the interference by arbitration. The arbitration is ongoing and a decision, once
rendered, must be submitted to the PTO for final approval. The proceedings are
ongoing and the Company is unable to predict the outcome.
In May 1998, HMRI filed an action in Belgium alleging that Sepracor's European
patent relating to fexofenadine is invalid in Belgium, or is not infringed by
HMRI's sales of fexofenadine in Belgium and Germany. In September 1998, Sepracor
commenced infringement proceedings in the United Kingdom against HMRI and
related companies for infringement of Sepracor's European patent relating to
fexofenadine.
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<PAGE>
On June 30, 1999, the PTO declared an interference between certain claims of
Sepracor's issued method-of-use patent relating to (+)-zopiclone, and a claim
in a Rhone-Poulenc Rorer S.A. ("RPR") patent application relating to a method
of improving sleep quality or time in a human by the administration of
(+)-zopiclone. If Sepracor prevails in the interference, Sepracor will retain
all of its claims in its issued patent. If, however, Sepracor loses the
interference, RPR will be issued a U.S. patent containing its claim involved
in the interference, and Sepracor will lose its claims involved in the
interference but retain the claims in its issued patents that are not
involved in the interference. The interference proceeding is in the early
stages. While the Company is unable to predict the outcome, it believes that
the interference will have no effect on its development of (+)-zopiclone
metabolites.
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 a motion 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
granted in part Pall's summary judgment motion and held that the LeukoNet
product infringes a single claim from the '321 Patent. HemaSure has terminated
the manufacture, use, sale and offer for sale of the filter subject to the
court's order. HemaSure appealed the October 1997 decision to the Court of
Appeals for the Federal Circuit. In June 1999, the Court of Appeals for the
Federal Circuit determined that the LeukoNet product did not infringe the claim
of the '321 patent.
With respect to the second action concerning U.S. Patent No's. 4,952,572 (the
"'572 Patent") and 4,340,479 (the "'479 patent"), HemaSure has answered the
complaint stating that it does not infringe any claim of the asserted patents.
Further, HemaSure has counterclaimed for declaratory judgment of invalidity,
noninfringement and unenforceability of the '572 Patent. Pall has amended its
complaint to add Lydall, Inc. ("Lydall"), whose subsidiary supplied filter media
for the LeukoNet product, as a co-defendant and has dropped its claim that the
LeukoNet product infringes the '479 patent. HemaSure has filed for summary
judgment of noninfringement, and Pall has cross-filed for summary judgment of
infringement at the same time. Lydall supported HemaSure's motion for summary
judgment of noninfringement, and has served a motion for summary judgment that
the asserted claims of the '572 Patent are invalid as a matter of law. Discovery
has been completed in the action.
On April 5, 1999, HemaSure and COBE BCT, Inc. ("COBE") filed a complaint for
declaratory relief against Pall in the U.S. District Court of Colorado. HemaSure
and COBE seek declaratory relief that Pall's U.S. patent No's. 4,925,572,
5,229,012, 5,344,561, 5,451,321, 5,501,795 and 5,863,436 are invalid and not
infringed by HemaSure's r\LS filter and methods of using the r\LS filter. Pall
moved to dismiss, to transfer, or, in the alternative, to stay this action and
HemaSure and COBE opposed Pall's motion. On July 16, 1999 the U.S. District
Court of Colorado denied Pall's motion.
On April 23, 1999, Pall filed a complaint against HemaSure and COBE in the
Eastern District of New York ("EDNY") alleging that HemaSure's r\LS filter
infringes Pall's '572 patent, tortiously interfered and unfairly competed
with Pall's business. HemaSure was served with the complaint on April 30,
1999. On May 19, 1999, Pall filed an amended complaint in the EDNY adding
Sepracor Inc., COBE Laboratories, Inc. and Gambro, A.B. as defendants and
alleging that Sepracor induced and contributed to HemaSure's alleged
infringement of Pall's '572 patent, and allegedly tortiously interfered and
unfairly competed with Pall's business. Sepracor was served with the amended
complaint on June 1, 1999. HemaSure and COBE have moved to dismiss, transfer,
or stay the action, and Pall has opposed the motion.
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<PAGE>
HemaSure believes, based on advice of its legal counsel, that a properly
informed court should conclude that the manufacture, use and/or sale by HemaSure
or its customers of the LeukoNet product and the r\LS product did not infringe
any valid enforceable claim of the Pall patents. However, there can be no
assurance that HemaSure will prevail in the pending litigation, and an adverse
outcome in a patent infringement action would have a material adverse effect on
HemaSure's financial condition and future business and operations.
Sepracor believes, based on advice of its legal counsel, that a properly
informed court should conclude that Pall's suit against Sepracor should be
dismissed. However, there can be no assurance that this suit will be dismissed
or that Sepracor will prevail in the pending litigation.
24
<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 19, 1999
(the "Annual Meeting"), the following proposals were approved as further
specified below:
1. Election of two Class II Directors:
<TABLE>
<CAPTION>
For Withheld Authority
--- ------------------
<S> <C> <C>
Timothy J. Barberich 29,899,823 110,036
Keith Mansford, Ph.D. 29,885,249 124,610
</TABLE>
The following directors' terms of office continued after the Annual
Meeting:
James G. Andress
Digby W. Barrios
Robert J. Cresci
James F. Mrazek
Alan A. Steigrod
2. Approval of amendment to the Company's Restated Certificate of
Incorporation, as amended, increasing from 80,000,000 to 140,000,000
the number of authorized shares of Common Stock.
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
20,039,437 906,716 63,706 --
3. Approval of the 1999 Director Stock Option Plan.
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
17,575,284 5,800,793 154,931 6,478,851
4. Approval of amendment to the Company's 1991 Restated Stock Option Plan.
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
14,721,023 8,653,890 156,095 6,478,851
25
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
3.1 Restated Certificate of Incorporation, as amended.
27.1 Financial Data Schedule
b) Reports on Form 8-K
1. Form 8-K filed with the Securities and Exchange Commission on
May 18, 1999.
26
<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 16, 1999 /s/ Timothy J. Barberich
------------------------------------------
Timothy J. Barberich
President and Chief
Executive Officer
(Principal Executive Officer)
Date: August 16, 1999 /s/ Robert F. Scumaci
------------------------------------------
Robert F. Scumaci
Senior Vice President
of Finance and Administration
(Principal Accounting Officer)
27
<PAGE>
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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<PAGE>
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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<PAGE>
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
3
<PAGE>
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
4
<PAGE>
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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<PAGE>
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
2
<PAGE>
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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<PAGE>
(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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
(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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<PAGE>
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
2
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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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<PAGE>
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
5
<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:
7
<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
8
<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
9
<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
10
<PAGE>
(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
11
<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
12
<PAGE>
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;
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<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:
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<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
<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 25, 1999, 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 one hundred and forty-one
million shares (141,000,000) consisting of one hundred and forty
million (140,000,000) 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
<PAGE>
the outstanding shares of Common Stock at the Corporation's Annual
Meeting of Stockholders held on May 19, 1999 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 19th day of May, 1999.
SEPRACOR INC.
By: /s/ Robert F. Scumaci
---------------------
Robert F. Scumaci
Its: SENIOR VICE PRESIDENT
<TABLE> <S> <C>
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