<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-2
SEPRACOR INC.
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
----------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------
/ / Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or
schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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</TABLE>
<PAGE>
SEPRACOR INC.
111 LOCKE DRIVE
MARLBOROUGH, MASSACHUSETTS 01752
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 24, 2000
The 2000 Annual Meeting of Stockholders of Sepracor Inc. (the "Company")
will be held at the offices of Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts 02109, on Wednesday, May 24, 2000 at 9:00 a.m., local time, to
consider and act upon the following matters:
1. To elect three Class I Directors for the ensuing three years;
2. To approve an amendment to the Company's Restated Certificate of
Incorporation, as amended, increasing from 140,000,000 to 240,000,000 the
authorized shares of Common Stock;
3. To approve the 2000 Stock Incentive Plan; and
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record at the close of business on April 12, 2000 are
entitled to notice of, and to vote at, the meeting. The stock transfer books of
the Company will remain open for the purchase and sale of the Company's Common
Stock.
All stockholders are cordially invited to attend the meeting.
By Order of the Board of Directors,
DAVID P. SOUTHWELL
Secretary
Marlborough, Massachusetts
April 24, 2000
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY CARD AND PROMPTLY MAIL IT IN THE ENCLOSED ENVELOPE IN
ORDER TO ASSURE REPRESENTATION OF YOUR SHARES AT THE MEETING. NO POSTAGE NEED BE
AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES.
<PAGE>
SEPRACOR INC.
111 LOCKE DRIVE
MARLBOROUGH, MASSACHUSETTS 01752
PROXY STATEMENT FOR THE 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 24, 2000
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Sepracor Inc. ("Sepracor" or the "Company")
for use at the 2000 Annual Meeting of Stockholders (the "Annual Meeting") to be
held at the offices of Hale and Dorr LLP, 60 State Street, Boston, Massachusetts
02109 at 9:00 a.m. on Wednesday, May 24, 2000 and at any adjournments of that
meeting.
All proxies will be voted in accordance with the instructions of the
stockholder. If no choice is specified, the proxies will be voted in favor of
the matters set forth in the accompanying Notice of Meeting. Any proxy may be
revoked by a stockholder at any time before it is exercised by delivery of
written revocation to the Secretary of the Company.
Except as specifically provided herein, all information contained in this
Proxy Statement has been adjusted to reflect the two-for-one stock split of the
Company's Common Stock effected on February 25, 2000.
The Company's Annual Report for the year ended December 31, 1999 is being
mailed to stockholders with the mailing of this Notice and Proxy Statement on or
about April 24, 2000.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1999, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WITHOUT
EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO ANY STOCKHOLDER UPON WRITTEN
REQUEST TO INVESTOR RELATIONS, SEPRACOR INC., 111 LOCKE DRIVE, MARLBOROUGH,
MASSACHUSETTS 01752.
VOTING SECURITIES AND VOTES REQUIRED
On April 12, 2000, the record date for the determination of stockholders
entitled to notice of and to vote at the Annual Meeting, there were outstanding
and entitled to vote an aggregate of 72,581,191 shares of Common Stock of the
Company, $.10 par value per share (the "Common Stock"). Holders of shares of
Common Stock are entitled to one vote per share.
Under the Company's Amended and Restated By-laws (the "By-laws"), the
holders of a majority of the shares of Common Stock issued, outstanding and
entitled to vote on any matter shall constitute a quorum with respect to that
matter at the Annual Meeting. Shares of Common Stock present in person or
represented by proxy (including shares which abstain or do not vote with respect
to one or more of the matters presented for stockholder approval) will be
counted for purposes of determining whether a quorum is present.
The affirmative vote of the holders of a plurality of the votes cast by the
stockholders entitled to vote at the Annual Meeting is required for the election
of directors. The affirmative vote of the holders of a majority of the shares of
Common Stock outstanding on the record date is required for the approval of the
proposed amendment to the Company's Restated Certificate of Incorporation, as
<PAGE>
amended. The affirmative vote of the holders of a majority of the votes cast by
the stockholders is required for the approval of each of the other matters
scheduled to be voted on.
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees, who indicate on their proxies that they
do not have discretionary authority to vote such shares as to a particular
matter, will not be counted as votes in favor of such matter, and will also not
be counted as votes cast or shares voting on such matter. Accordingly,
abstentions and "broker non-votes" will have no effect on the voting on each
matter that requires the affirmative vote of a certain percentage of the votes
cast or shares voting on a matter, and will have the effect of a vote against
the proposed amendment to the Company's Restated Certificate of Incorporation,
as amended.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of January 31, 2000,
with respect to the beneficial ownership of: (i) the Company's Common Stock by
each person known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock; and (ii) the Company's Common Stock, the
Common Stock of BioSphere Medical, Inc. ("BioSphere Common Stock"), a publicly
held subsidiary of Sepracor ("BioSphere"), and the Common Stock of
HemaSure Inc. ("HemaSure Common Stock"), a publicly held subsidiary of Sepracor
("HemaSure"), by (A) each director and nominee for director of the Company;
(B) each executive officer named in the Summary Compensation Table under the
heading "Compensation of Executive Officers" below; and (C) all directors and
executive officers of the Company as a group.
The number of shares of the Company's Common Stock, BioSphere Common Stock
and HemaSure Common Stock beneficially owned by each person is determined under
the rules of the Securities and Exchange Commission, and the information is not
necessarily indicative of beneficial ownership for any other purpose. Under such
rules, beneficial ownership includes any shares as to which the individual has
sole or shared voting power or investment power and also any shares which the
individual has the right to acquire within 60 days after January 31, 2000
through the exercise of any stock option or other right or upon conversion of
the Company's 6 1/4% Convertible Subordinated Debentures due 2005 (the "6 1/4%
Debentures") and the Company's 7% Convertible Subordinated Debentures due 2005
(the "7% Debentures"). Unless otherwise indicated, each person has sole
investment and voting power (or shares such power with his or her spouse) with
respect to the shares set forth in the following table. The inclusion herein of
any shares deemed beneficially owned does not constitute an admission of
beneficial ownership of those shares.
2
<PAGE>
The directors and executive officers of Sepracor disclaim beneficial
ownership of the shares of BioSphere Common Stock and HemaSure Common Stock
which are owned by Sepracor.
<TABLE>
<CAPTION>
SHARES OF SHARES OF
PERCENTAGE OF BIOSPHERE HEMASURE
COMMON STOCK SEPRACOR COMMON STOCK COMMON STOCK
BENEFICIALLY COMMON STOCK BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OWNED OUTSTANDING OWNED(1) OWNED (1)
- ---------------- -------------- ----------------- --------------- ----------------
<S> <C> <C> <C> <C>
5% STOCKHOLDERS
FMR Corp. and related entities...................... 9,962,568(2) 14.7% N/A N/A
82 Devonshire Street
Boston, MA 02109
Janus Capital Corporation........................... 8,598,840(3) 12.7% N/A N/A
100 Fillmore Street
Denver, Colorado 80206-4923
Putnam Investments Inc. and related entities........ 7,302,830(4) 10.8% N/A N/A
One Post Office Square
Boston, MA 02109
Soros Fund Management LLC and related entities...... 4,365,000(5) 6.4% N/A N/A
888 Seventh Avenue
33(rd) Floor
New York, NY 10106
Citigroup, Inc. and related entities................ 4,257,266(6) 6.3% N/A N/A
153 East 3rd Street
Legal Dept. 20th Floor
New York, NY 10043
DIRECTORS
Timothy J. Barberich(7)............................. 1,808,206 2.6% 74,777 138,500
James G. Andress.................................... 70,666(8) * -- --
Digby W. Barrios.................................... 72,666(9) * -- --
Robert J. Cresci.................................... 64,000(10) * -- --
Keith Mansford, Ph.D................................ 70,866(11) * -- --
James F. Mrazek..................................... 290,964(12) * -- 5,500
Alan A. Steigrod.................................... 52,000(13) * -- --
OTHER NAMED EXECUTIVE OFFICERS
David S. Barlow(14)................................. 142,666 * -- 31,125
Paul D. Rubin, M.D.................................. 125,804(15) * -- --
David P. Southwell.................................. 339,884(16) * 0 18,000
Robert F. Scumaci(17)............................... 40,176 * 30,000 --
All directors and executive officers
as a group (14 persons)........................... 3,130,771(18) 4.5% 104,777(19) 193,125(20)
</TABLE>
- ------------------------------
* Represents holdings of less than one percent.
(1) As of January 31, 2000, no officer or director of Sepracor beneficially
owned more than 1% of the BioSphere Common Stock or HemaSure Common Stock.
All directors and executive officers as a group beneficially own
approximately 1.2% of the outstanding BioSphere Common Stock and 1.2% of the
outstanding HemaSure Common Stock.
(2) This information is taken from a Schedule 13G/A dated February 14, 2000. FMR
Corp. ("FMR") beneficially owns 9,962,568 shares of Common Stock of the
Company (the "FMR Shares"). Fidelity Management & Research Company
("Fidelity") beneficially owns 9,818,168 of the FMR Shares as a result of
its serving as investment adviser to various investment companies registered
under Section 8 of the Investment Company Act of 1940 and to certain other
funds which are generally
3
<PAGE>
offered to limited groups of investors (collectively the "Fidelity Funds").
Fidelity Growth Company Fund ("FGCF") beneficially owns 5,807,160 of the FMR
Shares. Fidelity Management Trust Company ("FMTC") beneficially owns 144,400
of the FMR Shares as a result of its serving as investment manager of the
institutional accounts. Edward C. Johnson, 3d, Chairman of FMR, and FMR,
through its control of Fidelity, and the Fidelity Funds, each has sole power
to dispose of the 9,818,168 shares owned by the Fidelity Funds. Neither FMR
nor Edward C. Johnson, 3d has the sole power to vote or direct the voting of
the shares owned directly by the Fidelity Funds, which power resides with
the funds' Boards of Trustees. Edward C. Johnson, 3d and FMR, through its
control of FMTC, each has sole dispositive power and sole power to vote or
direct the voting of 144,400 of the FMR Shares.
(3) This information is taken from a Schedule 13G dated February 11, 2000. Janus
Capital is a registered investment adviser which furnishes investment advice
to several investment companies registered under Section 8 of the Investment
Company Act of 1940 and individual and institutional clients (collectively
referred to as "Managed Portfolios"). As a result of its role as investment
adviser or sub-adviser to the Managed Portfolios, Janus Capital may be
deemed to be the beneficial owner of the shares of Sepracor Common Stock
held by such Managed Portfolios. However, Janus Capital does not have the
right to receive any dividends from, or the proceeds from the sale of, the
securities held in the Managed Portfolios and disclaims any ownership
associated with such rights.
(4) This information is taken from a Schedule 13G/A dated February 18, 2000,
filed by Putnam Investments, Inc. ("PII") on behalf of itself and its
affiliates. Of the 7,302,830 shares of Common Stock deemed beneficially
owned, PII and Putnam Investment Management, Inc. report shared dispositive
power as to 7,024,368 of such shares of Common Stock of the Company, and PII
and Putnam Advisory Company Inc. report shared voting power of 80,502 of
such shares of Common Stock and shared dispositive power of 278,462 of such
shares of Common Stock. Securities reported as being beneficially owned by
PII consist of securities beneficially owned by subsidiaries of PII which
are registered investment advisers, which in turn include securities
beneficially owned by clients of such investment advisers, which clients may
include investment companies registered under the Investment Company Act
and/or employee benefit plans, pension funds, endowment funds or other
institutional clients.
(5) This information is taken from a Schedule 13G/A dated September 4, 1998.
George Soros may be deemed to have the sole power to direct the voting and
disposition of 900,000 shares of Common Stock (1.38% of the total number of
outstanding shares) held for his personal account. Each of Winston Partners
L.P. ("Winston Partners") and Chatterjee Fund Management, L.P. may be deemed
to have the sole power to direct the voting and disposition of 345,000
shares of Common Stock (.53% of the total number of outstanding shares) held
for the account of Winston Partners. Winston Partners II LDC ("Winston LDC")
may be deemed to have the sole power to direct the voting and disposition of
607,000 shares of Common Stock (.93% of the total amount number of
outstanding shares) held for its own account. Winston Partners II LLC
("Winston LLC") may be deemed to have the sole power to direct the voting
and disposition of 318,000 shares of Common Stock (.49% of the total number
of outstanding shares) held for its account. Each of the Chatterjee
Management Company ("Chatterjee Management") and Chatterjee Advisors LLC
("Chatterjee Advisors") may be deemed to have the sole power to direct the
voting and disposition of 925,000 shares of Common Stock (1.42% of the total
number of outstanding shares). This number consists of (i) 607,000 shares of
Common Stock held for the account of Winston LDC and (ii) 318,000 shares of
Common Stock held for the account of Winston LLC. Dr. Purnendu Chatterjee
may be deemed to have the sole power to direct the voting and disposition of
1,270,000 shares of Common Stock (1.95% of the total number of outstanding
shares). This number consists of (i) 925,000 shares of Common Stock which
Chatterjee Management and Chatterjee Advisors may be deemed to own
beneficially and (ii) 345,000 shares of Common Stock held for the account of
Winston Partners.
(6) This information is taken from a Schedule 13G/A dated February 14, 2000. SSB
CitiFund Management LLC reports shared voting and dispositive power over
3,452,616 shares of Common Stock. Salomon Smith Barney Holdings Inc. reports
shared voting and dispositive power over 4,204,416 shares of Common Stock.
Citigroup Inc. reports shared voting and dispositive power over 4,257,266
shares of Common Stock.
(7) The number of shares of Sepracor Common Stock that Mr. Barberich is deemed
to beneficially own includes 715,680 shares of Common Stock of the Company
which Mr. Barberich has the right to acquire within 60 days after
January 31, 2000 upon exercise of outstanding stock options, an aggregate of
23,200 shares of Common Stock of the Company held in trust for
Mr. Barberich's children, 70,000 shares of Common Stock of the Company held
in trust for Mr. Barberich's wife, 214 shares of Common Stock of the Company
held by Mr. Barberich's wife and 62,408 shares of Common Stock of the
Company held by Mr. Barberich's children. The number of shares of BioSphere
Common Stock that Mr. Barberich is deemed to beneficially own includes
45,000 shares of BioSphere Common Stock which Mr. Barberich has the right to
acquire within 60 days after January 31, 2000 upon exercise of outstanding
stock options. The number of shares of HemaSure Common
4
<PAGE>
Stock that Mr. Barberich is deemed to beneficially own includes 109,500
shares of HemaSure Common Stock which Mr. Barberich has the right to acquire
within 60 days after January 31, 2000 upon exercise of outstanding stock
options.
(8) Represents 70,666 shares of Common Stock of the Company which Mr. Andress
has the right to acquire within 60 days after January 31, 2000 upon exercise
of outstanding stock options.
(9) Includes 70,666 shares of Common Stock of the Company which Mr. Barrios has
the right to acquire within 60 days after January 31, 2000 upon exercise of
outstanding stock options.
(10) Represents 64,000 shares of Common Stock of the Company which Mr. Cresci
has the right to acquire within 60 days after January 31, 2000 upon exercise
of outstanding stock options.
(11) Includes 70,666 shares of Common Stock of the Company which Dr. Mansford
has the right to acquire within 60 days after January 31, 2000 upon exercise
of outstanding stock options.
(12) Includes 90,666 shares of Common Stock of the Company which Mr. Mrazek has
the right to acquire within 60 days after January 31, 2000 upon exercise of
outstanding stock options and 200,298 shares of Common Stock held by a trust
of which Mr. Mrazek is a trustee and beneficiary.
(13) Includes 48,000 shares of Common Stock of the Company which Mr. Steigrod
has the right to acquire within 60 days after January 31, 2000 upon exercise
of outstanding stock options.
(14) The number of shares of Sepracor Common Stock Mr. Barlow is deemed to
beneficially own includes 78,666 shares of Common Stock of the Company which
Mr. Barlow has the right to acquire within 60 days after January 31, 2000
upon exercise of outstanding stock options. The number of shares of HemaSure
Common Stock Mr. Barlow is deemed to beneficially own represents 31,125
shares of HemaSure Common Stock which Mr. Barlow has the right to acquire
within 60 days after January 31, 2000 upon exercise of outstanding stock
options.
(15) Represents 123,332 shares of Common Stock of the Company which Dr. Rubin
has the right to acquire within 60 days after January 31, 2000 upon exercise
of outstanding stock options and 2,472 shares of Common Stock of the Company
held by Dr. Rubin's children.
(16) Includes 262,000 shares of Common Stock of the Company which Mr. Southwell
has the right to acquire within 60 days after January 31, 2000 upon exercise
of outstanding stock options.
(17) The number of shares of Sepracor Common Stock that Mr. Scumaci is deemed to
beneficially own includes 36,332 shares of Common Stock of the Company which
Mr. Scumaci has the right to acquire within 60 days after January 31, 2000
upon exercise of outstanding stock options and 800 shares of Sepracor Common
Stock held in a trust for Mr. Scumaci's two children. The number of shares
of BioSphere Common Stock that Mr. Scumaci is deemed to beneficially own
represents 30,000 shares of BioSphere Common Stock which Mr. Scumaci has the
right to acquire within 60 days after January 31, 2000.
(18) Includes an aggregate of 1,682,274 shares of Common Stock which all
executive officers and directors have the right to acquire within 60 days
after January 31, 2000 upon exercise of outstanding stock options.
(19) Includes an aggregate of 75,000 shares of BioSphere Common Stock which all
directors and executive officers have the right to acquire within 60 days
after January 31, 2000 upon exercise of outstanding stock options.
(20) Includes an aggregate of 140,625 shares of HemaSure Common Stock which all
directors and executive officers have the right to acquire within 60 days
after January 31, 2000 upon exercise of outstanding stock options.
5
<PAGE>
PROPOSAL 1--ELECTION OF DIRECTORS
The Company has a classified Board of Directors consisting of three Class I
Directors, two Class II Directors and two Class III Directors. The Class I,
Class II and Class III Directors will serve until the annual meeting of
stockholders to be held in 2000, 2002 and 2001, respectively, and until their
respective successors are elected and qualified. At each annual meeting of
stockholders, directors are elected for a full term of three years to succeed
those whose terms are expiring.
The persons named in the enclosed proxy will vote to elect as directors
James G. Andress, Robert J. Cresci and James F. Mrazek, the Class I nominees
named below, unless the proxy is marked otherwise. Each of the nominees is
currently a member of the Board of Directors of the Company.
Each nominee for Class I Director will be elected to hold office until the
Annual Meeting of Stockholders in 2003 and until his successor is duly elected
and qualified. Each of the nominees has indicated his willingness to serve, if
elected; however, if any nominee should be unable to serve, the shares of Common
Stock represented by proxies may be voted for a substitute nominee designated by
the Board of Directors.
There are no family relationships between or among any officers or directors
of the Company.
Set forth below are the names and ages of each member of the Board of
Directors (including those who are nominees for election as Class I Directors),
and the positions and offices held by him, his principal occupation and business
experience during the past five years, the names of other publicly held
companies of which he serves as a director and the year of the commencement of
his term as a director of the Company. Information with respect to the number of
shares of Common Stock beneficially owned by each director, directly or
indirectly, as of January 31, 2000, appears under the heading "Stock Ownership
of Certain Beneficial Owners and Management."
NOMINEES FOR TERMS EXPIRING IN 2003 (CLASS I DIRECTORS)
JAMES G. ANDRESS, age 61, has been a director since 1991.
Since November 1996, Mr. Andress has been Chief Executive Officer of Warner
Chilcott, PLC, a publicly held pharmaceutical company. From November 1995 to
October 1996, Mr. Andress was a management consultant. Mr. Andress served as
President and Chief Executive Officer of Information Resources, Inc., a market
research and computer software company, from 1989 to November 1995. He also
serves as a director of Allstate Insurance Company, Inc., Information
Resources, Inc., OptionCare Corporation, The Liposome Company, Inc. and Xoma
Corporation.
ROBERT J. CRESCI, age 56, has been a director since 1990.
Mr. Cresci has served as Managing Director of Pecks Management
Partners Ltd., an investment management firm, since September 1990. Mr. Cresci
currently serves as a director of Arcadia Financial Ltd., Candlewood Hotel Co.,
Castle Dental Centers, Inc., Film Roman, Inc., Aviva Petroleum Ltd., Quest
Education Corporation, SeraCare, Inc., JFax.com, Inc., E-Stamp Corporation and
several private companies.
JAMES F. MRAZEK, age 59, has been a director since 1984.
Since March 1996, Mr. Mrazek has served as President and Managing Partner of
the Four Corners Venture Fund, a venture capital and management consulting firm.
From January 1990 to March 1996, Mr. Mrazek was President of Carnegie Venture
Resources, a venture capital and management consulting firm. He also serves as a
director of Photon Technology International, Inc.
6
<PAGE>
DIRECTORS WHOSE TERMS EXPIRE IN 2001 (CLASS III DIRECTORS)
DIGBY W. BARRIOS, age 62, has been a director since 1992.
Since July 1992, Mr. Barrios has been a management consultant. Mr. Barrios
served as President and Chief Executive Officer of Boehringer Ingelheim
Corporation, a fine chemical and pharmaceutical company, from 1988 until
June 1992. Mr. Barrios also serves as a director of Questcor Pharmaceuticals,
Drug Royalty Corporation, Inc. and Sheffield Pharmaceuticals.
ALAN A. STEIGROD, age 62, has been a director since 1995.
Since January 1996, Mr. Steigrod has been Managing Director of Newport
HealthCare Ventures, which provides consulting services in connection with the
biopharmaceutical industry. From January 1993 to November 1995, Mr. Steigrod
served as President and Chief Executive Officer of Cortex
Pharmaceuticals, Inc., a development-stage neuroscience company. From
March 1991 to January 1993, Mr. Steigrod was an independent
biotechnology/pharmaceutical business consultant. From March 1981 to
March 1991, Mr. Steigrod served as Executive Vice President of Marketing/Sales
of Glaxo Inc., a pharmaceutical corporation. Mr. Steigrod also serves as a
director of Cellegy Pharmaceuticals, Inc. and NeoRx Corporation.
DIRECTORS WHOSE TERMS EXPIRE IN 2002 (CLASS II DIRECTORS)
TIMOTHY J. BARBERICH, age 52, has been a director since 1984.
Mr. Barberich has served as Chief Executive Officer of the Company since
1984. From 1984 to October 1999, Mr. Barberich also served as President of the
Company. He also serves as Chairman of the Board of HemaSure and as a director
of BioSphere, publicly held subsidiaries of the Company.
KEITH MANSFORD, PH.D., age 68, has been a director since 1993.
Dr. Mansford has served as the Principal of Mansford Associates, a
pharmaceutical consulting firm, since 1992. Dr. Mansford served as a Chairman,
Research & Development, of SmithKline Beecham PLC from July 1989 to
January 1992. He also serves as a director of SkyePharma PLC and Proteome
Sciences PLC.
BOARD AND COMMITTEE MEETINGS
The Company has a standing Audit Committee of the Board of Directors, which
provides the opportunity for direct contact between the Company's independent
accountants and the Board. The Audit Committee is responsible for recommending
the appointment of the Company's independent accountants, reviewing the scope
and results of audits and reviewing the Company's internal accounting control
policies and procedures. The Audit Committee held one meeting in 1999. The
members of the Audit Committee are Messrs. Cresci, Mrazek and Steigrod.
The Company also has a standing Compensation Committee of the Board of
Directors, which provides recommendations to the Board regarding compensation
programs of the Company. The Compensation Committee is responsible for
establishing and modifying the compensation of all corporate officers of the
Company, adoption and amendment of all stock option and other employee benefit
plans, and the engagement of, terms of any employment agreements and
arrangements with, and termination of, all corporate officers of the Company.
The Compensation Committee held three meetings during 1999. The members of the
Compensation Committee are Messrs. Andress, Barrios and Mrazek. See "Report of
the Compensation Committee" below.
The Company does not have a nominating committee or a committee serving a
similar function. Nominations are made by and through the full Board of
Directors.
The Board of Directors held five meetings during 1999. Each director
attended at least 75% of the total number of meetings of the Board of Directors
and all committees of the Board on which he served.
7
<PAGE>
COMPENSATION FOR DIRECTORS
Directors who are neither officers nor employees of the Company (the
"Non-Employee Directors") receive $18,000 per year for their services as
directors, receive expense reimbursement for attending Board and committee
meetings and are entitled to participate in the Company's 1999 Director Stock
Option Plan (the "1999 Director Plan") which provides for annual, automatic
grants of non-statutory stock options to Non-Employee Directors.
Messrs. Andress, Barrios, Cresci, Mrazek and Steigrod and Dr. Mansford each
received stock options in 1999 under the 1999 Director Plan to purchase 20,000
shares of Common Stock with an exercise price of $39.0625. All options were
granted at the closing price of the Company's Common Stock on the Nasdaq
National Market on the date of grant.
Directors who are officers or employees of the Company do not receive any
additional compensation for their services as directors.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE. The following table sets forth certain
information with respect to the annual and long-term compensation for each of
the last three years of the Company's Chief Executive Officer and the Company's
four other most highly compensated executive officers during 1999 (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION -----------------
-------------------- OTHER ANNUAL NUMBER OF SHARES ALL OTHER
NAME AND SALARY COMPENSATION UNDERLYING STOCK COMPENSATION
PRINCIPAL POSITION YEAR ($) BONUS ($) ($)(1) OPTIONS (2) ($)
- -------------------------------------------- -------- -------- --------- ------------- ----------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Timothy J. Barberich........................ 1999 349,329 135,000 0 200,000 5,761(3)
Chief Executive Officer 1998 284,849 125,000 0 600,000 6,138(4)
1997 261,250 125,000 0 210,000 2,794(5)(6)
David S. Barlow(7).......................... 1999 234,969 20,000 0 100,000 2,562(3)
Former Executive Vice President and 1998 212,092 70,000 0 280,000 2,697(4)
President, Pharmaceuticals 1997 192,326 90,000 0 160,000 2,418(5)(6)
David P. Southwell.......................... 1999 234,969 100,000 0 120,000 2,286(3)
Executive Vice President, Chief Financial 1998 195,814 90,000 0 360,000 2,220(4)
Officer and Secretary 1997 191,100 95,000 0 150,000 1,594(5)(6)
Paul D. Rubin, M.D.......................... 1999 270,751 120,000 0 120,000 3,514(3)
Senior Vice President, Development 1998 259,264 120,000 0 480,000 4,033(4)
1997 241,662 120,000 10,218 150,000 2,418(5)(6)
Robert F. Scumaci........................... 1999 208,862 52,250 51,104 120,000 2,435(3)
Senior Vice President, Finance and 1998 185,483 45,000 0 170,000 2,169(4)
Administration and Treasurer 1997 157,871 46,000 0 130,000 2,068(5)(6)
</TABLE>
- ------------------------------
(1) Amounts shown represent reimbursement received for relocation expenses.
Other compensation in the form of perquisites and other personal benefits
has been omitted in those instances where such perquisites and other
personal benefits constituted less than the lesser of $50,000 or 10 percent
of the total salary and bonus for each Named Executive Officer for such
year.
(2) The Company did not make any restricted stock awards, grant any stock
appreciation rights or make any long-term incentive plan payouts during
1997, 1998 and 1999.
8
<PAGE>
(3) Includes $4,262, $1,062, $786, $2,014 and $935 of the taxable portion of
insurance premiums paid by the Company on behalf of Mr. Barberich,
Mr. Southwell, Dr. Rubin and Mr. Scumaci, respectively, during 1999 with
respect to group life insurance for the benefit of the Named Executive
Officer. Also includes $1,500 contributed by the Company on behalf of each
of the Named Executive Officers pursuant to the Company's 401(k) Plan in
1999.
(4) Includes $4,638, $1,197, $720, $2,533 and $669 of the taxable portion of
insurance premiums paid by the Company on behalf of Mr. Barberich,
Mr. Barlow, Mr. Southwell, Dr. Rubin and Mr. Scumaci, respectively, during
1998 with respect to group life insurance for the benefit of the Named
Executive Officer. Also includes $1,500 contributed by the Company on behalf
of each of the Named Executive Officers pursuant to the Company's 401(k)
Plan in 1998.
(5) Includes $1,566, $918, $594, $918 and $568 of the taxable portion of
insurance premiums paid by the Company on behalf of Mr. Barberich,
Mr. Barlow, Mr. Southwell, Dr. Rubin and Mr. Scumaci, respectively, during
1997 with respect to group life insurance for the benefit of the Named
Executive Officer.
(6) Includes $1,228, $1,500, $1,000, $1,500 and $1,500 contributed by the
Company on behalf of Mr. Barberich, Mr. Barlow, Mr. Southwell, Dr. Rubin and
Mr. Scumaci, respectively, pursuant to the Company's 401(k) Plan in 1997.
(7) Mr. Barlow resigned from the Company on January 24, 2000.
OPTION GRANT TABLE. The following table sets forth certain information
regarding stock options granted during the year ended December 31, 1999 by the
Company to the Named Executive Officers.
OPTION GRANTS IN LAST YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM (3)
OPTIONS EMPLOYEES IN OR BASE PRICE EXPIRATION ----------------------
NAME GRANTED (#)(1) FISCAL YEAR (%) ($/SH)(2) DATE 5%($) 10%($)
- ---- -------------- --------------- ------------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Timothy J. Barberich................. 200,000(4) 6 59.125 02/25/2009 7,436,679 18,846,005
David S. Barlow...................... 100,000(4) 3 59.125 02/25/2009 3,718,339 9,423,002
David P. Southwell................... 120,000(4) 4 59.125 02/25/2009 4,462,007 11,307,603
Paul D. Rubin, M.D................... 120,000(4) 4 59.125 02/25/2009 4,462,007 11,307,603
Robert F. Scumaci.................... 120,000(4) 4 59.125 02/25/2009 4,462,007 11,307,603
</TABLE>
- ------------------------------
(1) Stock options granted by the Company generally vest in five equal annual
installments commencing one year from the date of grant. See also footnote 4
below.
(2) The exercise price is equal to the closing price of the Company's Common
Stock as reported by the Nasdaq National Market on the date of grant.
(3) Amounts represent hypothetical gains that could be achieved for stock
options if exercised at the end of the option term. These gains are based on
assumed rates of stock price appreciation of 5% and 10% compounded annually
from the date stock options are granted. Actual gains, if any, on stock
option exercises will depend on the future performance of the Common Stock
on the date on which the stock options are exercised.
(4) The stock options granted to the Named Executive Officers on February 25,
1999 vest in three equal annual installments commencing on the date the
price per share of the Company's Common Stock reaches or exceeds $100.00 per
share for 20 consecutive business days; provided, however, that if the price
per share objectives are not achieved, the stock options will vest in full
on February 25, 2006, subject to the terms of the option agreement and the
plan.
9
<PAGE>
OPTION EXERCISES AND YEAR-END OPTION VALUES TABLE. The following table sets
forth certain information regarding the aggregate shares of Common Stock
acquired upon stock option exercises by the Named Executive Officers and the
value realized upon such exercises during the year ended December 31, 1999, as
well as the number and value of unexercised stock options held by the Named
Executive Officers as of December 31, 1999.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT YEAR-END (#) YEAR-END ($)(2)
ACQUIRED ON VALUE REALIZED --------------------------- ---------------------------
NAME EXERCISE (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Timothy J. Barberich................. 400,000 16,623,837 715,680 988,000 29,403,505 26,978,175
David S. Barlow...................... 200,000 8,951,190 387,472 541,334 15,997,178 15,463,906
David P. Southwell................... 306,000 13,393,390 262,000 592,000 10,977,613 16,060,630
Paul D. Rubin, M.D................... 110,000 4,409,448 147,332 742,668 2,370,912 19,668,151
Robert F. Scumaci.................... 108,000 4,372,303 36,334 381,666 1,222,822 9,127,905
</TABLE>
- --------------------------
(1) Based on the closing sales price of the Common Stock as reported by the
Nasdaq National Market on the date of exercise less the option exercise
price.
(2) Value based on the closing sales price of the Common Stock as reported by
the Nasdaq National Market on December 31, 1999 ($49.59), the last trading
day of 1999, less the applicable option exercise price.
REPORT OF THE COMPENSATION COMMITTEE
The executive compensation program of the Company is administered by the
Compensation Committee which is composed of three non-employee directors.
The Company's executive compensation program is designed to retain and
reward executives who are capable of leading the Company in achieving its
business objectives in the competitive and rapidly changing industries in which
the Company competes. The Compensation Committee establishes the compensation
policies of the Company for Mr. Barberich, the Chairman of the Board and Chief
Executive Officer of the Company, Mr. O'Shea, the President and Chief Operating
Officer and the Company's three Executive Vice Presidents, Messrs. Barlow and
Southwell and Dr. Rubin. In addition, Mr. Barberich recommends compensation
packages for the remaining executive officers which the Compensation Committee
reviews and approves. All decisions by the Compensation Committee relating to
the compensation of the Company's executive officers are reviewed by the full
Board.
This report is submitted by the Compensation Committee and addresses the
Company's compensation policies for 1999 as they affected Mr. Barberich and the
Company's other executive officers.
COMPENSATION PHILOSOPHY
The objectives of the executive compensation program are to align
compensation with business objectives and individual performance and to enable
the Company to attract, retain and reward
10
<PAGE>
executive officers who are expected to contribute to the long-term success of
the Company. The Company's executive compensation philosophy is based on the
following principles:
- Competitive and Fair Compensation
The Company is committed to providing an executive compensation program
that helps attract and retain highly qualified executives. To ensure that
compensation is competitive, the Company regularly compares its compensation
practices with those of other companies in the industry and sets its
compensation guidelines based on this review. The Company also seeks to
achieve a balance of the compensation paid to a particular individual and
the compensation paid to other executives at the Company.
- Sustained Performance
Executive officers are rewarded based upon corporate performance,
business group performance and individual performance. Corporate performance
and business group performance are evaluated by reviewing the extent to
which strategic and business plan goals are met, including such factors as
achievement of operating budgets, establishment of strategic licensing and
development alliances with third parties, timely development and
introduction of new processes and products and performance relative to
competitors. Individual performance is evaluated by reviewing attainment of
specified individual objectives and the degree to which teamwork and Company
values are fostered.
In evaluating each executive officer's performance, the Company generally
conforms to the following process:
- Company and individual goals and objectives are set for each performance
cycle.
- At the end of the performance cycle, the accomplishment of the executive's
goals and objectives and his contributions to the Company are evaluated.
- The executive's performance is then compared with peers within the Company
and the results are communicated to the executive.
- The comparative results, combined with comparative compensation practices
of other companies in the industry, are then used to determine salary and
stock compensation levels.
Annual compensation for the Company's executives generally consists of three
elements -- salary, bonus and stock options. In late 1998, the Committee
established an executive bonus plan for 1999 pursuant to which executives were
entitled to receive bonuses based on achievement of individual performance
goals. Bonuses totaling $545,000 were paid to the executive officers for 1999.
The salary for executives is generally set by reviewing compensation for
competitive positions in the market and the historical compensation levels of
the executives. Increases in annual salaries are based on actual corporate and
individual performance against targeted performance and various subjective
performance criteria. Targeted performance criteria vary for each executive
based on his business group or area of responsibility, and may include
achievement of the operating budget for the Company as a whole or of a business
group of the Company, continued innovation in development and commercialization
of the Company's technology, timely development and introduction of new products
or processes, development and implementation of successful marketing and
commercialization strategies, implementation of financing strategies and
establishment of strategic licensing and development alliances with third
parties. Subjective performance criteria include an executive's ability
11
<PAGE>
to motivate others, develop the skills necessary to grow as the Company matures,
recognize and pursue new business opportunities and initiate programs to enhance
the Company's growth and success.
Compensation for executive officers also includes the long-term incentives
afforded by stock options. The stock option program is designed to promote the
identity of long-term interests between the Company's employees and its
shareholders and assist in the retention of executives. The size of option
grants is generally intended to reflect the executive's position with the
Company and his contributions to the Company, including his success in achieving
the individual performance criteria described above. The option program
generally uses a five-year vesting period to encourage key employees to continue
in the employ of the Company. From time to time, the Compensation Committee
chooses to align more closely the vesting of stock options with the achievement
by an executive officer of corporate, business group or individual performance
goals. In 1999, the Company granted stock options to purchase an aggregate of
800,000 shares of the Company's Common Stock to executive officers at an
exercise price of $59.125 per share and 1,000,000 shares at an exercise price of
$35.44 per share. All stock options granted to executive officers in 1999 were
granted at fair market value on the date of grant.
Executive officers are also eligible to participate in the Company's
Employee Stock Purchase Plan (the "Purchase Plan"). The Purchase Plan is
available to virtually all employees of the Company and generally permits
participants to purchase shares at a discount of approximately 15% from the fair
market value at the beginning or end of the applicable purchase period.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally disallows a tax deduction to public companies for
compensation over $1 million paid to the corporation's Chief Executive Officer
and four other most highly compensated executive officers. Qualifying
performance-based compensation will not be subject to the deduction limit if
certain requirements are met. The Company intends to structure the
performance-based portion of the compensation of its executive officers (which
currently consists solely of stock option grants) in a manner that complies with
Section 162(m) of the Code so as to mitigate any disallowance of deductions. The
Company's 1991 Plan was amended in 1995 and was reapproved by the stockholders
in 1997 with the intent of preserving the availability of tax deductions to the
Company that might otherwise be unavailable under Section 162(m) of the Code.
Nevertheless, there can be no assurance that compensation attributable to stock
options granted under the Company's stock plans will be exempt from
Section 162(m) as qualifying performance-based compensation.
MR. BARBERICH'S 1999 COMPENSATION
Mr. Barberich is eligible to participate in the same executive compensation
plans available to the other executive officers. The Compensation Committee
believes that Mr. Barberich's annual compensation, including the portion of his
compensation based upon the Company's stock option program, has been set at a
level competitive with other companies in the industry.
Mr. Barberich's salary for 1999 increased from $284,849 to $349,329.
Mr. Barberich received a bonus of $135,000 in 2000 for 1999 performance. In
determining Mr. Barberich's bonus compensation, the Compensation Committee
considered the successful commercial introduction by the Company of Xopenex-TM-,
the first product developed and commercialized by the Company, the Company's
progress
12
<PAGE>
in its drug development program and the Company's continued success with
corporate collaborative partners with respect to development and
commercialization of its products.
Compensation Committee
James G. Andress
Digby W. Barrios
James F. Mrazek
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Messrs. Andress,
Barrios and Mrazek. No member of the Compensation Committee was at any time
during 1999, or formerly, an officer or employee of the Company or any
subsidiary of the Company, nor has any member of the Compensation Committee had
any relationship with the Company requiring disclosure under Item 404 of
Regulation S-K under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
No executive officer of the Company has served as a director or member of
the Compensation Committee (or other committee serving an equivalent function)
of any other entity, one of whose executive officers served as a director of or
member of the Compensation Committee of the Company.
13
<PAGE>
COMPARATIVE STOCK PERFORMANCE
The comparative stock performance graph below compares the cumulative
stockholder return on the Common Stock of the Company for the period from
December 31, 1994 through the year ended December 31, 1999 with the cumulative
total return on (i) the Total Return Index for the Nasdaq Stock Market (U.S.
Companies) (the "Nasdaq Composite Index"), and (ii) the Nasdaq Pharmaceutical
Index (assuming the investment of $100 in the Company's Common Stock, the Nasdaq
Composite Index and the Nasdaq Pharmaceutical Index on December 31, 1994 and
reinvestment of all dividends). Measurement points are the last trading days of
each of the years ended December 31, 1994, 1995, 1996, 1997, 1998 and 1999.
STOCK PERFORMANCE GRAPH
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
<S> <C> <C> <C> <C> <C> <C>
Sepracor Inc. $100.00 $445.45 $403.03 $971.21 $2,136.36 $2,404.55
Nasdaq Composite Index $100.00 $139.92 $171.69 $208.83 $291.60 $541.16
Nasdaq Pharmaceutical Index $100.00 $154.69 $187.88 $278.98 $407.54 $366.49
</TABLE>
EMPLOYMENT AGREEMENTS
Under a letter agreement, dated June 14, 1993, between the Company and
Mr. Barlow, the Company agreed to pay Mr. Barlow six months' salary in the event
of termination of Mr. Barlow's employment without cause. Mr. Barlow resigned
from the Company on January 24, 2000.
Under a letter agreement, dated June 10, 1994, between the Company and
Mr. Southwell, the Company has agreed to pay Mr. Southwell one year's salary
plus bonus in the event of termination of Mr. Southwell's employment.
Under a letter agreement, dated February 23, 1995, between the Company and
Mr. Scumaci, the Company has agreed to pay Mr. Scumaci six months' salary plus
pro rata bonus in the event of termination of Mr. Scumaci's employment during
his first year of employment, nine months' salary plus
14
<PAGE>
pro rata bonus in the event of termination of Mr. Scumaci's employment during
his second to fifth year of employment and one year's salary plus bonus in the
event of termination of Mr. Scumaci's employment after his fifth year of
employment.
Under a letter agreement, dated February 23, 1996, between the Company and
Dr. Rubin, Dr. Rubin is entitled to a minimum annual salary of $240,000. If
Dr. Rubin is terminated by the Company without cause, or if the Company is
acquired by a third party for a price per share of $2.00 or less above the
exercise price of the stock options granted to Dr. Rubin, upon commencement of
his employment, Dr. Rubin is entitled to receive a severance payment equal to
one year's salary.
Under a letter agreement, dated September 10, 1999, between the Company and
Mr. O'Shea, the Company has agreed to pay Mr. O'Shea one year's salary in the
event of termination of Mr. O'Shea's employment.
In February 1999 the Board of Directors approved a plan concerning the
payment of gross-up payments to officers and employees of the Company. In the
event of a change in ownership or control of the Company, if any of the payments
or benefits received by any executive officer of the Company constitute
"parachute payments" and are therefore subject to the excise tax imposed by
Section 4999 of the Code, the Company shall pay to such executive officer an
additional gross-up payment so that the executive officer will be placed in the
same after-tax financial position he would have been in if the executive officer
had not incurred any tax liability under Section 4999 of the Code.
PROPOSAL 2--APPROVAL OF AMENDMENT TO THE
COMPANY'S RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED
On February 24, 2000, the Board of Directors adopted, subject to stockholder
approval, an amendment to the Company's Restated Certificate of Incorporation,
as amended (the "Restated Certificate of Incorporation"), providing for an
increase from 140,000,000 to 240,000,000 in the number of authorized shares of
Common Stock (the "Charter Amendment"). As of March 15, 2000, the Company had a
total of approximately 72,230,347 shares of Common Stock outstanding,
approximately 9,852,000 shares of Common Stock reserved for issuance upon
conversion of stock options outstanding under its stock option and stock
purchase plans, approximately 3,929,000 shares of Common Stock reserved for
issuance upon conversion of the 6 1/4% Debentures, approximately 4,805,000
shares of Common Stock reserved for issuance upon conversion of the 7%
Debentures and 4,980,000 shares of Common Stock reserved for issuance upon
conversion of the 5% Debentures.
If the Charter Amendment is approved, the additional authorized shares of
Common Stock would be available for issuance in the future for corporate
purposes, including without limitation, stock splits, stock dividends,
financings, acquisitions, and management incentive and employee benefit plans,
as the Board of Directors may deem advisable, without the necessity of further
stockholder action. The issuance of additional shares of Common Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, would have the effect of diluting the Company's
current stockholders and could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from attempting to
acquire, control of the Company. Other than in connection with its existing
stock option plans, upon conversion of the outstanding debentures and upon sale
of shares purchased pursuant to employee stock purchase plans, the Company has
no present intention or plan to issue any shares of Common Stock.
BOARD RECOMMENDATION
The Board of Directors believes that the approval of the Charter Amendment
increasing the number of shares of authorized Common Stock is in the best
interests of the Company and its stockholders and therefore recommends a vote
FOR this proposal.
15
<PAGE>
PROPOSAL 3--APPROVAL OF THE 2000 STOCK INCENTIVE PLAN
On February 24, 2000, the Board of Directors of the Company adopted, subject
to stockholder approval, the 2000 Stock Incentive Plan (the "2000 Plan"). Up to
2,500,000 shares of Common Stock (subject to adjustment in the event of stock
splits and other similar events) may be issued pursuant to awards granted under
the 2000 Plan.
The 2000 Plan is intended to replace the Company's 1991 Stock Option Plan
(the "1991 Plan"), which expires by its terms on June 24, 2001. As of
January 31, 2000, options to purchase 9,109,120 shares of Common Stock were
outstanding under the 1991 Plan and an additional 1,939,508 shares were reserved
for future option grants. Upon the expiration date of the 1991 Plan on June 24,
2001, all then outstanding options will remain in effect, but no additional
option grants may be made under the 1991 Plan.
The Board of Directors believes that the future success of the Company
depends, in large part, upon the ability of the Company to maintain a
competitive position in attracting, retaining and motivating key personnel.
SUMMARY OF THE 2000 STOCK INCENTIVE PLAN
The following is a summary of the material provisions of the 2000 Plan.
DESCRIPTION OF AWARDS
The 2000 Plan provides for the grant of incentive stock options intended to
qualify under Section 422 of the Code, nonstatutory stock options, restricted
stock awards and other stock-based awards, including the grant of shares based
upon certain conditions, the grant of securities convertible into Common Stock
and the grant of stock appreciation rights (collectively "Awards").
INCENTIVE STOCK OPTIONS AND NONSTATUTORY STOCK OPTIONS. Optionees receive
the right to purchase a specified number of shares of Common Stock at a
specified option price and subject to such other terms and conditions as are
specified in connection with the option grant. All options granted under the
2000 Plan will be granted at an exercise price equal to or greater than the fair
market value of the Common Stock on the date of grant. Under present law,
however, incentive stock options may not be granted to optionees holding more
than 10% of the total combined voting power of the Company or its subsidiaries
at an exercise price less than 110% of the fair market. Options may not be
granted for a term in excess of ten years (five years in the case of incentive
stock options granted to optionees holding more than 10% of the total combined
voting power of the Company or its subsidiaries). The 2000 Plan permits the
Board to determine the manner of payment of the exercise price of options,
including through payment by cash, check or in connection with a "cashless
exercise" through a broker, by surrender to the Company of shares of Common
Stock, by delivery to the Company of a promissory note, or by any other lawful
means.
In the event of a "Change of Control" all outstanding options immediately
vest. As defined in the 2000 Plan, a "Change of Control" means: (a) any merger
or consolidation which results in the voting securities of the Company
outstanding immediately prior thereto representing immediately thereafter
(either by remaining outstanding or by being converted into voting securities of
the surviving or acquiring entity) less than 30% of the combined voting power of
the voting securities of the Company or such surviving or acquiring entity
outstanding immediately after such merger or consolidation;
16
<PAGE>
(b) any sale of all, or substantially all, the assets of the Company; or
(c) the complete liquidation of the Company.
RESTRICTED STOCK AWARDS. Restricted Stock Awards entitle recipients to
acquire shares of Common Stock, subject to the right of the Company to
repurchase all or part of such shares from the recipient in the event that the
conditions specified in the applicable Award are not satisfied prior to the end
of the applicable restriction period established for such Award.
OTHER STOCK-BASED AWARDS. Under the 2000 Plan, the Board has the right to
grant other Awards based upon the Common Stock having such terms and conditions
as the Board may determine, including the grant of shares based upon certain
conditions, the grant of securities convertible into Common Stock and the grant
of stock appreciation rights.
ELIGIBILITY TO RECEIVE AWARDS
Officers, employees, directors, consultants and advisors of the Company and
its subsidiaries are eligible to be granted Awards under the 2000 Plan. Under
present law, however, incentive stock options may only be granted to employees.
The maximum number of shares with respect to which Awards may be granted to any
participant under the 2000 Plan may not exceed 500,000 shares per calendar year.
It is expected that stock options will generally become exercisable over a
five-year period and expire ten years after the date of grant (subject to
earlier termination in the event of the termination of the optionee's employment
or other relationship with the Company).
As of January 31, 2000, approximately 350 persons were eligible to receive
Awards under the 2000 Plan, including the Company's seven executive officers and
six non-employee directors. The granting of Awards under the 2000 Plan is
discretionary, and the Company cannot now determine the number or type of Awards
to be granted in the future to any particular person or group.
On March 31, 2000, the last reported sale price of the Company Common Stock
on the Nasdaq National Market was $72.8125.
ADMINISTRATION
The 2000 Plan is administered by the Board of Directors. The Board has the
authority to adopt, amend and repeal the administrative rules, guidelines and
practices relating to the 2000 Plan and to interpret the provisions of the 2000
Plan. Pursuant to the terms of the 2000 Plan, the Board of Directors may
delegate authority under the 2000 Plan to one or more committees of the Board.
The Board has authorized the Compensation Committee to administer certain
aspects of the 2000 Plan, including the granting of options to executive
officers. Subject to any applicable limitations contained in the 2000 Plan, the
Board of Directors, the Compensation Committee, or any other committee to whom
the Board delegates authority, as the case may be, selects the recipients of
Awards and determines (i) the number of shares of Common Stock covered by
options and the dates upon which such options become exercisable, (ii) the
exercise price of options, (iii) the duration of options and (iv) the number of
shares of Common Stock subject to any restricted stock or other stock-based
Awards and the terms and conditions of such Awards, including conditions for
repurchase, issue price and repurchase price.
The Board of Directors is required to make appropriate adjustments in
connection with the 2000 Plan and any outstanding Awards to reflect stock
dividends, stock splits and certain other events. If any
17
<PAGE>
Award expires or is terminated, surrendered, canceled or forfeited, the unused
shares of Common Stock covered by such Award will again be available for grant
under the 2000 Plan.
AMENDMENT OR TERMINATION
No Award may be made under the 2000 Plan after February 24, 2010, but Awards
previously granted may extend beyond that date. The Board of Directors may at
any time amend, suspend or terminate the 2000 Plan, except that no Award
designated as subject to Section 162(m) of the Code by the Board of Directors
after the date of such amendment shall become exercisable, realizable or vested
(to the extent such amendment was required to grant such Award) unless and until
such amendment shall have been approved by the Company's stockholders as
required by Section 162(m).
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to Awards granted under the
2000 Plan and with respect to the sale of Common Stock acquired under the 2000
Plan.
INCENTIVE STOCK OPTIONS
In general, a participant will not recognize taxable income upon the grant
or exercise of an incentive stock option. Instead, a participant will recognize
taxable income with respect to an incentive stock option only upon the sale of
Common Stock acquired through the exercise of the option ("ISO Stock"). The
exercise of an incentive stock option, however, may subject the participant to
the alternative minimum tax.
Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least two
years from the date the option was granted (the "Grant Date") and one year from
the date the option was exercised (the "Exercise Date"), then the participant
will recognize long-term capital gain in an amount equal to the excess of the
sale price of the ISO Stock over the exercise price.
If the participant sells ISO Stock for more than the exercise price prior to
having owned it for at least two years from the Grant Date and one year from the
Exercise Date (a "Disqualifying Disposition"), then all or a portion of the gain
recognized by the participant will be ordinary compensation income and the
remaining gain, if any, will be a capital gain. This capital gain will be a
long-term capital gain if the participant has held the ISO Stock for more than
one year prior to the date of sale.
If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss in an amount equal to the excess of the
exercise price over the sale price of the ISO Stock. This capital loss will be a
long-term capital loss if the participant has held the ISO Stock for more than
one year prior to the date of sale.
NONSTATUTORY STOCK OPTIONS
As in the case of an incentive stock option, a participant will not
recognize taxable income upon the grant of a nonstatutory stock option. Unlike
the case of an incentive stock option, however, a
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participant who exercises a nonstatutory stock option generally will recognize
ordinary compensation income in an amount equal to the excess of the fair market
value of the Common Stock acquired through the exercise of the option ("NSO
Stock") on the Exercise Date over the exercise price.
With respect to any NSO Stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO Stock, a participant generally will recognize capital gain or
loss in an amount equal to the excess of the sale price of the NSO Stock over
the participant's tax basis in the NSO Stock. This capital gain or loss will be
a long-term gain or loss if the participant has held the NSO Stock for more than
one year prior to the date of the sale.
RESTRICTED STOCK AWARDS
A participant will not recognize taxable income upon the grant of a
restricted stock Award, unless the participant makes an election under
Section 83(b) of the Code (a "Section 83(b) Election"). If the participant makes
a Section 83(b) Election within 30 days of the date of the grant, then the
participant will recognize ordinary income, for the year in which the Award is
granted, in an amount equal to the difference between the fair market value of
the Common Stock at the time the Award is granted and the purchase price paid
for the Common Stock. If a Section 83(b) Election is not made, the participant
will recognize ordinary income, at the time that the forfeiture provisions or
restrictions on transfer lapse, in an amount equal to the difference between the
fair market value of the Common Stock at the time of such lapse and the original
purchase price paid for the Common Stock. The participant will have a basis in
the Common Stock acquired equal to the sum of the price paid and the amount of
ordinary compensation income recognized.
Upon the disposition of the Common Stock acquired pursuant to a restricted
stock Award, the participant will recognize a capital gain or loss equal to the
difference between the sale price of the Common Stock and the participant's
basis in the Common Stock. The gain or loss will be a long-term gain or loss if
the shares are held for more than one year. For this purpose, the holding period
shall begin just after the date on which the forfeiture provisions or
restrictions lapse if a Section 83(b) Election is not made, or just after the
Award is granted if a Section 83(b) Election is made.
OTHER STOCK-BASED AWARDS
The tax consequences associated with any other stock-based Award granted
under the 2000 Plan will vary depending on the specific terms of such Award.
Among the relevant factors are whether or not the Award has a readily
ascertainable fair market value, whether or not the Award is subject to
forfeiture provisions or restrictions on transfer, the nature of the property to
be received by the participant under the Award and the participant's holding
period and tax basis for the Award or underlying Common Stock.
TAX CONSEQUENCES TO THE COMPANY
The grant of an Award under the 2000 Plan will have no tax consequences to
the Company. Moreover, in general, neither the exercise of an incentive stock
option nor the sale of any Common Stock acquired under the 2000 Plan will have
any tax consequences to the Company. The Company generally will be entitled to a
business-expense deduction, however, with respect to any ordinary compensation
income recognized by a participant under the 2000 Plan, including in connection
with a
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restricted stock Award or as a result of the exercise of a nonstatutory stock
option or a Disqualifying Disposition. Any such deduction will be subject to the
limitations of Section 162(m) of the Code.
BOARD RECOMMENDATION
The Board of Directors believes adoption of the 2000 Plan is in the best
interests of the Company and its stockholders and therefore recommends a vote
FOR this proposal.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP is currently serving as the Company's independent
accountants. PricewaterhouseCoopers LLP has served as the Company's independent
accountants since 1985. Representatives of PricewaterhouseCoopers LLP are
expected to be present at the Annual Meeting and will have the opportunity to
make a statement if they desire to do so and will also be available to respond
to appropriate questions from stockholders.
OTHER MATTERS
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and holders of more than 10% of the Company's Common Stock to
file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of Common Stock and other equity securities
of the Company. Based solely on its review of copies of Section 16(a) reports
furnished to the Company and representations made to the Company, the Company
believes that during 1999 its officers, directors and holders of more than 10%
of the Company's Common Stock complied with all Section 16(a) filing
requirements, with the following exceptions: Mr. Andress sold 10,000 shares in
November 1999, and the Form 5 reporting this transaction was filed on
February 14, 2000; Mr. Mrazek sold 5,000 shares in March 1999, and the Form 4
reporting this transaction was filed on April 14, 1999; Mr. Mrazek sold 5,500
shares in December 1999, and the Form 4 reporting this transaction was filed on
January 25, 2000; Mr. Rubin become subject to the Section 16(a) reporting
requirements on February 25, 1999, and the Form 3 reporting this event was filed
on December 28, 1999; and Mr. Barberich gifted 600 shares in December 1999, and
the Form 5 reporting this transaction was filed on April 6, 2000.
MATTERS TO BE CONSIDERED AT THE MEETING
The Board of Directors does not know of any other matters which may come
before the Annual Meeting. However, if any other matters are properly presented
to the Annual Meeting, it is the intention of the persons named in the
accompanying proxy to vote, or otherwise act, in accordance with their judgment
on such matters.
SOLICITATION OF PROXIES
All costs of solicitation of proxies will be borne by the Company. The
Company's directors, officers and regular employees, without additional
remuneration, may solicit proxies by mail, courier, telephone, facsimile and
personal interviews. In addition, the Company has retained D.F. King &
Co., Inc. to solicit proxies by mail, courier, telephone and facsimile and to
request brokers, custodians and fiduciaries to forward proxy soliciting material
to the owners of stock held in their names. For these
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services the Company will pay a fee of approximately $2,000 plus expenses. The
Company will reimburse brokers, custodians and fiduciaries for their reasonable
out-of-pocket expenses incurred in connection with the distribution of proxy
materials.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 2001 Annual
Meeting of Stockholders must be received by the Company at its principal office
in Marlborough, Massachusetts not later than December 26, 2000 for inclusion in
the proxy statement for that meeting.
In addition, the Company's By-laws require that the Company be given advance
notice of stockholder nominations for election to the Company's Board of
Directors and of other matters which stockholders wish to present for action at
an annual meeting of stockholders (other than matters included in the Company's
proxy statement in accordance with Rule 14a-8). The required notice must be
delivered to the Secretary of the Company at the principal offices of the
Company not later than 30 days prior to the first anniversary date of the
initial written notice delivered to stockholders for the previous year's annual
meeting of stockholders, provided that such notice need not be provided more
than 60 days prior to the annual meeting of stockholders. The advance notice
provisions of the Company's By-laws supersede the notice requirements contained
in recent amendments to Rule 14a-4 under the Exchange Act.
<TABLE>
<S> <C> <C>
BY ORDER OF THE BOARD OF DIRECTORS,
DAVID P. SOUTHWELL
SECRETARY
</TABLE>
April 24, 2000
THE BOARD OF DIRECTORS ENCOURAGES STOCKHOLDERS TO ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. A PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THIS MEETING MAY VOTE THEIR STOCK
PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
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APPENDIX A
SEPRACOR INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS - MAY 24, 2000
Those signing on the reverse side, revoking any prior proxies, hereby
appoint(s) Timothy J. Barberich and David P. Southwell, or each of them with
full power of substitution, as proxies for those signing on the reverse side to
act and vote at the 2000 Annual Meeting of Stockholders of Sepracor Inc. and at
any adjournments thereof as indicated upon all matters referred to on the
reverse side and described in the Proxy Statement for the Meeting, and, in their
discretion, upon any other matters which may properly come before the Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNED STOCKHOLDER(S). IF NO OTHER INDICATION IS MADE, THE PROXIES
SHALL VOTE "FOR" PROPOSAL NUMBERS 1, 2, 3 AND 4.
PLEASE VOTE, DATE, AND SIGN ON OTHER SIDE
AND RETURN PROMPTLY IN ENCLOSED ENVELOPE
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
SEE REVERSE SIDE
<PAGE>
[X] Please mark votes as in this example.
A VOTE FOR THE DIRECTOR NOMINEES AND FOR PROPOSAL NUMBERS 2, 3 AND 4
IS RECOMMENDED BY THE BOARD OF DIRECTORS.
<TABLE>
<S> <C> <C> <C> <C> <C>
1. Election of Class I Directors NOMINEES: FOR AGAINST ABSTAIN
James G. Andress 2. Approval of an amendment to [ ] [ ] [ ]
Robert J. Cresci the Company's Restated
James F. Mrazek Certificate of Incorporation
increasing from 140,000,000 to
240,000,000 the number of
authorized shares of Common
Stock.
3. Approval of the 2000 [ ] [ ] [ ]
Stock Incentive Plan
[ ] [ ]
FOR all WITHHELD
nominees from all 4. To transact such [ ] [ ] [ ]
(except as nominees other business as may
indicated to properly come before
the contrary) the meeting.
INSTRUCTIONS: TO WITHHOLD AUTHORITY MARK HERE
TO VOTE FOR INDIVIDUAL NOMINEE(S) STRIKE FOR ADDRESS CHANGE [ ]
A LINE THROUGH EACH SUCH NOMINEE'S NAME. OR COMMENTS AND
YOUR SHARES WILL BE VOTED NOTE ON REVERSE
FOR THE REMAINING NOMINEE(S).
Please sign this proxy exactly as your name appears hereon.
Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign.
If a corporation or partnership, this signature should be
that of an authorized officer who should state his or her title.
Signature: _______________________ Date: __________ Signature: __________________ Date: ___________
</TABLE>
