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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT
TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
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/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
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/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 0-19410
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SEPRACOR INC.
(Exact Name of Registrant as Specified in its Charter)
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DELAWARE 22-2536587
(State or Other Jurisdiction of) (I.R.S. Employer
Incorporation or Organization) Identification No.)
111 LOCKE DRIVE, MARLBOROUGH, 01752
MASSACHUSETTS (Zip Code)
(Address of Principal Executive
Offices)
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Registrant's telephone number, including area code: (508) 481-6700
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.10 PAR VALUE
(Title of class)
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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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. / /
The aggregate market value of voting Common Stock held by nonaffiliates of the
registrant was approximately $6,843,825,000 based on the last reported sale
price of the Common Stock on the Nasdaq consolidated transaction reporting
system on March 15, 2000.
Number of shares outstanding of the registrant's class of Common Stock as of
March 15, 2000: 72,230,347 shares.
DOCUMENTS INCORPORATED BY REFERENCE
1999 Annual Report to Stockholders--Part II
Proxy Statement for the 2000 Annual Meeting of Stockholders--Part III
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PART I
ITEM 1. BUSINESS.
THE COMPANY
Sepracor Inc. ("Sepracor" or the "Company") is a leading specialty
pharmaceutical company focused on the cost-effective development of safer, purer
and more effective drugs that are improved versions of widely-prescribed
pharmaceutical compounds. Typically, these Improved Chemical Entities ("ICEs")
are patented, single-isomer or active-metabolite forms of the parent compound.
The Company selects for development compounds with the potential to offer
improvements over existing therapies with respect to efficacy, side-effect
profile or both. The Company develops and markets these drugs by leveraging its
expertise in conducting preclinical and clinical trials and seeking regulatory
approvals for new drugs. Sepracor's drug development program has yielded an
extensive portfolio of pharmaceuticals and drug candidates intended to treat a
broad range of indications. Sepracor is concentrating its product development
efforts in three major therapeutic areas: respiratory, urological and central
nervous system disorders. To date, certain of these candidates have been, and
are being developed at lower cost and in less time than the New Chemical
Entities ("NCEs") that characterize traditional drug development. The Company
believes that the probability of the United States Food and Drug Administration
("FDA") approval of its ICE drug candidates is increased because the parent
drugs have previously been approved.
In May 1999, Sepracor introduced Xopenex-TM-, a beta agonist for the
treatment of reversible bronchospasm. Xopenex is a single-isomer form of the
leading bronchodilator, albuterol. Xopenex is the first pharmaceutical product
developed and commercialized by Sepracor.
CORPORATE COLLABORATIONS
The Company's strategy for commercializing its ICE pharmaceuticals includes
licensing and co-promotion collaborations with major pharmaceutical companies
and direct marketing through one or more specialty sales forces.
XOPENEX-TM-. In November 1999, Abbott Laboratories ("Abbott") and Sepracor
announced a co-promotion agreement for Xopenex (levalbuterol HCl). Under terms
of the agreement, Abbott's Ross Products Division will provide expanded coverage
for Xopenex with pediatricians in the United States through its sales force of
over 500 professionals. This will supplement Sepracor's sales force of
approximately 200 persons (including Innovex, described below), which will
continue to market Xopenex to hospitals, pulmonologists, allergists and primary
care physicians. All sales will be for Sepracor's account and Abbott will
receive a commission on sales generated by its sales force. The agreement is for
a term of six years but can be terminated earlier by Abbott if certain specified
development or sales objectives are not achieved. In September 1999, Sepracor
established a relationship with Innovex, a division of Quintiles Transnational
Corporation. Innovex has provided Sepracor with a contract sales organization of
approximately 155 Xopenex territory representatives to complement Sepracor's
respiratory specialty sales force. Sepracor's commercial launch of Xopenex was
in May 1999.
(+)-ZOPICLONE. In October 1999, Sepracor announced that it had entered into an
agreement with Rhone Poulenc Rorer, a unit of Rhone Poulenc SA (now Aventis)
("RPR"), whereby Sepracor obtained an exclusive royalty-bearing license to RPR's
preclinical, clinical and post-marketing surveillance data package relating to
zopiclone, its isomers and metabolites, to develop, make, use and sell
(+)-zopiclone in the United States. (+)-Zopiclone, marketed by RPR under the
brand names of Imovane-Registered Trademark- and Amoban-Registered Trademark-,
is available in approximately 80 countries worldwide and is not registered for
the U.S market. Pursuant to the agreement, RPR retains the right under the
licensed data package to manufacture (+)-zopiclone in the U.S. for use and sale
in non-U.S. markets.
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LEVOCETIRIZINE. In June 1999, Sepracor announced a license agreement with UCB
Farchim SA, an affiliate of UCB ("UCB"), relating to levocetirizine, an isomer
of ZYRTEC-Registered Trademark- (racemic cetirizine), an antihistamine. UCB has
announced that it intends to file a Marketing Authorization application, the
European equivalent of a New Drug Application ("NDA"), for levocetirizine in
early 2000. Levocetirizine is currently in Phase III clinical trials in Europe.
Sepracor believes, based on a review of preclinical and clinical studies, that
the levocetirizine isomer offers the opportunity for an improved treatment for
patients with allergies. Sepracor has issued patents on levocetirizine in the
United States and Europe that expire in 2013, and pending patent applications in
other major countries. Under the 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. Under the agreement, UCB will begin to pay Sepracor
royalties upon first product sale, and royalties will escalate upon achievement
of sales volume milestones.
(R)-FLUOXETINE. In December 1998, Sepracor announced an exclusive license
agreement with Eli Lilly and Company ("Lilly") relating to development and
commercialization of (R)-fluoxetine, an isomer of fluoxetine, which is marketed
as Prozac-Registered Trademark- by Lilly. (R)-fluoxetine is currently in
Phase II clinical development in the United States. Under the terms of the
agreement, Lilly will have the worldwide, exclusive right to develop and market
products containing (R)-fluoxetine. Lilly will be responsible for all subsequent
development, regulatory submissions, product manufacturing, marketing, and sales
relating to (R)-fluoxetine. Upon the effective date of the agreement, Sepracor
is entitled to receive a milestone payment and license fee totaling
$20 million. Sepracor also may receive up to $70 million in milestone payments
based on the progression of (R)-fluoxetine through development. In addition,
Sepracor is entitled to royalties on worldwide sales of (R)-fluoxetine beginning
upon first commercial sale. Effectiveness of the agreement is subject to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act").
See "Factors Affecting Future Operating Results" and "Legal Proceedings" for
information concerning the Federal Trade Commission's ("FTC") review of the
(R)-fluoxetine agreement with Lilly.
(+)-NORCISAPRIDE. In July 1998, Sepracor entered into a development and license
agreement with Janssen Pharmaceutica, N.V., a wholly-owned subsidiary of
Johnson & Johnson ("Janssen"), relating to (+)-norcisapride, an isomer of the
active metabolite of cisapride, which is marketed by Janssen as
Propulsid-Registered Trademark-. Propulsid is indicated for the symptomatic
treatment of patients with nocturnal heartburn due to gastroesophageal reflux
disease. Under the terms of the agreement, Janssen will have worldwide exclusive
rights to develop and market products containing norcisapride enantiomers.
Sepracor is entitled to royalties on product sales beginning upon the first
commercial sale, and royalties will escalate upon achievement of sales volume
milestones. Under certain circumstances, Sepracor may co-promote the product in
the pediatric market.
DESLORATADINE. In December 1997, Sepracor licensed to Schering-Plough
Corporation ("Schering") worldwide rights to develop and market desloratadine,
an active-metabolite form of loratadine. Currently, Schering markets loratadine
as Claritin-Registered Trademark-, the world's leading non-sedating
antihistamine. On October 26, 1999, Schering announced that it had submitted an
NDA to the FDA seeking clearance to market desloratadine for the treatment of
seasonal allergic rhinitis ("SAR"). Schering also announced that it has
submitted a centralized Marketing Authorization application for desloratadine to
the European Union's ("EU") EMEA. Approval of the centralized Marketing
Authorization for desloratadine would result in unified labeling that would be
valid in all 15 EU member states.
FEXOFENADINE. In July 1993, Sepracor licensed to Hoechst Marion Roussel, Inc.
("HMRI") its U.S. patent rights covering fexofenadine. In October 1996, HMRI
introduced Allegra-Registered Trademark- as an improved version of the
non-sedating antihistamine Seldane-Registered Trademark-. 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 patent and
HMRI's use patent application on the anti-histaminic effects of fexofenadine on
hepatically impaired patients. On September 1, 1999, HMRI and Sepracor announced
that they have amended their
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business arrangement related to fexofenadine. The amended arrangement settles
patent issues between the two companies involving the non-sedating antihistamine
developed and marketed by HMRI. Under the terms of one agreement entered into by
Sepracor and HMRI, Sepracor transferred to HMRI Sepracor's use patent on
fexofenadine to treat allergic rhinitis and another similar patent application
of Sepracor. HMRI has also obtained an exclusive license to various other
Sepracor U.S. patent applications related to fexofenadine. Sepracor will receive
royalties on any fexofenadine sales in the U.S. following expiration of HMRI's
composition of matter patent in mid-February 2001. Under the terms of a separate
agreement, HMRI has obtained an exclusive license to Sepracor's patents that had
been the subject of litigation in Europe, as well as various other patent
oppositions between the two companies outside the U.S. Under this agreement, all
legal actions outside the U.S. have been settled and Sepracor has received
royalties on fexofenadine products since March 1, 1999 in countries where
Sepracor holds issued patents on fexofenadine.
BACKGROUND
CHIRAL COMPOUNDS
Approximately 500 currently available drugs are chiral compounds. Chiral
compounds frequently exist as mixtures of mirror-image molecules known as
isomers. Although these isomers are identical in chemical composition, their
three-dimensional structures differ and, as a result, often interact differently
with cell receptors in a living organism. This interaction between the drug and
the receptor either stimulates or inhibits a biological function of the receptor
and thereby initiates the therapeutic effect. In some cases, only one of the
isomers is the desired active ingredient while the other isomer is inactive or
may cause undesirable side effects. When a chiral compound contains equal
amounts of both isomers, it is a racemic mixture. These two isomers are
generally referred to as (S)-isomers (left) and (R)-isomers (right). Typically,
in its product development process, Sepracor purifies racemic mixtures of two
isomers into compounds containing only one isomer.
ACTIVE METABOLITES
A metabolite is a compound resulting from the chemical modification of a drug
after it is administered. Like the different isomers of a chiral drug, the
activity of metabolites and the isomers of metabolites may vary from the
activity of the parent compound depending upon their interaction with specific
receptors or differences in absorption, excretion, metabolism or distribution
within the body. These changes in activity may result in a compound that
demonstrates improved safety or efficacy as compared to the parent compound.
Sepracor and its licensees are developing certain compounds in active-metabolite
form in an effort to improve the parent drug.
ICE DEVELOPMENT PROGRAM
The following products are being commercialized or are in development:
RESPIRATORY--ASTHMA
Xopenex-TM-, the first pharmaceutical product developed and commercialized by
Sepracor, is a single-isomer form of the leading bronchodilator, albuterol. In
addition, the Company is currently conducting Phase II clinical trials with
(R,R)-formoterol, a single-isomer bronchodilator, that has been shown in
Phase II human clinical trials to combine a more rapid onset of action with a
longer duration of effect as compared to currently marketed bronchodilators.
Xopenex was launched by Sepracor in May 1999 through a direct specialty sales
force, following the approval of its NDA in March 1999. In September 1999,
Sepracor entered into a contract with Innovex to
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supplement its 65-person direct sales force with approximately 155 contract
salespersons. In November 1999, the Company entered into a co-promotion
agreement with the Ross Products Division of Abbott Laboratories, which will
market Xopenex through its pediatric sales force of over 500 professionals.
The clinical portion of Sepracor's NDA for Xopenex is based on nine clinical
studies conducted with over 500 patients. In a 362-patient, four-week pivotal
study, patients who received Xopenex were shown to have a greater improvement in
lung function than those who received racemic albuterol. Xopenex taken
chronically showed equivalent or greater changes in forced expiratory volume
over one second (FEV(1)), compared to the marketed dose of racemic albuterol. At
doses demonstrating equivalent efficacy to albuterol, Xopenex demonstrated
significant decreases in beta-mediated side effects. These include an increase
in pulse rate, muscular tremor, a decrease in blood potassium levels, and an
increase in blood glucose levels. In addition, Phase III clinical trials
undertaken by Sepracor for Xopenex suggested a superior long-term effect on lung
function of patients, as compared to albuterol, particularly in those patients
not receiving concomitant steroid therapy. In a controlled double-blind,
single-dose study, Xopenex showed fewer changes in heart rate, glucose and
potassium levels at doses causing clinically relevant bronchodilation in
children ages three to eleven years old.
Sepracor is also developing Xopenex for use in oral and other delivery systems.
Sepracor has four issued U.S. patents for the use of Xopenex for the treatment
of asthma, three that expire in 2011 and one that expires in 2013.
(R,R)-formoterol is a single-isomer form of Foradil-Registered Trademark- and
Atock-TM-. Foradil is marketed in Canada and Europe by Novartis, and Atock is
marketed in Japan by Yamanouchi Pharmaceuticals. Sepracor is developing
(R,R)-formoterol as a bronchodilator intended to offer benefits over existing
long-acting bronchodilators, including rapid onset and longer duration of
action. If successfully developed, the Company intends to market
(R,R)-formoterol through its direct sales force. Sepracor has an issued U.S.
patent covering the use of (R,R)-formoterol that expires in 2012. In
April 1999, Sepracor announced the results of a Phase IIA, 49-patient
single-dose study comparing four doses of (R,R)-formoterol with the marketed
dose of Ventolin-Registered Trademark- and placebo. This randomized,
double-blind, placebo-controlled six-way cross-over study was designed to
evaluate the duration and onset of improvement in forced expiratory volume in
one second (FEV(1)), as well as the beta-agonist effects at the doses tested.
The mean baseline FEV(1) of patients tested was 60% of the predicted value. The
four doses of (R,R)-formoterol studied were 12, 24, 48 and 72 mcg and the
marketed dose of Ventolin is 2.5 mg. (R,R)-formoterol demonstrated an immediate
increase in FEV(1) after administration at all doses tested, with comparable
peak FEV(1) improvement. After 24 hours, patients receiving higher doses of
(R,R)-formoterol showed improvements in FEV(1) greater than 15%, and these
improvements were greater than those exhibited by patients on Ventolin or
placebo, (p (LESS THAN).05). The study indicated that beta-mediated side effects
of patients on doses of (R,R)-formoterol were equivalent to or less than those
of patients on Ventolin. These side effects include an increase in pulse rate
and blood glucose levels, and tremor. Sepracor is currently conducting a
Phase IIB clinical trial of (R,R)-formoterol.
RESPIRATORY--ALLERGIES
Sepracor is currently conducting Phase III clinical trials of norastemizole.
Phase I and Phase II clinical trials conducted by Sepracor have indicated that
norastemizole is potentially a safe and potent non-sedating antihistamine with
rapid onset and long duration of action. The Company believes, on the basis of
these clinical trials, that this profile, if reflected in the labeling of the
drug, could give norastemizole a competitive advantage versus currently marketed
non-sedating antihistamines. In addition, Phase I and Phase II clinical trials
conducted by Sepracor have indicated that there have been no observed
differences in incidence and severity of side effects, including cardiac events
as measured by an electrocardiogram (ECG), between norastemizole and placebo.
Sepracor and Janssen have entered into an agreement for norastemizole whereby
Sepracor has worldwide rights to all Johnson & Johnson intellectual property
covering norastemizole, including the right in exchange for royalty payments on
sales of
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norastemizole to reference data from the astemizole NDA, for manufacture,
development, and marketing of prescription norastemizole products. Sepracor
anticipates selling this compound, if approved, through its respiratory sales
force.
Desloratadine is an active metabolite of Claritin-Registered Trademark-, a
leading non-sedating antihistamine. In December 1997, Sepracor and Schering
entered into a license agreement granting Schering-Plough exclusive worldwide
rights to Sepracor's patents covering desloratadine. Sepracor's preclinical
studies have indicated that desloratadine may be more potent than other
commercially available antihistamines. Sepracor's patent portfolio for
desloratadine includes U.S. patents covering the use of desloratadine to treat
allergic rhinitis and allergic asthma that expire in 2014 and U.S. patent
applications pending covering pharmaceutical formulations and additional uses.
Sepracor received $5 million as an upfront license fee and is entitled to
royalty payments upon the sale of desloratadine, at a rate increasing over time
and upon the achievement of specified sales volume and other milestones. On
October 26, 1999, Schering announced that it had submitted an NDA to the FDA
seeking clearance to market desloratadine for the treatment of seasonal allergic
rhinitis. Schering is currently conducting Phase III clinical trials with
desloratadine for the treatment of urticaria.
Fexofenadine, marketed by Aventis, is a leading non-sedating antihistamine.
Sepracor entered into a license agreement with HMRI (now Aventis) under which
Sepracor licensed its patents on fexofenadine to HMRI. This agreement was
amended in September 1999. See "--Corporate Collaborations." In October 1996,
HMRI commercially introduced fexofenadine, marketed as a second-generation
non-sedating antihistamine under the name Allegra. Sepracor currently receives
royalties on European sales of fexofenadine in countries where Sepracor holds
issued patents on fexofenadine. Under this agreement, Sepracor is expected to
receive royalties on fexofenadine sales in the U.S. upon expiration of Aventis'
composition of matter patent in mid-February 2001.
Sepracor has licensed to UCB rights to (-)-cetirizine, a single-isomer form of
cetirizine for manufacture, marketing and sale in Europe. Cetirizine, an
antihistamine, is marketed by UCB and Pfizer in the U.S. as ZYRTEC. UCB Pharma
is currently conducting Phase III clinical trials in Europe on (-)-cetirizine.
UROLOGY
(S)-oxybutynin, a single-isomer form of Ditropan-Registered Trademark-, marketed
by Alza, is currently under development for the treatment of urge incontinence.
Urinary incontinence affects approximately 17 million people in the U.S. In a
186 patient, double blind placebo controlled Phase IIA trial conducted by
Sepracor indicated that (S)-oxybutynin significantly improved both urinary
frequency (18% better than placebo) and urinary incontinence (30% better than
placebo) while being well tolerated (15% incidence of moderate/severe dry
mouth). The Company is currently conducting a Phase IIB dose-ranging trial for
(S)-oxybutynin. Sepracor has two issued U.S. patents for (S)-oxybutynin covering
methods of treating urinary incontinence and pharmaceutical compositions that
expire in 2015.
(S)-doxazosin is a single-isomer form of Cardura-Registered Trademark-, marketed
by Pfizer Inc. Cardura is used primarily to treat benign prostatic hyperplasia
("BPH"), or enlargement of the prostate, a condition that is estimated to affect
a majority of males over the age of 55. A side effect of doxazosin is
orthostatic hypotension, the lowering of blood pressure that can cause severe
dizziness or fainting. As a result of this side effect, initial doses of the
drug are generally administered in a doctor's office over several visits.
Sepracor's preclinical studies indicate that (S)-doxazosin exhibits potential
for a significant reduction in orthostatic hypotension and is more potent than
the parent drug. Sepracor believes that an improved version could reduce the
cost of treatment by reducing the number of required doctor's visits. While
further extensive studies and clinical work are needed to determine the efficacy
and safety profile of this compound, Sepracor believes this compound may offer a
significant pharmacoeconomic benefit as compared to the parent drug. Sepracor
has submitted an investigational new drug application ("IND") and plans to
commence Phase I human
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clinical trials in the first quarter of 2000. Sepracor has an issued U.S. patent
for the use of (S)-doxazosin to treat BPH that expires in 2013.
(-)-Desmethylsibutramine is a single-isomer metabolite form of
Meridia-Registered Trademark-. Meridia is marketed by Knoll Pharmaceutical Co.,
a division of BASF AG ("Knoll"), for the treatment of obesity. (-)-
Desmethylsibutramine is a norepinephrine and dopamine reuptake inhibitor that is
being investigated by Sepracor for urological disorders such as erectile
dysfunction and urinary stress incontinence.
GASTROENTEROLOGY
(+)-Norcisapride is a metabolite of Propulsid-Registered Trademark-, marketed by
Janssen for treatment of gastroesophageal reflux disease ("GERD"). Propulsid
carries a "black box" label warning of the potential for fatal cardiac toxicity.
In preclinical studies, norcisapride has been found by Sepracor to have the
potential to treat GERD and other indications, including emesis, bulimia, and
irritable bowel syndrome without the risk of cardiac toxicity. The Company has
an issued U.S. patent for the use of (+)-norcisapride to treat Central Nervous
System ("CNS") disorders and emesis, which expires in 2015, and pending patent
applications for the use of (+)-norcisapride to treat GERD. In July 1998, the
Company exclusively licensed its norcisapride rights to Janssen, and is entitled
to receive royalties on product sales beginning upon the first commercial sale,
and roylaties escalate upon achievement of sales volume milestones.
(+)-Norcisapride is in Phase II clinical development.
(S)-lansoprazole is a single-isomer form of Prevacid-Registered Trademark-,
marketed in the U.S. by TAP Pharmaceuticals. This proton pump inhibitor drug is
used to treat diseases associated with excess gastric acid secretions, primarily
GERD. Based on preclinical studies, Sepracor believes that (S)-lansoprazole may
offer more consistent dosing and improved efficacy, as compared to Prevacid. The
Company has a patent application pending for (S)-lansoprazole.
(-)-Pantoprazole is a single-isomer form of Pantozol-TM-, marketed by Byk-Gulden
and American Home Products for the treatment of GERD. Sepracor's preclinical
work suggests that (-)-pantoprazole has the potential for more consistent dosing
and improved efficacy. The Company has an issued U.S. patent for
(-)-pantoprazole that expires in 2013.
CENTRAL NERVOUS SYSTEM--PSYCHIATRY/NEUROLOGY
(R)-fluoxetine is a single-isomer form of Prozac-Registered Trademark-. Prozac,
marketed by Lilly, is a leading selective serotonin reuptake inhibitor for the
treatment of depression. Based on preclinical studies, Sepracor believes that
the unique pharmacology of (R)-fluoxetine offers the potential for more rapid
onset of relief, greater efficacy for treatment of depression, and fewer side
effects such as sexual dysfunction, and additional indications including
anxiety. In addition, Sepracor believes based on these preclinical studies, that
improvements in its pharmacokenetic profile should allow for shorter washout and
reduced drug-interaction. Sepracor has an issued U.S. patent for (R)-fluoxetine
for the treatment of depression that expires in 2015. Sepracor filed a U.S. IND
in October 1998 and completed single and multiple dose Phase I clinical trials
for (R)-fluoxetine.
On December 7, 1998, Sepracor announced a proposed license agreement with Lilly
relating to development and commercialization of (R)-fluoxetine. Under the terms
of the agreement, Lilly will have the worldwide, exclusive right to develop and
market products containing (R)-fluoxetine. Lilly will be responsible for all
subsequent development work on (R)-fluoxetine, regulatory submissions, product
manufacturing, marketing, and sales. Upon the effective date of the agreement,
Sepracor is entitled to receive a milestone payment and license fee totaling
$20 million. Sepracor also may receive up to $70 million in milestone payments
based on the progression of (R)-fluoxetine through development. In addition,
Sepracor is entitled to royalties on (R)-fluoxetine worldwide sales beginning
upon first commercial sale. This license agreement is subject to approval by the
FTC. See "Corporate Collaborations," "Factors Affecting Future Operating
Results" and "Legal Proceedings."
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(+)-Desmethylsibutramine ("DMS") is a single-isomer metabolite form of
Meridia-Registered Trademark-. Meridia is marketed by Knoll for the treatment of
obesity. In January 2000, Sepracor announced that it had initiated a Phase I
clinical trial on DMS and plans to commence clinical studies on multiple
indications for central nervous system disorders in the second half of 2000.
Sepracor's preclinical studies indicate that DMS is a potent serotonin,
norepinephrine and dopamine reuptake inhibitor. This unique triple mechanism of
action may offer improvement in the treatment of disorders including depression
and attention deficit hyperactivity disorder.
CENTRAL NERVOUS SYSTEM--SLEEPING DISORDERS
(+)-Zopiclone is a single-isomer form of Imovane-TM-. Zopiclone, marketed by RPR
under the brand names of Imovane-Registered Trademark- and
Amoban-Registered Trademark-, is available in approximately 80 countries
worldwide and has never been marketed in the U.S. Sepracor has entered into an
agreement with RPR under which Sepracor has exclusively licensed RPR's
preclinical, clinical and post-marketing surveillance data package relating to
zopiclone, its isomers and metabolites, for the United States market. In
January 2000, Sepracor announced that it has initiated a 400-patient clinical
efficacy trial for (+)-zopiclone in the treatment of insomnia. Sepracor recently
completed two clinical trials that demonstrated the activity of (+)-zopiclone in
surrogate models of insomnia. These studies demonstrated that the
pharmacological effects of (+)-zopiclone occur rapidly and can be seen for up to
six hours. This duration of action may result in better maintenance of sleep
with a lower incidence of nocturnal awakening. Based on the results of clinical
trials done to date and subject to the results of additional clinical trials,
the Company believes that lower doses of (+)-zopiclone have the potential to
induce sleep when a shorter duration of action is required. The Company has an
issued U.S. patent relating to the use of (+)-zopiclone to treat sleep disorders
and other indications that expires in 2015.
CENTRAL NERVOUS SYSTEM--ANXIETY
(+)-Deszopiclone is a single isomer metabolite of zopiclone. Sepracor is seeking
to develop this compound as a treatment for anxiety and epilepsy syndrome.
Preclinical studies have indicated that (+)-deszopiclone has potent anxiolytic
and antiepileptic activities without demonstrating significant sedation.
CENTRAL NERVOUS SYSTEM--MIGRAINE
(S)-fluoxetine is a single-isomer form of Prozac. Sepracor has conducted
Phase II clinical trials on the use of the (S)-isomer of fluoxetine as a
treatment to prevent migraine. Migraine affects approximately 23 million people
in the U.S. Sumatriptan, marketed as Imitrex by GlaxoWellcome, is approved for
acute, but not prophylactic, treatment of migraine, and is the leading
prescription antimigraine drug on the market. In Phase II trials, Sepracor
demonstrated a statistically significant decrease in the frequency of migraine
attacks for patients receiving (S)-fluoxetine. Sepracor has an issued U.S.
patent for (S)-fluoxetine for the prevention of migraine that expires in 2013.
OTHER INDICATIONS
The Company is also developing (R)-ondansetron, a single-isomer form of
Zofran-Registered Trademark-, marketed by GlaxoWellcome, for the treatment of
emesis.
DRUG DISCOVERY
The Company is broadening its development focus to include discovery and
development of NCEs. The accessibility and widespread use of the new
technologies of combinatorial chemistry and ultra high throughput screening
provide an opportunity for Sepracor to participate in the area of NCE discovery.
Sepracor's approach to the discovery of NCEs is identifying novel compounds
which are of strategic interest to Sepracor, with in vitro and in vivo
biological activity in the anti-infective, anti-inflammatory, pain and
behavioral disease therapeutic areas.
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SUBSIDIARIES
In 1994, Sepracor established and independently financed BioSepra Inc.
("BioSepra") as a subsidiary, through an initial public offering of its common
stock. From 1994 to 1999, the company operated as BioSepra, developing
proprietary microsphere beads used as chromatography media in the production of
pharmaceuticals. In February 1999, BioSepra determined that it would refocus on
embolotherapy, which is the occlusion of the blood supply to fibroids and
vascular defects, BioSepra sold its chromatography business and acquired a 51%
interest in French-based BioSphere Medical, S.A. ("BioSphere France"), with an
option to purchase the remaining 49% interest; and changed its corporate name to
BioSphere Medical, Inc ("BioSphere"). The acquisition enabled BioSphere to gain
ownership of product know-how and European regulatory approval of
Embosphere-Registered Trademark- Microspheres. As of December 31, 1999,
Sepracor's ownership of BioSphere was 64%. Following BioSphere's $5,900,000
private placement of common stock and warrants in February 2000, Sepracor's
ownership of BioSphere decreased to 59%.
BioSphere is an endovascular medical device company focused on embolotherapy,
which is the occlusion of the blood supply to fibroids and vascular defects.
Embolization is a procedure performed primarily by interventional radiologists
to treat cancer, hypervascularized tumors and arteriovenous malformations and to
control hemorrhage. BioSphere is pioneering the use of patented and proprietary
bioengineered microspheres as a new class of embolotherapy devices.
BioSphere's objective is to achieve a significant market share in the emerging
market for high-volume procedures, including the growing uterine artery
embolization market in the U.S., for its lead product,
Embosphere-Registered Trademark- Microspheres. Embosphere-Registered Trademark-
Microspheres are precisely calibrated, spherical, hydrophilic, micro-porous
beads made of a cross-linked acrylic co-polymer, which is then embedded with
gelatin. BioSphere believes that Embosphere-Registered Trademark- Microspheres
may potentially have certain competitive advantages over first-generation
embolization products because they eliminate aggregation in the catheter,
unwanted proximal embolization and unpredictable distal embolization due to
particle fragmentation, common with first-generation products. Clinical results
in Europe achieved over six years highlight the potential advantages of
Embosphere-Registered Trademark- technology. BioSphere's research indicates that
Embosphere-Registered Trademark- Microspheres may be less likely to cause
catheter blockage and aggregates than first generation embolization products. At
least one clinical study of pre-surgical embolization of brain tumors has
suggested that Embosphere-Registered Trademark- Microspheres have the capacity
to achieve a more controlled and targeted embolization than first generation
embolization products, thus minimizing blood loss.
BioSphere has already received a CE Mark which allows it to market
Embosphere-Registered Trademark- Microspheres in the 19 countries of the
European Economic Area. In early 2000, the Company received similar marketing
approval in Canada and Australia. Over 10,000 vials of
Embosphere-Registered Trademark- Microspheres have been sold since 1994.
BioSphere is currently seeking approval from the FDA to market
Embosphere-Registered Trademark- Microspheres in the United States. In
May 1999, BioSphere filed a 510(k) application with the FDA. In October 1999,
BioSphere filed an Investigational Device Exemption with the FDA to begin
clinical studies in the U.S. for specific uterine artery embolization labeling.
AFFILIATES
HEMASURE
In 1994, Sepracor established and independently financed HemaSure Inc.
("HemaSure") as a subsidiary. Through two public offerings of HemaSure's common
stock, HemaSure became first a subsidiary, and ultimately, an affiliate of the
Company. HemaSure is applying its proprietary filtration technology to develop
products to increase the safety of donated blood and to improve certain blood
collection and transfusion procedures. In February 1999, Sepracor entered into
an agreement with HemaSure pursuant to which the Company invested $2,000,000 in
HemaSure in exchange for 1,333,334 shares of HemaSure
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<PAGE>
common stock and warrants to purchase 667,000 additional shares of HemaSure
common stock. As a result of these transactions, Sepracor's ownership of
HemaSure became approximately 42% as of February 1999.
In May 1999, HemaSure completed a private placement financing with COBE
Laboratories, Inc. ("COBE Labs"), a wholly-owned subsidiary of Gambo AB. COBE
Labs, purchased 4.5 million shares of HemaSure common stock for an aggregate
purchase price of $9.0 million. The agreement also provided COBE Labs with an
option to purchase an additional $3 million of HemaSure common stock, which it
exercised in October 1999. As a result of these transactions, Sepracor's
ownership of HemaSure was reduced to 27% and Sepracor recorded a gain of
$820,000, which was recorded through additional paid-in-capital.
In March 2000, HemaSure sold 3,700,000 shares of common stock in a private
placement financing, thereby reducing Sepracor ownership to approximately 22%.
VERSICOR
Versicor Inc. ("Versicor") was formed as a majority-owned subsidiary of the
Company in May 1995 to develop novel drug candidates principally for the
treatment of infectious diseases. In December 1997, Versicor announced the
completion of a private equity financing for approximately $22,000,000.
Following this financing, Sepracor had an approximately 22% equity ownership in
Versicor.
In 1999, Versicor completed various transactions resulting in the issuance of
three series of preferred stock, and as a result, Sepracor's ownership of
Versicor has been reduced to approximately 10%. As a result of these equity
investments in Versicor, Sepracor recorded a gain of $1,077,000, which was
recorded through additional paid-in-capital, and, effective April 1999, Sepracor
changed its accounting for its investment in Versicor from the equity method of
accounting to the cost method.
RESEARCH AND DEVELOPMENT
The Company's research and development activities are primarily directed toward
discovering and developing potentially improved versions of widely-prescribed
drugs.
The Company's total research and development expenses were $122,400,000,
$61,797,000, and $41,230,000 for 1999, 1998, and 1997, respectively.
Collaborative research and development revenues totaled $2,390,000, $4,761,000,
and $0 in 1999, 1998, and 1997, respectively. BioSphere's portion of total
research and development expenses was $968,000, $34,000, and $34,000 in 1999,
1998 and 1997, respectively.
In 2000, the Company expects research and development expenditures to increase
significantly over 1999, as activities are expanded to accommodate the
development of its portfolio of pharmaceuticals and drug candidates.
MARKETING AND SALES
The Company's marketing strategy includes arrangements with corporate marketing
partners, outlicensing product rights in exchange for royalties and marketing
through its direct and third party sales forces. The Company believes that
corporate partnering arrangements allow the Company to market its ICEs more
quickly and to use the partner's marketing expertise. The Company currently has
collaborative agreements with Lilly, Schering, HMRI, RPR, Janssen and UCB. In
each of these collaborative agreements, the Company is dependent upon the
efforts of its collaboration partner and these efforts may not be successful.
The Company has established a direct sales force consisting of representatives
and technical specialists to market its single isomer form of albuterol,
Xopenex, introduced in 1999. The sales representatives demonstrate the use of
the Company's products while educating physicians as to the clinical benefits of
the ICEs. The technical specialists act as a resource to provide physicians with
relevant information regarding the Company's products.
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<PAGE>
The Company has also established contract sales arrangements with Innovex, a
division of Quintiles Transnational Corporation, and with Abbott Laboratories.
Innovex has provided Sepracor with a contract sales organization of
approximately 155 Xopenex territory representatives. Abbott's Ross Products
Division will promote Xopenex to pediatricians in the United States through its
sales force of over 500 professionals.
As the Company begins to enter into co-promotion arrangements or market and sell
additional products directly, the Company will need to significantly expand its
direct sales force which will require substantial efforts and significant
management and financial resources. The Company's business and future operating
results will depend in significant part upon its ability to attract and retain
skilled sales and marketing personnel. Competition for such personnel is
intense, and the Company may not be successful in attracting or retaining such
personnel. The Company may not be successful in building a marketing staff or
sales force, and it cannot be assumed that establishing such a marketing staff
or sales force will be cost-effective or that the Company's sales and marketing
efforts will be successful.
Customers accounting for more than 10% of total revenues in 1999 include HMRI
(16%), with respect to license and royalty revenue, and McKesson (15%), Cardinal
Healthcare (11%), and Bergen Brunswig (11%), with respect to sales of Xopenex.
In 2000, the Company expects marketing and sales expenditures to increase
significantly over 1999, as the Company increases activities relating to sales
and marketing of Xopenex and efforts relating to corporate partnering
arrangements.
MANUFACTURING
The Company prepares its drug compounds primarily at its laboratories in
Marlborough, Massachusetts. The Company also owns and operates a current Good
Manufacturing Practices ("cGMP") compliant 39,000 square foot fine chemical
manufacturing facility in Windsor, Nova Scotia, which the Company believes has
sufficient capacity to support the production of its drugs in quantities
required for its clinical trials. If additional product candidates of Sepracor
become approved for sale, the Company will need to either manufacture such drugs
itself or license the manufacturing and marketing rights to third parties. While
the Company believes that it has the capability to scale up its manufacturing
process to support the production in commercial quantities of certain of the
drugs which it intends to market and sell directly, the production of a
substantial portion of those drugs must be contracted out to third-party
manufacturers. Prior to December 31, 2001, the Company is obligated to purchase
from ChiRex Inc. ("ChiRex"), a Delaware corporation, all of the pharmaceutical
active ingredients (other than commercial quantities of its drugs which Sepracor
is capable of producing at its Nova Scotia manufacturing plant) of those drugs
which Sepracor intends to directly market and sell, subject to certain pricing,
supply and quality control conditions.
COMPETITION
The Company's principal competitors are generic drug companies that seek to
market the racemic mixture of a compound following expiration of the innovator's
composition-of-matter patent and also pharmaceutical companies which develop new
patented therapies to treat the disease indications that the Company is
targeting. The Company expects that these companies will seek to compete against
Sepracor's differentiated products with lower pricing, which could adversely
affect the prices charged by Sepracor. In addition, any ICE developed by the
Company is likely to encounter competition from the original brand-name parent
drug, potentially in a generic form, following expiration of the innovator's
composition-of-matter patent. Many competitors and potential competitors have
substantially greater resources, manufacturing and marketing capabilities,
research and development staff and production facilities than Sepracor and its
subsidiaries.
In its ICE program, the Company expects to compete primarily by obtaining use
patents on the single-isomer or active-metabolite forms of existing, widely-sold
racemic drugs and by establishing, through
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preclinical and clinical tests, that such products in single-isomer or
active-metabolite form offer benefits over the racemic compounds, such as
reduced side effects, improved therapeutic efficacy, new indications or improved
dosage forms. Any such patents obtained by the Company should exclude others
from marketing the targeted single-isomer compound for the indications claimed
in Sepracor's issued use patents.
GOVERNMENT REGULATION
The Company and its customers are required to obtain the approval of the FDA and
similar health authorities in foreign countries to test clinically and sell
commercially pharmaceuticals and biopharmaceuticals for human use.
Human therapeutics are normally subject to rigorous preclinical and clinical
testing. The standard process required by the FDA before a drug may be marketed
in the U.S. includes (i) preclinical laboratory tests with toxicity and, often,
carcinogenicity testing, (ii) submission to the FDA of an application for an
IND, which must be approved before human clinical trials may commence,
(iii) adequate and well-controlled human clinical trials to establish the safety
and efficacy of the drug for its intended indication, (iv) submission to the FDA
of an NDA, and (v) FDA approval of the NDA prior to any commercial sale or
shipment of the drug. In the past, the Company has attempted to shorten the
regulatory approval process of its ICEs by relying on preclinical and clinical
toxicology data already on file with the FDA with respect to the parent drug.
Typically, clinical evaluation involves a three-phase process. In Phase I, the
initial introduction of the drug to humans, the drug is tested for safety
(adverse effects), dosage tolerance, absorption, distribution, metabolism and
excretion. Phase II involves studies in a limited patient population to
(i) determine the efficacy of the drug for specific targeted indications,
(ii) determine dosage tolerance and optimal dosage and (iii) identify possible
adverse effects and safety risks. When a compound is found to be effective and
to have an acceptable safety profile in Phase II evaluations, Phase III trials
are undertaken to evaluate further clinical efficacy and to test further for
safety within an expanded patient population at geographically dispersed
clinical study sites. The process of completing clinical testing, obtaining FDA
regulatory approval and commencing commercial marketing is likely to take a
number of years. There can be no assurance that Phase I, Phase II or Phase III
testing will be completed successfully within any specified time period, if at
all, with respect to any of the Company's products subject to such testing.
Furthermore, there can be no assurance that the FDA will accept the Company's
evidence that a particular product meets the Company's claims of superiority.
FDA regulations pertain not only to healthcare products, but also to the
processes and production facilities used to produce such products. Although the
Company has designed the required areas of its U.S. facility to conform to cGMP,
the FDA will not review the facilities for compliance until the Company produces
a product for which FDA commercial approval has been sought. Environmental
legislation provides for restrictions and prohibitions on releases or emissions
of various substances produced in, and waste by-products from, Sepracor's
operations.
The FDA also imposes requirements relating to the marketing of drug products
after approval, including requirements relating to the promotion of drug
products to buyers and to the reporting to the FDA of adverse drug experiences
known to companies holding approved applications. Failure of the Company to
adhere to these requirements could lead to regulatory action by the FDA.
Information reported to the FDA in compliance with these requirements could
cause the FDA to withdraw drug approval or to require modification of labeling
(e.g., to add warnings or contraindications). The FDA has the statutory
authority to seek judicial remedies and sanctions and to take administrative
corrective action for violation of these and other FDA requirements and
standards.
BioSphere faces similar regulatory requirements before it can market and sell
Embosphere-Registered Trademark- Microspheres in the U.S. Approvals must be
received by the FDA and these necessary approvals may not be obtained
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within a reasonable period of time, if at all. Any difficulty or delay in
commercializing Embosphere-Registered Trademark- Microspheres could harm the
ability to generate revenues in the future.
PATENTS AND PROPRIETARY TECHNOLOGY
Sepracor (including its affiliates and subsidiaries) has filed patent
applications in the U.S. relating to the use of, and compositions containing,
single-isomer or metabolite compounds, chiral synthesis and separations and
membrane affinity separations. As of December 31, 1999, approximately 94 U.S.
patents have been issued to the Company and approximately 180 patent
applications are pending in the PTO. Sepracor has filed many patent applications
in selected countries other than the U.S. In addition, the Company has licensed
from third parties certain rights under various patents and patent applications.
To the extent that Sepracor invents or discovers a new, useful and non-obvious
invention and files a U.S. patent application for such invention, a composition
or method-of-use patent may be issued. The Company has been issued U.S. patents
on the use of single-isomer or active-metabolite forms of drugs currently
marketed as racemic mixtures. The Company is currently pursuing a policy of
aggressively seeking patent protection for the use of single-isomer forms of
certain existing drugs now sold as racemic mixtures.
Many of the ICEs for which the Company has obtained method-of-use patents or
filed patent applications may be subject to composition-of-matter or other
patents held by third parties. For example, each of the following ICEs is
claimed by third party U.S. patents or patent applications as indicated:
- (S)-doxazosin, third party patent claiming doxazosin and pharmaceutical
formulations that expires in 2000;
- fexofenadine, third party patent claiming fexofenadine that expires in
2001 and a third party patent claiming substantially pure fexofenadine
expiring in 2013;
- (R)-fluoxetine, third party patents claiming fluoxetine and methods of use
that expire in 2001 and 2003, respectively;
- (S)-fluoxetine, third party patents claiming fluoxetine and methods of use
that expire in 2001 and 2003, respectively;
- (S)-lansoprazole, third party patents claiming lansoprazole,
pharmaceutical formulations and methods of use that expire in 2009, 2008
and 2005, respectively;
- (+)-norcisapride, third party patent claiming norcisapride that expires in
2009 and a third party patent application claiming the use of
(+)-norcisapride to treat GERD;
- (+)-desmethylsibutramine, third party patent claiming desmethylsibutramine
and methods of treating depression that expires in 2002;
- (+)-hydroxyitraconazole, third party patent claiming hydroxyitraconazole
expiring in 2005;
- (R)-ondansetron, third party patent claiming ondansetron and methods of
use to treat emesis expiring in 2005 and 2006, respectively;
- (-)-pantoprazole, third party patent claiming pantoprazole and methods of
use expiring in 2005; and
- (-)-cetirizine, third party patent claiming cetirizine that expires in
2007.
There are foreign equivalents to a number of the U.S. patents identified above,
the scope and expiration of which vary from country to country. Even if a patent
is issued to the Company for the use of a single-isomer or active-metabolite
form of a racemic mixture that is currently claimed by one or more third party
patents, products based on any such patent issued to the Company may not be sold
until the expiration of all of such third party patents (unless a license is
obtained to such third party patents or such third party patents are determined
to be invalid, unenforceable, or not infringed by a court of proper
jurisdiction). In addition, there may be pending additional third party patent
applications covering the Company's ICEs which, if issued, may preclude the sale
of an ICE.
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BioSphere holds several patents and patent applications. The patent positions of
companies in the biopharmaceutical industry are highly uncertain, involve
complex legal and factual questions and recently have been the subject of much
litigation. A significant number of patents have been applied for by and issued
to other companies in BioSphere's industry, and other companies may have filed
applications for, may have been issued patents for, or may obtain additional
patents and proprietary rights relating to products competitive with those of
BioSphere.
In addition, BioSphere's products may give rise to claims that they infringe the
proprietary rights of others. No assurance can be given that any license
required under any such patents or rights would be made available on terms
acceptable to BioSphere, if at all. If BioSphere does not obtain such licenses,
it could encounter delays in product introductions while it attempts to design
around such patents, or could find that the development, manufacture or sale of
products requiring such licenses could be precluded. Litigation may be necessary
to defend against or assert claims of infringement, to enforce patents issued to
BioSphere, to protect trade secrets or know-how owned by BioSphere, or to
determine the scope and validity of the proprietary rights of others, and could
result in substantial costs to and diversion of effort by, and may have a
material adverse impact on, BioSphere.
EMPLOYEES
On March 1, 2000, Sepracor and its wholly-owned subsidiaries, excluding
BioSphere, employed 338 persons. Of these 338 employees, 170 were primarily
engaged in research, development and engineering activities, 29 were primarily
engaged in manufacturing, and the remainder were primarily engaged in marketing,
sales, administration, finance and accounting.
On March 1, 2000 BioSphere employed 39 persons.
ITEM 2. PROPERTIES.
Sepracor's facilities, including those used by BioSphere, are located in
Marlborough, Massachusetts, Windsor, Nova Scotia, and Louvres, France. In
Massachusetts, the Company leases a total of 101,292 square feet of space in two
buildings. Approximately 5,000 square feet is devoted to manufacturing
operations and the remainder to research and development and administration. The
two leases currently in effect extend to June 2007 for 32,477 square feet and
June 2007 for 68,815 square feet. In Nova Scotia, Sepracor's primary
manufacturing location is a 39,000 square-foot fine chemical manufacturing
facility located on a four-acre site in Windsor, Nova Scotia. The facility was
acquired by the Company in March 1994. Production at the Nova Scotia facility
began in February 1995.
BioSphere's facilities are located in Marlborough, Massachusetts and Louvres,
France. In Massachusetts, BioSphere subleases approximately 13,000 square feet
of office space from Sepracor. At its facility in Louvres, France, BioSphere
leases approximately 10,000 square feet, with 7,000 square feet used for
manufacturing and the balance for research and development and administration.
Effective April 1, 2000, BioSphere will relocate from Marlborough, Massachusetts
to Rockland, Massachusetts, where it will lease approximately 8,000 square feet
of office and laboratory space pursuant to a lease for a term of five years.
ITEM 3. LEGAL PROCEEDINGS.
On February 12, 1999, the FTC issued a request for additional information or
documentary materials relating to the Company's exclusive license agreement with
Lilly relating to (R)-fluoxetine (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 or 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.
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An interference declared on June 30, 1999 between Sepracor and RPR relating to
(+)-zopiclone was dissolved by Sepracor's agreement with RPR on October 7, 1999,
under which RPR's involved patent application was assigned to Sepracor.
All legal proceedings between Sepracor and HMRI relating to fexofenadine,
including foreign litigation and the interference between Sepracor and HMRI,
have been settled by Sepracor's agreement with HMRI of September 1, 1999.
HemaSure is a defendant in a lawsuit brought by Pall Corporation ("Pall")
regarding its LeukoNet System, which is no longer made or sold by HemaSure. In a
complaint filed in November 1996, Pall alleged that HemaSure's manufacture, use
and/or sale of the LeukoNet System infringed upon two patents held by Pall. Pall
dropped its allegations concerning infringement of one of the patents and
alleges only that HemaSure's LeukoNet System infringed U.S. Patent
No. 4,952,572 (the "'572 Patent").
With respect to the allegations concerning the '572 Patent, HemaSure has
answered the complaint stating that it does not infringe any claim of the
asserted patent. 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. 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 filed 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. The court has not acted on the
summary judgment motions.
On April 5, 1999, HemaSure and Gambro BCT, Inc. ("Gambro BCT") filed a complaint
for declaratory relief against Pall in the U.S. District Court of Colorado.
HemaSure and Gambro BCT seek declaratory relief that the '572 Patent and Pall's
U.S. Patent No's. 5,451,321, 5,229,012, 5,344,561, 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 or transfer to the Eastern District of New
York or, in the alternative, to stay this action. HemaSure and Gambro opposed
Pall's motion. On July 16, 1999, the United States District Court of Colorado
denied Pall's motion to transfer or, in the alternative, to stay the action, and
the action is proceeding. On September 30, 1999, the Court denied Pall's motion
to dismiss the action and the case is proceeding. On October 20, 1999, Pall
submitted a counterclaim alleging that HemaSure's r/LS System infringes its '572
patent and that HemaSure and Gambro BCT tortiously interfered and unfairly
competed with Pall's business. On March 22, 2000, Pall filed its second amended
answer and counterclaims alleging infringement of all the patents-in-suit. Pall
also added counterclaims against Gambro A.B.
On April 23, 1999, Pall filed a complaint against HemaSure and Gambro BCT in the
U.S. District Court of the Eastern District of New York alleging that HemaSure's
r\LS filter infringes Pall's '572 Patent, and tortiously interfered and unfairly
competed with Pall's business. On May 19, 1999, Pall filed an amended complaint
adding Sepracor, Gambro, Inc. and Gambro, A.B., a Swedish company, of which
Gambro Inc. is a business unit, as defendants. Sepracor, HemaSure and Gambro BCT
have moved to dismiss, transfer, or stay the action, and Pall has opposed the
motion. There has been no decision on the motion.
A prior lawsuit brought by Pall in February 1996 has concluded. In June 1999,
the U.S. Court of Appeals for the Federal Circuit determined that the LeukoNet
System did not infringe claim 39 of U.S. Patent No. 5,451,321 and Pall has not
appealed that decision.
HemaSure has engaged patent counsel to investigate the pending litigations.
HemaSure believes, based upon its review of these matters, that a properly
informed court should conclude that the manufacture, use and/or sale by HemaSure
or its customers of the LeukoNet System and the r\LS System does 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, including
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the possibility of significant damages in the litigations and an injunction
against the sale of the r/LS System if HemaSure does not prevail in the
litigations.
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.
In January 1997, HemaSure entered into a Restructuring Agreement of the debt
related to HemaSure's acquisition of Novo Nordisk A/S's plasma products unit. In
January 1998, HemaSure elected to convert all indebtedness under the
approximately $11,700,000 promissory note which was issued to Novo Nordisk A/S
in connection with the Restructuring Agreement into common stock at a conversion
price of $10.50 per share, or 827,375 shares. HemaSure also elected to treat as
forgiven $3,000,000 in principal amount of the note, pursuant to the terms of
the note. Novo Nordisk A/S has contested the conversion of the note, including
the forgiveness of the $3,000,000 amount. This dispute, with or without merit,
could be time-consuming and expensive to litigate or settle if brought into a
court of law, and could divert management attention from administering
HemaSure's core business. If Novo Nordisk A/S succeeds on its dispute and
HemaSure is deemed to have wrongfully converted the original note, then the
827,375 shares of common stock issued to Novo Nordisk A/S may no longer be
outstanding and HemaSure may be obligated to repay certain indebtedness under
the original note.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders of the Company, through
solicitation of proxies or otherwise, during the last quarter of the year ended
December 31, 1999.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names, ages and positions of the current
executive officers of the Company as of December 31, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- --------
<S> <C> <C>
Timothy J. Barberich........ 52 Chairman, Chief Executive Officer
William J. O'Shea........... 50 President, Chief Operating Officer
David P. Southwell.......... 39 Executive Vice President; Chief Financial Officer and
Secretary
Paul D. Rubin, M.D. ........ 46 Executive Vice President, Drug Development and ICE
Research
James R. Hauske, Ph.D. ..... 46 Senior Vice President, Discovery
Robert F. Scumaci........... 40 Senior Vice President, Finance and Administration and
Treasurer
Douglas E. Reedich, 42 Senior Vice President, Legal Affairs and Chief Patent
Ph.D. .................... Counsel
</TABLE>
MR. BARBERICH, a founder of the Company, has been a director of the Company and
its Chief Executive Officer since the Company's organization in 1984.
Mr. Barberich also served as President of the Company from 1984 to
October 1999. Prior to founding the Company, Mr. Barberich served in a number of
executive and managerial capacities at Millipore Corporation, which he joined in
1973. Most recently, prior to founding Sepracor, Mr. Barberich served as Vice
President and General Manager of Millipore's Medical Products Division and as
General Manager of Millipore's Laboratory Products Division. Mr. Barberich is
Chairman of the Board of Directors of BioSphere and is a director of HemaSure
and Versicor.
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MR. O'SHEA has served as President and Chief Operating Officer of the Company
since October 1999. Prior to joining the Company, Mr. O'Shea was Senior Vice
President of Sales and Marketing and Medical Affairs for Zeneca Pharmaceuticals,
a business unit of Zeneca, Inc. Mr. O'Shea joined Zeneca in the U.K. in 1975 and
held management positions in the U.K. and the U.S. in the areas of international
sales and marketing.
MR. SOUTHWELL has served as Executive Vice President, Chief Financial Officer of
the Company since October 1995 and served as Senior Vice President and Chief
Financial Officer of the Company from July 1994 to October 1995. From
August 1988 until July 1994, Mr. Southwell was associated with Lehman
Brothers Inc., a securities firm, in various positions with the investment
banking division, most recently in the position of Vice President.
Mr. Southwell is a director of BioSphere.
DR. RUBIN has served as Executive Vice President, Drug Development and ICE
Research of the Company since January 1999. He was Senior Vice President, Drug
Development of the Company from April 1996 until January 1999. He was formerly
Vice President and Worldwide Director of Clinical Pharmacology for
Glaxo-Wellcome, a pharmaceutical company, from 1993 until 1996 and Vice
President, Immunology and Metabolic Disease for Abbott Laboratories, a
pharmaceutical company, from 1987 until 1993. Dr. Rubin was responsible for
early clinical development of Glaxo-Wellcome's entire portfolio. While at Abbott
Laboratories, Dr. Rubin was responsible for the development of the
5-lipoxygenase inhibitor, zileuton. Dr. Rubin is a director of Endorex Corp.
DR. HAUSKE has served as Senior Vice President, Discovery of the Company since
October 1995. Prior to joining the Company, from June 1994 to October 1995,
Dr. Hauske was employed by Arris Pharmaceuticals, a pharmaceutical company, as
Director of Combinatorial Chemistry and Receptor Chemistry. Before joining Arris
Pharmaceuticals, Dr. Hauske worked for Pfizer Central Research in Groton,
Connecticut. While, at Pfizer, Dr. Hauske was a member of the project management
team that discovered Pfizer's azamacrolide antibacterial,
Zithromax-Registered Trademark-.
MR. SCUMACI has served as Senior Vice President, Finance and Administration and
Treasurer of the Company since March 1996. He was Vice President and Controller
of the Company from March 1995 until March 1996. From 1987 to 1994, Mr. Scumaci
was employed by Ares-Serono Group, a multinational pharmaceutical company, most
recently as Vice President, Finance and Administration of North American
Operations. Previously, he was associated with Revlon and Coopers & Lybrand in
various finance and accounting capacities.
DR. REEDICH has served as Senior Vice President, Legal Affairs and Chief Patent
Counsel of the Company since January 1999 and has served as the Company's Chief
Patent Counsel since June 1995. From October 1987 to June 1995, he was employed
by 3M Company ("3M"), most recently as patent counsel for 3M's Pharmaceuticals
Division. Prior to joining 3M, Dr. Reedich was employed as a chemist by Eli
Lilly.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Incorporated by reference from the Company's 1999 Annual Report to Stockholders
(the "1999 Annual Report") under the headings "Supplemental Stockholder
Information--Price Range of Common Stock" and "Supplemental Stockholder
Information--Dividend Policy."
The Company did not sell any equity securities during the quarter ended
December 31, 1999 that were not registered under the Securities Act of 1933, as
amended.
ITEM 6. SELECTED FINANCIAL DATA.
Incorporated by reference from the 1999 Annual Report under the heading
"Sepracor Inc. Selected Financial Data."
16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Incorporated by reference from the 1999 Annual Report under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Incorporated by reference from the 1999 Annual Report under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements filed as part of this Annual Report on Form 10-K are
incorporated by reference from the 1999 Annual Report under the headings
"Consolidated Financial Statements and Notes Thereto" and are listed under Item
14 below.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been no disagreements on accounting and financial disclosure matters.
PART III
ITEMS 10-13.
The information required for Part III in this Annual Report on Form 10-K is
incorporated by reference from the Company's definitive proxy statement for the
Company's 2000 Annual Meeting of Stockholders. Such information will be
contained in the sections of such proxy statement captioned "Stock Ownership of
Certain Beneficial Owners and Management", "Proposal 1--Election of Directors",
"Board and Committee Meetings", "Compensation for Directors", "Compensation of
Executive Officers", "Certain Relationships and Related Transactions",
"Employment Agreements" and "Section 16(a) Beneficial Ownership Reporting
Compliance." Information regarding executive officers of the Company is also
furnished in Part I of this Annual Report on Form 10-K under the heading
"Executive Officers of the Registrant."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are included or incorporated by reference from the
1999 Annual Report.
1. The following financial statements (and related notes) of the Company are
incorporated by reference from the 1999 Annual Report:
<TABLE>
<CAPTION>
PAGE*
--------
<S> <C>
Report of Independent Accountants........................... 23*
Consolidated Balance Sheets at December 31, 1999 and 1998... 24*
Consolidated Statements of Operations for the Years Ended 25*
December 31, 1999, 1998 and 1997..........................
Consolidated Statements of Stockholders' Equity (deficit) 26*
and Comprehensive Income for the Years Ended December 31,
1999, 1998 and 1997.......................................
Consolidated Statements of Cash Flows for the Years Ended 27*
December 31, 1999, 1998 and 1997..........................
Notes to the Consolidated Financial Statements.............. 28*
</TABLE>
* Refers to page number of the 1999 Annual Report. The consolidated financial
statements (and related notes) are incorporated by reference from the 1999
Annual Report.
17
<PAGE>
2. The schedule listed below and the Report of Independent Accountants on
financial statement schedule are filed as part of this Annual Report on
Form 10-K:
<TABLE>
<S> <C>
Report of Independent Accountants on Financial Statement S-1
Schedule..................................................
Schedule II--Valuation and Qualifying Accounts.............. S-2
</TABLE>
All other schedules are omitted as the information required is inapplicable or
the information is presented in the consolidated financial statements or the
related notes.
3. The Exhibits listed in the Exhibit Index immediately preceding the Exhibits
filed as a part of this Annual Report on Form 10-K.
(b) No current reports on Form 8-K were filed by the Company during the quarter
ended December 31, 1999;
The following trademarks are mentioned in this Annual Report on Form 10-K:
Sepracor, ICE and Xopenex are trademarks of Sepracor. BioSphere and
Embosphere-Registered Trademark- Microspheres are trademarks of BioSphere.
HemaSure and LeukoNet are trademarks of HemaSure. This Annual Report on
Form 10-K also contains trademarks of other companies.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
<TABLE>
<S> <C> <C>
SEPRACOR INC.
By: /s/ TIMOTHY J. BARBERICH
-----------------------------------------
Timothy J. Barberich
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
</TABLE>
Date: March 29, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Chairman, Chief Executive
/s/ TIMOTHY J. BARBERICH Officer and Director
------------------------------------------- (Principal Executive March 29, 2000
Timothy J. Barberich Officer)
Executive Vice President,
/s/ DAVID P. SOUTHWELL Chief Financial Officer, and
------------------------------------------- Secretary (Principal March 29, 2000
David P. Southwell Financial Officer)
Senior Vice President, Finance
/s/ ROBERT F. SCUMACI and Administration and
------------------------------------------- Treasurer (Principal March 29, 2000
Robert F. Scumaci Accounting Officer)
Director
------------------------------------------- March , 2000
James G. Andress
/s/ DIGBY W. BARRIOS Director
------------------------------------------- March 29, 2000
Digby W. Barrios
/s/ ROBERT J. CRESCI Director
------------------------------------------- March 29, 2000
Robert J. Cresci
Director
------------------------------------------- March , 2000
Keith Mansford
Director
------------------------------------------- March , 2000
James F. Mrazek
/s/ ALAN A. STEIGROD Director
------------------------------------------- March 29, 2000
Alan A. Steigrod
</TABLE>
19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of Sepracor Inc.
Our audits of the consolidated financial statements referred to in our report
dated January 27, 2000, except as to the information in Note V for which the
date is March 9, 2000 appearing on page 23 of the 1999 Annual Report to
Stockholders of Sepracor Inc. (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the financial statement schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, based upon our audits and the
reports of other auditors, this financial statement schedule presents fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
/s/PricewaterhouseCoopers LLP
Boston, Massachusetts
January 27, 2000, except as to the information in
Note V for which the date is March 9, 2000
S-1
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING CHARGED TO OTHER END OF
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS (1) PERIOD
---------- ---------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1999 Accounts
Receivable Reserves.................. $ -- $174,853 $ -- $10,184 $164,669
Year ended December 31, 1998 Accounts
Receivable Reserves (2).............. $ -- $ -- $ -- $ -- $ --
Year ended December 31, 1997 Accounts
Receivable Reserves (2).............. $ -- $ -- $ -- $ -- $ --
</TABLE>
- ------------------------
(1) Collections and bad debt write-offs.
(2) 1998 and 1997 reserves were restated to zero due to discontinued operations
of BioSphere Medical, Inc.
S-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- ------------------------------------------------------------
<C> <C> <S> <C>
3.1 -- Restated Certificate of Incorporation of the Registrant, as
amended.
3.2(1) -- Amended and Restated By-Laws of the Registrant.
4.1(1) -- Specimen Certificate for shares of Common Stock, $.10 par
value, of the Registrant.
4.2(5) -- Form of 6 1/4% Convertible Subordinated Debenture due 2005.
4.3(5) -- Global 6 1/4% Convertible Subordinated Debenture payable to
Cede & Co. due 2005.
4.4(6) -- Global 7% Convertible Subordinated Debenture payable to Cede
& Co. due 2005.
4.5 -- Form of 5% Convertible Subordinated Debenture due 2007.
(*)10.1(7) -- The Registrant's 1991 Amended and Restated Stock Option
Plan.
(*)10.2(6) -- The Registrant's 1991 Director Stock Option Plan, as amended
and restated.
(*)10.3(4) -- The Registrant's 1996 Employee Stock Purchase Plan, as
amended and restated.
(*)10.4(5) -- The Registrant's 1997 Stock Option Plan.
(*)10.5(6) -- The Registrant's 1998 Employee Stock Purchase Plan.
(*)10.6(7) -- The Registrant's 1999 Director Stock Option Plan
10.7(3) -- Lease as to Marlboro Industrial Park, dated December 12,
1995, between Valerie A. Colbert, Trustee of Second Marlboro
Development Trust under Declaration of Trust dated September
15, 1972, and the Registrant (the "Marlboro Lease").
10.8(5) -- First Amendment to Marlboro Lease, dated February 1, 1997,
and Second Amendment to Marlboro Lease, dated July 1, 1997.
10.9(6) -- Technology Transfer and License Agreement dated as of
January 1, 1994, between the Registrant and BioSepra Inc.
10.10(6) -- Technology Transfer and License Agreement dated as of
January 1, 1994, between the Registrant and HemaSure Inc.
10.11(6) -- Technology Transfer and License Agreement, effective January
1, 1995, between the Registrant and SepraChem Inc.
(*)10.12(2) -- Letter Agreement, dated September 30, 1993, between the
Company and David S. Barlow.
(*)10.13(2) -- Letter Agreement, dated June 10, 1994, between the
Registrant and David Southwell.
(*)10.14(4) -- Letter Agreement, dated February 23, 1996, between the
Registrant and Paul D. Rubin.
(*)10.15(4) -- Letter Agreement, dated February 23, 1995, between the
Registrant and Robert F. Scumaci.
10.16(5) -- Put Agreement, dated as of December 30, 1997, between the
Registrant and Fleet National Bank.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- ------------------------------------------------------------
<C> <C> <S> <C>
10.17(5)+ -- Agreement, dated as of December 5, 1997, by and between the
Registrant and Schering-Plough Ltd.
10.18(5)+ -- License Agreement, dated January 30, 1998, by and between
the Registrant and Janssen Pharmaceutica N.V.
10.19(6)+ -- Norcisapride Development and License Agreement, dated as of
July 20, 1998, between Janssen Pharmaceutica N.V. and the
Registrant.
10.20(6)+ -- Exclusive License Agreement by and between Eli Lilly and
Company and the Registrant.
10.21(5) -- Indenture, dated as of February 10, 1998, between the
Registrant and The Chase Manhattan Bank, as trustee,
relating to the 6 1/4% Convertible Subordinated Debentures
due 2005.
10.22(5) -- Registration Rights Agreement, dated as of February 5, 1998,
by and among the Registrant, Morgan Stanley & Co.
Incorporated, Lehman Brothers Inc., Smith Barney Inc. and
Vector Securities International, Inc.
10.23(6) -- Indenture, dated as of December 15, 1998, between the
Registrant and The Chase Manhattan Bank, as trustee,
relating to the 7% Convertible Subordinated Debentures due
2005.
10.24(6) -- Registration Rights Agreement, dated as of December 10,
1998, by and among the Registrant, Morgan Stanley & Co.
Incorporated and Salomon Smith Barney, Inc.
10.25(7) -- Assignment Agreement, dated as of August 25, 1999, by and
between the Registrant and Georgetown University.
10.26(7) -- Registration Rights Agreement, dated as of August 25, 1999,
by and between the Registrant and Georgetown University.
10.27 -- Indenture, dated as of February 14, 2000, between the
Registrant and the Chase Manhattan Bank, as trustee,
relating to the 5% Convertible Subordinated Debentures due
2007.
10.28 -- Registration Rights Agreement, dated as of February 14,
2000, by and among the Registrant and Deutsche Bank
Securities Inc.
10.29 -- Second Amended and Restated Revolving Credit Agreement Among
Fleet National Bank, Sepracor Inc. and BioSphere Medical,
Inc. dated as of December 22, 1999, as amended on
February 14, 2000.
10.30++ -- License Agreement, dated August 31, 1999, by and between the
Registrant and Hoechst Marion Roussel, Inc.
10.31++ -- EX-US License Agreement, dated August 31, 1999, by and
between the Registrant and Hoechst Marion Roussel, Inc.
10.32++ -- License and Assignment Agreement, dated September 30, 1999,
by and between the Registrant and Rhone-Poulenc Rorer SA.
10.33++ -- License Agreement, dated May 27, 1999, by and between UCB
Farchim S.A. and the Registrant.
10.34++ -- Co-Promotion Agreement, dated as of November 18, 1999, by
and between Ross Products Division of Abbott Laboratories
Inc. and the Registrant.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- ------------------------------------------------------------
<C> <C> <S> <C>
(*)10.35 -- Summary of Plan regarding "Parachute Payments" and Section
280G Gross-Up Payments.
13 -- Selected portions of the 1999 Annual Report to Stockholders
(which shall be deemed filed only with respect to those
portions specifically incorporated by reference herein).
21 -- Subsidiaries of the Company.
23.1 -- Consent of PricewaterhouseCoopers LLP.
23.2 -- Consent of Arthur Andersen LLP.
27 -- Financial Data Schedule.
99 -- Report of Arthur Andersen LLP.
</TABLE>
(*) Management contract or compensatory plan or arrangement filed as an exhibit
to this Form pursuant to Item 14(c) of Form 10-K.
(+) Confidential treatment granted as to certain portions.
(++)Confidential treatment requested as to certain portions.
(1) Incorporated herein by reference from the Registrant's Registration
Statement on Form S-1 (File No. 33-41653).
(2) Incorporated by reference from the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994.
(3) Incorporated by reference from the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995.
(4) Incorporated by reference from the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996.
(5) Incorporated by reference from the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1997.
(6) Incorporated by reference from the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1998.
(7) Incorporated by reference from the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999.
<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 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
<PAGE>
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.
-2-
<PAGE>
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 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 stockholders, directors and officers are subject to this reserved
power.
-3-
<PAGE>
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 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
-4-
<PAGE>
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 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."
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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."
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<PAGE>
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 (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 deem proper.
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<PAGE>
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.
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
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<PAGE>
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 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
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<PAGE>
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 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).
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<PAGE>
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.
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<PAGE>
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:
/s/ Mark G. Borden
- -------------------------
Mark G. Borden, Secretary
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<PAGE>
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
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<PAGE>
RESOLVED: That the appropriate officers of the Company be, and each of them
acting singly hereby is, authorized to execute all such documents and
instruments as they or any of them deem necessary or appropriate to
effectuate the purposes of the foregoing resolutions.
IN WITNESS WHEREOF, Sepracor Inc. has caused this Certificate to be signed by
its President and attested by its Secretary, this 21st day of December, 1992.
By: /s/ Timothy J. Barberich
------------------------
Timothy J. Barberich,
President
ATTEST:
By: /s/ Mark G. Borden
------------------
Mark G. Borden
Secretary
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<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 Sseries 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 outstanding share of Series A Preferred Stock in an
amount at least equal to the product of (i) the per share amount, if any, of the
dividends or other distribution to be declared, paid or set aside for the Common
Stock, multiplied by (ii) the number of shares of Common Stock into which such
shares of Series A Preferred Stock is then convertible.
(b) For purposes of this Section 1, unless the context requires
otherwise, "distribution" shall mean the transfer of cash, securities or
property without consideration, whether by way of dividends or otherwise,
payable other than in Common Stock or other securities of the Corporation, or
the purchase or redemption of shares of the Corporation (other than repurchases
of Common Stock held by employees or directors of, or consultants to, the
Corporation upon termination of their employment or services pursuant to
agreements providing for such repurchase and other than redemptions in
liquidation or dissolution of the Corporation) for cash, securities or property,
including any such transfer, purchase or redemption by a subsidiary of this
Corporation.
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<PAGE>
2. Liquidation, Dissolution or Winding Up.
(a) In the event of any voluntary of involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series A
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 the payment in full of all amounts required to be distributed to the
holders of any other class or series of stock of the Corporation ranking on
liquidation prior and in preference to the Series A Preferred Stock
(collectively referred to as "Senior Preferred Stock"), but before any payment
shall be made to the holders of Common Stock or any other class or series of
stock ranking on liquidation junior to the Series A 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 $63.00 per share, together
with dividends or distributions required to be declared under Section 1(a). If
upon any such liquidation, dissolution or winding up of the Corporation the
remaining assets of the Corporation available for distribution to its
stockholders shall be insufficient to pay the holders of shares of Series A
Preferred Stock the full amount to which they shall be entitled, the holders of
shares of Series A Preferred Stock and any class or series of stock ranking on
liquidation on a parity with the Series A Preferred Stock shall hare 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 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
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<PAGE>
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 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.
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<PAGE>
(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 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
Common Stock upon
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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
or other distribution on shares of Common
Stock that is covered by Subsection 4(e) or
4(f) below;
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(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 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
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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:
(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
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<PAGE>
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 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.
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<PAGE>
(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.
(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,
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<PAGE>
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 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:
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<PAGE>
(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 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
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<PAGE>
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 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.
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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
------------------------
Timothy J. Barberich
President
ATTEST:
/s/ Victor Woolley
- -------------------
Assistant Secretary
[Corporate Seal]
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<PAGE>
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);
(d) The final page of said certificate was inadvertently numbered
as page 15.
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<PAGE>
In order to correct said inaccuracies or defects, the following shall occur:
(a) Subsection (b) of Section 3 shall read in its entirety:
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
------------------------
Timothy J. Barberich
President
ATTEST:
By: /s/ Victor Woolley
-------------------
Victor Woolley
Assistant Secretary
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CERTIFICATE OF DESIGNATIONS, PREFERENCES,
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF PREFERRED STOCK
AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
OF
SERIES B REDEEMABLE EXCHANGEABLE PREFERRED STOCK
OF
SEPRACOR INC.
--------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
--------------------
Sepracor Inc., a Delaware corporation (the "Corporation"), certifies that
pursuant to the authority contained in Article FOURTH of its Restated
Certificate of Incorporation (the "Certificate of Incorporation") and in
accordance with the provisions of Section 151 of the General Corporation Law of
the State of Delaware, the Board of Directors of the Corporation, at a meeting
duly called and held, at which a quorum was present and acting throughout, duly
adopted the following resolution, which resolution remains in full force and
effect on the date hereof:
RESOLVED, that there is hereby established a series of authorized Preferred
Stock having a par value of $1.00 per share, which series shall be designated
"Series B Redeemable Exchangeable Preferred Stock" (hereinafter "Series B
Preferred Stock"), shall consist of 312,500 shares and shall have the following
powers, preferences and relative, participating, optional and other special
rights, and qualifications, limitations and restrictions thereof:
1. Dividends. Holders of shares of Series B Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available therefor, an annual cash dividend of $1.92 per share,
payable on each March 8 after the date of issuance of Series B Preferred Stock
until March 8, 2000. Such dividends shall accrue from day to day and shall be
cumulative from the date of issuance of each share of Series B Preferred Stock,
whether or not declared. After March 8, 2000, no dividends shall accrue on
outstanding shares of Series B Preferred Stock. Dividends will be payable to
holders of record as they appear on the stock records of the Corporation on such
record dates, not more than 60 days preceding the applicable payment date, as
shall be fixed by the Board of Directors of the Corporation. Dividends payable
for any partial period shall be calculated on the basis of a 360-day year, and
accrued but unpaid dividends shall not bear interest.
2. Liquidation, Dissolution or Winding Up: Certain Mergers and
Consolidations.
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<PAGE>
(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.
(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.
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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 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
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(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.
(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
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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:
(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;
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(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
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:
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(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 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(d) 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
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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
(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 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 insurance 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:
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(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 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
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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, 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
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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;
(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
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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 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
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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:
Portion of the Then Outstanding
Shares of
Series B Preferred Per Share
Redemption Date Stock to be Redeemed Redemption Price
- --------------- -------------------- ----------------
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 shares $21.41
of Series B Preferred Stock
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 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.
-42-
<PAGE>
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, or 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 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.
-43-
<PAGE>
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 13th day of March, 1995.
SEPRACOR INC.,
a Delaware corporation
By: /s/ Timothy J. Barberich
------------------------
Timothy J. Barberich
President
-44-
<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.
SEPRACOR INC.
By: /s/ Timothy J. Barberich
------------------------
Timothy J. Barberich
Its: President
-45-
<PAGE>
ATTEST:
By: /s/ Victor Woolley
-------------------
Victor Woolley
-46-
<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.
SEPRACOR INC.
By: /s/ Robert F. Scumaci
---------------------
Robert F. Scumaci
Its: Senior Vice President
-47-
<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").
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
-48-
<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 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
-49-
<PAGE>
Exhibit 4.5
Debenture
THE DEBENTURE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR FOREIGN
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE BENEFIT OF,
U.S. PERSONS, EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT), OR (B) IT IS NOT A "UNITED STATES PERSON"
(AS DEFINED IN RULE 902 OF REGULATION S) AND IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S; (2) AGREES THAT IT WILL
NOT, PRIOR TO THE DATE THAT IS TWO YEARS AFTER THE LATER OF THE INITIAL ISSUANCE
OF THE DEBENTURE EVIDENCED HEREBY AND THE LAST DATE ON WHICH SEPRACOR (THE
"COMPANY") OR ANY "AFFILIATE" (AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT)
OF THE COMPANY WAS THE OWNER OF THE DEBENTURE (THE "RESTRICTION TERMINATION
DATE") RESELL OR OTHERWISE TRANSFER THE DEBENTURE EVIDENCED HEREBY OR THE COMMON
STOCK ISSUABLE UPON CONVERSION OF SUCH DEBENTURE EXCEPT (A) TO THE COMPANY OR
ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN AN OFFSHORE
TRANSACTION COMPLYING WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE
UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S, (D) PURSUANT TO ANY
OTHER AVAILABLE EXEMPTION FROM REGISTRATION PROVIDED BY THE SECURITIES ACT (IF
AVAILABLE) OR (E) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE
TIME OF SUCH TRANSFER); AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THE DEBENTURE EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE DEBENTURE
EVIDENCED HEREBY BEFORE THE RESTRICTION TERMINATION DATE, THE HOLDER MUST CHECK
THE APPROPRIATE BOX SET FORTH ON THE
<PAGE>
REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO THE CHASE MANHATTAN BANK, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS
APPLICABLE). THE HOLDER MUST, PRIOR TO SUCH TRANSFER (OTHER THAN A TRANSFER
PURSUANT TO CLAUSE 2(E) ABOVE), FURNISH TO THE CHASE MANHATTAN BANK AS TRUSTEE
(OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS SUCH TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND
WILL BE REMOVED UPON ANY TRANSFER OF THE DEBENTURE EVIDENCED HEREBY UPON OR
AFTER THE RESTRICTION TERMINATION DATE.
<PAGE>
SEPRACOR INC.
5% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2007
No: G- CUSIP: 817315AJ3
ISIN: US 817315AJ30
SEPRACOR INC., a corporation duly organized and validly existing under the
laws of the State of Delaware (herein called the "Company"), which term includes
any successor corporation under the Indenture referred to on the reverse hereof,
for value received hereby promises to pay to _________ or registered assigns,
the principal sum of $_______ on February 15, 2007, at the office or agency of
the Company maintained for that purpose in accordance with the terms of the
Indenture, or, at the option of the holder of this Debenture, at the Corporate
Trust Office, in such coin or currency of the United States of America as at the
time of payment shall be legal tender for the payment of public and private
debts, and to pay interest, semi-annually on February 15 and August 15, of each
year, commencing August 15, 2000, on said principal sum at said office or
agency, in like coin or currency, at the rate per annum of 5% from February 14,
2000 and thereafter to maturity from the February 15 or August 15, as the case
may be, next preceding the date of this Debenture to which interest has been
paid or duly provided for, unless the date hereof is a date to which interest
has been paid or duly provided for, in which case from the date of this
Debenture, or unless no interest has been paid or duly provided for on the
Debentures, in which case from February 14, 2000, until payment of said
principal sum has been made or duly provided for. Notwithstanding the foregoing,
if the date hereof is after any January 31 or July 31, as the case may be, and
before the following February 15 or August 15, this Debenture shall bear
interest from such February 15 or August 15; provided, however, that if the
Company shall default in the payment of interest due on such February 15 or
August 15, then this Debenture shall bear interest from the next preceding
February 15 or August 15, to which interest has been paid or duly provided for
or, if no interest has been paid or duly provided for on such Debenture, from
February 14, 2000. The interest payable on the Debenture pursuant to the
Indenture on any February 15 or August 15 will be paid to the person entitled
thereto as it appears in the Debenture register at the close of business on the
record date, which shall be the January 31 or July 31 (whether or not a Business
Day) next preceding such February 15 or August 15, as provided in the Indenture;
provided that any such interest not punctually paid or duly provided for shall
be payable as provided in the Indenture. Interest may, at the option of the
Company, be paid either (i) by check mailed to the registered address of such
person (provided that the holder of Debentures with an aggregate principal
amount in excess of $2,000,000 shall, at the written election of such holder, be
paid by wire transfer in immediately available funds) or (ii) by transfer to an
account maintained by such person located in the United States.
Reference is made to the further provisions of this Debenture set forth on
the reverse hereof, including, without limitation, provisions subordinating the
payment of principal of and premium, if any, and interest on the Debentures to
the prior payment in full of all Senior Obligations, as defined in the
Indenture, and provisions giving the holder of this Debenture the right to
convert
<PAGE>
this Debenture into Common Stock of the Company on the terms and subject
to the limitations referred to on the reverse hereof and as more fully specified
in the Indenture. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place.
This Debenture shall be deemed to be a contract made under the laws of The
Commonwealth of Massachusetts, and for all purposes shall be construed in
accordance with and governed by the laws of The Commonwealth of Massachusetts.
This Debenture shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been manually signed
by the Trustee or a duly authorized authenticating agent under the Indenture.
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed under its corporate seal to be affixed or imported hereon.
SEPRACOR INC.
BY: __________________________________
Name:
Title:
Attest: ______________________________
Name:
Title:
Dated:________________________
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Debentures described in the within-named Indenture.
THE CHASE MANHATTAN BANK, as Trustee
By: __________________________
Authorized Signatory
By: __________________________
As Authenticating Agent
(if different from Trustee)
<PAGE>
SEPRACOR INC.
5% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2007
This Debenture is one of a duly authorized issue of Debentures of
the Company, designated as its 5% Convertible Subordinated Debentures due 2007
(herein called the "Debentures"), limited to the aggregate principal amount of
$________ all issued or to be issued under and pursuant to an Indenture dated as
of February 14, 2000 (herein called the "Indenture"), between the Company and
The Chase Manhattan Bank as trustee (herein called the "Trustee"), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the holders of the
Debentures.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of, premium, if any, and accrued
interest (including Liquidated Damages, if any) on all Debentures may be
declared, and upon said declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture:
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Debentures at the time outstanding, evidenced
as in the Indenture provided, to execute supplemental indentures adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Indenture or of any supplemental indenture or modifying in any manner the
rights of the holders of the Debentures; provided, however, that no such
supplemental indenture shall (i) extend the fixed maturity of any Debenture, or
reduce the rate or extend the time of payment of interest thereon, or reduce the
principal amount thereof or premium, if any, thereon, or reduce any amount
payable on redemption thereof, or impair the right of any Debentureholder to
institute suit for the payment thereof, or make the principal thereof or
interest or premium, if any, thereon payable in any coin or currency other than
that provided in the Debenture, or modify the provisions of the Indenture with
respect to the subordination of the Debentures in a manner adverse to the
Debentureholders in any material respect, or change the obligation of the
Company to make redemption of any Debenture upon the happening of a Fundamental
Change in a manner adverse to the holder of the Debentures, or impair the right
to convert the Debentures into Common Stock subject to the terms set forth in
the Indenture, including Section 15.6 thereof, without the consent of the holder
of each Debenture so affected or (ii) reduce the aforesaid percentage of
Debentures, the holders of which are required to consent to any such
supplemental indenture, without the consent of the holders of all Debentures
then outstanding. It is also provided in the Indenture that, prior to any
declaration accelerating the maturity of the Debentures, the holders of a
majority in aggregate principal amount of the Debentures at the time outstanding
may on behalf of the holders of all of the Debentures waive any past default or
Event of Default under the Indenture and its consequences except a default in
the payment of interest (including Liquidated Damages, if any) or any premium on
or the principal of any of the Debentures, a default in the payment of
redemption price pursuant to Article III or a failure by the Company to convert
any Debentures into Common Stock of the Company. Any such consent or waiver by
the holder of this Debenture (unless revoked as provided in the Indenture) shall
be
<PAGE>
conclusive and binding upon such holder and upon all future holders and owners
of this Debenture and any Debentures which may be issued in exchange or
substitute hereof, irrespective of whether or not any notation thereof is made
upon this Debenture or such other Debentures.
The indebtedness evidenced by the Debentures is, to the extent and
in the manner provided in the Indenture, expressly subordinate and subject in
right of payment to the prior payment in full of all Senior Obligations of the
Company, as defined in the Indenture, whether outstanding at the date of the
Indenture or thereafter incurred, and this Debenture is issued subject to the
provisions of the Indenture with respect to such subordination. Each holder of
this Debenture, by accepting the same, agrees to and shall be bound by such
provisions and authorizes the Trustee on its behalf to take such action as may
be necessary or appropriate to effectuate the subordination so provided and
appoints the Trustee his attorney-in-fact for such purpose.
No reference herein to the Indenture and no provision of this
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and any
premium and interest (including Liquidated Damages, if any) on this Debenture at
the place, at the respective times, at the rate and in the coin or currency
herein prescribed.
Interest on the Debentures shall be computed on the basis of a year
of twelve 30-day months.
The Debentures are issuable in registered form without coupons in
denominations of $1,000 and any integral multiple of $1,000. At the office or
agency of the Company referred to on the face hereof, and in the manner and
subject to the limitations provided in the Indenture, without payment of any
service charge but with payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration or
exchange of Debentures, Debentures may be exchanged for a like aggregate
principal amount of Debentures of other authorized denominations.
The Debentures may be provisionally redeemed by the Company, in
whole or in part, at any time prior to February 15, 2003, at a redemption price
equal to $1,000 per Debenture to be redeemed plus accrued and unpaid interest,
if any (including Liquidated Damages Amount, if any) to the date of redemption
if (i) the closing price of the Common Stock shall have exceeded 150% of the
conversion price then in effect for at least 20 trading days in any consecutive
30-trading day period ending on the trading day prior to the date of mailing of
the notice of provisional redemption, which date shall be not more than 60 nor
less than 30 days prior to the date of redemption and (ii) (A) the shelf
registration statement covering resales of the Debentures and the Common Stock
issuable upon conversion of the Debentures is effective and available for use
and is expected to remain effective and available for use for the 30 days
immediately following the date of redemption, or (B) the Company is no longer
required under the terms of the Registration Rights Agreement to maintain the
effectiveness of such registration statement.
Upon any such provisional redemption, the Company shall make an
additional Make-Whole Payment (as defined in the Indenture) with respect to the
Debentures called for redemption
<PAGE>
to holders on the date of mailing of the notice of provisional redemption in an
amount equal to $230.77 per $1,000 Debenture, less the amount of any interest
actually paid on such Debenture prior to or in connection with such provisional
redemption. The Company shall make the Make-Whole Payment on all Debentures
called for provisional redemption, including any Debentures converted after the
date of mailing of the notice of provisional redemption and prior to the date of
redemption.
At any time on or after February 15, 2003, and prior to maturity, if
(i) the closing price of the Common Stock shall have exceeded 120% of the
conversion price then in effect for at least 20 trading days in any consecutive
30-trading day period ending on the trading day prior to the date of mailing of
the notice of optional redemption, which date shall be not more than 60 nor less
than 30 days prior to the date of redemption and (ii) the shelf registration
statement covering resales of the Debentures and the Common Stock issuable upon
conversion of the Debentures is effective and available for use for the 30 days
immediately following the date of redemption, the Debentures may be redeemed at
the option of the Company as a whole, or from time to time in part, upon mailing
a notice of such redemption not less than thirty (30) days before the date fixed
for redemption to the holders of Debentures at their last registered addresses,
all as provided in the Indenture, at the following optional redemption prices
(expressed as percentages of the principal amount), together in each case with
accrued interest (including Liquidated Damages, if any) to, but excluding, the
date fixed for redemption:
If redeemed during the period beginning February 15, 2003 and ending
on February 14, 2004, at a redemption price of 102%; if redeemed during the
period beginning February 15, 2004 and ending on February 14, 2005, at a
redemption price of 101%; and if redeemed during the period beginning February
15, 2005 and ending on February 15, 2007, at a redemption price of 100%;
provided that if the date fixed for redemption is on February 15 or August 15,
then the interest payable on such date shall be paid to the holder of record on
the next preceding January 31 or July 31, respectively.
The Debentures are not subject to redemption through the operation
of any sinking fund.
If a Fundamental Change (as defined in the Indenture) occurs at any
time prior to February 15, 2007, the Debentures will be redeemable on the 30th
day after notice thereof at the option of the holder at a redemption price equal
to 100% of the principal amount of the Debenture (or portion thereof) redeemed,
together with accrued interest to the date of redemption; provided that if such
Repurchase Date is February 15 or August 15, then the interest payable on such
date shall be paid to the holder of record of the Debenture on the next
preceding January 31 or July 31, respectively. The Company shall mail to all
holders of record of the Debentures a notice of the occurrence of a Fundamental
Change and of the redemption right arising as a result thereof on or before the
10th day after the occurrence of such Fundamental Change. For a Debenture to be
so repaid at the option of the holder, the Company must receive at the office or
agency of the Company maintained for that purpose in accordance with the terms
of the Indenture, such Debenture with the form entitled "Option to Elect
Repayment Upon a Fundamental Change" on the reverse thereof duly completed,
together with such Debentures duly endorsed for transfer, on or before the 30th
day after the date of such notice (or if such 30th day is not a Business Day,
the next succeeding Business Day).
<PAGE>
Subject to the provisions of the Indenture, the holder hereof has
the right, at its option, at any time after ninety (90) days following the
latest date of original issuance thereof through the close of business on
February 15, 2007, or, as to all or any portion hereof called for redemption,
prior to the close of business on the Business Day immediately preceding the
date fixed for redemption (unless the Company shall default in payment due upon
redemption thereof), to convert the principal hereof or any portion of such
principal which is $1,000 or an integral multiple thereof into that number of
shares of the Company's Common Stock, as said shares shall be constituted at the
date of conversion, obtained by dividing the principal amount of this Debenture
or portion thereof to be converted by the Conversion Price of $184.76 or such
Conversion Price as adjusted from time to time as provided in the Indenture,
upon surrender of this Debenture, together with a conversion notice as provided
in the Indenture, to the Company at the office or agency of the Company
maintained for that purpose in accordance with the terms of the Indenture, or at
the option of such holder, the Corporate Trust Office, and, unless the shares
issuable on conversion are to be issued in the same name as this Debenture, duly
endorsed by, or accompanied by instruments of transfer in form satisfactory to
the Company duly executed by, the holder or by his duly authorized attorney. No
adjustment in respect of interest or dividends will be made upon any conversion;
provided, however, that if this Debenture shall be surrendered for conversion
during the period from (but excluding) a record date for any interest payment
date to (but excluding) such interest payment date, this Debenture (unless it or
the portion being converted shall have been called for redemption during such
period) must be accompanied by an amount, in New York Clearing House funds or
other funds acceptable to the Company, equal to the interest payable on such
interest payment date on the principal amount being converted. No fractional
shares will be issued upon any conversion, but an adjustment in cash will be
made, as provided in the Indenture, in respect of any fraction of a share which
would otherwise be issuable upon the surrender of any Debenture or Debentures
for conversion.
Any Debentures called for redemption, unless surrendered for
conversion on or before the close of business on the date fixed for redemption,
may be deemed to be purchased from the holder of such Debentures at an amount
equal to the applicable redemption price, together with accrued interest
(including Liquidated Damages, if any) to (but excluding) the date fixed for
redemption, by one or more investment bankers or other purchasers who may agree
with the Company to purchase such Debentures from the holders thereof and
convert them into Common Stock of the Company and to make payment for such
Debentures as aforesaid to the Trustee in trust for such holders.
Upon due presentment for registration of transfer of this Debenture
at the office or agency of the Company maintained for that purpose in accordance
with the terms of the Indenture, or at the option of the holder of this
Debenture, at the Corporate Trust Office, a new Debenture or Debentures of
authorized denominations for an equal aggregate principal amount will be issued
to the transferee in exchange thereof, subject to the limitations provided in
the Indenture, without charge except for any tax or other governmental charge
imposed in connection therewith.
The Company, the Trustee, any authenticating agent, any paying
agent, any conversion agent and any Debenture registrar may deem and treat the
registered holder hereof as the
<PAGE>
absolute owner of this Debenture (whether or not this Debenture shall be overdue
and notwithstanding any notation of ownership or other writing hereon made by
anyone other than the Company or any Debenture registrar), for the purpose of
receiving payment hereof, or on account hereof, for the conversion hereof and
for all other purposes, and neither the Company nor the Trustee nor any other
authenticating agent nor any paying agent nor any other conversion agent nor any
Debenture registrar shall be affected by any notice to the contrary. All
payments made to or upon the order of such registered holder shall, to the
extent of the sum or sums paid, satisfy and discharge liability for monies
payable on this Debenture.
No recourse for the payment of the principal of or any premium or
interest on this Debenture, or for any claim based hereon or otherwise in
respect hereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in the Indenture or any indenture supplemental thereto
or in any Debenture, or because of the creation of any indebtedness represented
thereby, shall be had against any incorporator, stockholder, employee, agent,
officer or director or subsidiary, as such, past, present or future, of the
Company or of any successor corporation, either directly or through the Company
or any successor corporation, whether by virtue of any constitution, statute or
rule of law or by the enforcement of any assessment or penalty or otherwise, all
such liability being, by the acceptance hereof and as part of the consideration
for the issue hereof, expressly waived and released.
Terms used in this Debenture and defined in the Indenture are used
herein as therein defined.
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription of the face of this
Debenture, shall be construed as though they were written out in full according
to applicable laws or regulations:
- -------------------------------------------------------------------------------
TEN COM- as tenants in common UNIF GIFT MIN ACT --
____________________ Custodian
(Cust)
____________________
(Minor)
- -------------------------------------------------------------------------------
TEN ENT- as tenants by the
entireties
- -------------------------------------------------------------------------------
JT TEN- as joint tenants with under Uniform Gifts to Minors Act
right of survivorship
and not as tenants in ____________________
common (State)
- -------------------------------------------------------------------------------
ADDITIONAL ABBREVIATIONS MAY ALSO BE USED
THOUGH NOT IN THE ABOVE LIST.
<PAGE>
CONVERSION NOTICE
To: SEPRACOR INC.
The undersigned registered owner of this Debenture hereby irrevocably
exercises the option to convert this Debenture, or the portion hereof (which is
$1,000 or an integral multiple thereof) below designated, into shares of Common
Stock of Sepracor Inc. in accordance with the terms of the Indenture referred to
in this Debenture, and directs that the shares issuable and deliverable upon
such conversion, together with any check in payment for fractional shares and
any Debentures representing any unconverted principal amount hereof, be issued
and delivered to the registered holder hereof unless a different name has been
indicated below. If shares or any portion of this Debenture not converted are to
be issued in the name of a person other than the undersigned, the undersigned
will check the appropriate box below and pay all transfer taxes payable with
respect thereto. Any amount required to be paid to the undersigned on account of
interest accompanies this Debenture.
Dated:__________________________ __________________________________________
__________________________________________
Signature(s)
Signature(s) must be guaranteed by a
commercial bank or trust company or a member
firm of a major stock exchange if shares of
Common Stock are to be issued, or Debentures
to be delivered, other than to and in the
name of the registered holder.
__________________________________________
Signature Guarantee
<PAGE>
Fill in for registration of shares of Common Stock if to be issued, and
Debentures if to be delivered, other than to and in the name of the registered
holder:
_____________________________________
(Name)
_____________________________________
(Street Address)
_____________________________________
(City, State and Zip Code)
Please print name and address
Principal amount to be Converted
(if less than all): $____________
Social Security or Other Taxpayer
Identification Number:
<PAGE>
OPTION TO ELECT REPAYMENT
UPON A FUNDAMENTAL CHANGE
TO: SEPRACOR INC.
The undersigned registered owner of this Debenture hereby irrevocably
acknowledges receipt of a notice from Sepracor Inc. (the "Company") as to the
occurrence of a Fundamental Change with respect to the Company and requests and
instructs the Company to repay the entire principal amount of this Debenture, or
the portion thereof (which is $1,000 or an integral multiple thereof) below
designated, in accordance with the terms of the Indenture referred to in this
Debenture at the redemption price, together with accrued interest to, but
excluding, such date, to the registered holder hereof.
Dated:__________________________ __________________________________
__________________________________
Signature(s)
NOTICE: The above signatures of the
holder(s) hereof must correspond with the
name as written upon the face of the
Debenture in every particular without
alteration or enlargement or any change
whatever.
Principal amount to be Converted (if less
than all):
$______________
__________________________________
Social Security or Other Taxpayer
Identification Number
<PAGE>
ASSIGNMENT
For value received ___________________________ hereby sell(s),
assign(s) and transfer(s) unto ___________________________ (Please insert social
security or other Taxpayer Identification Number of assignee) the within
Debenture, and hereby irrevocably constitutes and appoints
_________________________ attorney to transfer the said Debenture on the books
of the Company, with full power of substitution in the premises.
In connection with any transfer of the Debenture within the period
prior to the expiration of the holding period applicable to sales thereof under
Rule 144(k) under the Securities Act (or any successor provision) (other than
any transfer pursuant to a registration statement that has been declared
effective under the Securities Act), the undersigned confirms that such
Debenture is being transferred:
o To Sepracor Inc. or a subsidiary thereof, or
o Pursuant to and in compliance with Rule 144A under the Securities Act of
1933, as amended; or
o To an Institutional Accredited Investor pursuant to and in compliance with
the Securities Act of 1933, as amended; or
o Pursuant to and in compliance with Regulation S under the Securities Act
of 1933, as amended; or
o Pursuant to and in compliance with Rule 144 under the Securities Act of
1933, as amended;
and unless the box below is checked, the undersigned confirms that such
Debenture is not being transferred to an "affiliate" of the Company as defined
in Rule 144 under the Securities Act of 1933, as amended (an "Affiliate").
o The transferee is an Affiliate of the Company.
Dated:
<PAGE>
_______________________________________
Signature(s)
Signature(s) must be guaranteed by a commercial
bank or trust company or a member firm of a major
stock exchange if shares of Common Stock are to be
issued, or Debentures to be delivered, other than
to or in the name of the registered holder.
_______________________________________
Signature Guarantee
NOTICE: The signature on the conversion notice, the option to elect repayment
upon a Fundamental Change or the assignment must correspond with the name as
written upon the face of the Debenture in every particular without alteration or
enlargement or any change whatever.
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF DEBENTURES
Re: 5% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2007 OF SEPRACOR INC.
This Certificate relates to $________________ principal amount of
Debentures held in* |_| book-entry or |_| definitive form by _____________ (the
"Transferor").
1. The Transferor has requested the Trustee by written order to exchange
or register the transfer of a Debenture or Debentures.
2. In connection with any such request and with respect to each such
Debenture, the Transferor does hereby certify that Transferor is familiar with
the Indenture relating to the above-captioned Debentures and, as provided in
Section 2.5 of such Indenture, the transfer of this Debenture does not require
registration under the Securities Act because:*
|_| (a) Such Debenture is being acquired for the Transferor's own account,
without transfer.
|_| (b) Such Debenture is being transferred to a person who the Transferor
reasonably believes is a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) purchasing for its own account or for the account
of a qualified institutional buyer over which it exercises sole investment
discretion who is aware that the transfer is being made in reliance on Rule
144A.
|_| (c) Such Debenture is being transferred to a person that is not a U.S.
Person in accordance with Regulation S under the Securities Act and a
certificate in the form attached hereto is being delivered to the Trustee.
|_| (d) Such Debenture is being transferred in reliance on and in
compliance with another exemption from the registration requirements of the
Securities Act. An opinion of counsel, if so requested by the Company or the
Trustee, to the effect that such transfer is in compliance with the Securities
Act accompanies this Certificate.
<PAGE>
- -----------------------
* Check applicable box ___________________________________
[INSERT NAME OF TRANSFEROR]
By:________________________________
Date:_______________________________
<PAGE>
3. Affiliation with the Company [check if applicable]
|_| (a) The undersigned represents and warrants that it is, or at some
time during which it held this Debenture was, an Affiliate of the Company.
|_| (b) If 3(a) above is checked and if the undersigned was not an
Affiliate of the Company at all times during which it held this Debenture,
indicate the periods during which the undersigned was an Affiliate of the
Company:
------------------
TO BE COMPLETED BY TRANSFEREE IF 2(b) ABOVE IS CHECKED AND THE TRANSFEROR IS NOT
A QUALIFIED INSTITUTIONAL BUYER:
The undersigned represents and warrants that it is a "qualified
institutional buyer" as defined in Rule 144A under the Securities Act of 1933,
as amended, and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information.
Dated:________________________ ____________________________________
NOTICE: To be executed by an
officer.
------------------
If none of the boxes under Section 2 of this certificate is checked or if
any of the above representations required to be made by the Transferee is not
made, the Registrar shall not be obligated to register this Debenture in the
name of any person other than the Holder hereof.
THE UNDERSIGNED HEREBY AGREES THAT, UNLESS THE BOX FOR ITEM 3(a) IS
CHECKED, THE UNDERSIGNED SHALL BE DEEMED TO HAVE REPRESENTED THAT IT IS NOT NOR
HAS IT BEEN AT ANY TIME DURING WHICH IT HELD THIS SECURITY AN AFFILIATE, AS
DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OF THE
COMPANY.
<PAGE>
Dated:________________________
______________________________________
NOTICE: The signature of the Holder to
this assignment must correspond with
the name as written upon the face of
this Debenture particular, without
alteration or any change whatsoever.
<PAGE>
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION
WITH REGULATION S TRANSFERS
The Chase Manhattan Bank Date:________________
450 West 33rd Street, 15th Floor
New York, New York 10001-2697
Attention: Corporate Trust and Agency Services
Ladies and Gentlemen:
In connection with our proposed sale of 5% Convertible Subordinated
Debentures due 2007 of Sepracor Inc. (the "Company"), we confirm that such sale
has been effected pursuant to and in accordance with Regulation S under the
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we
represent that:
(1) the offer of the Debentures was not made to a person in the
United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United States, or
(b) the transaction was executed in, on or through the facilities of a
designated off-shore securities market and neither we nor any person acting on
our behalf knows that the transaction has been pre-arranged with a buyer in the
United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation
S under the Securities Act, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act;
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes; and
<PAGE>
(6) if the circumstances set forth in Rule 904(c) under the
Securities Act are applicable, we have complied with the additional conditions
therein, including (if applicable) sending a confirmation or other notice
stating that the Debentures may be offered and sold during the restricted period
specified in Rule 903(c)(2) or (3), as applicable, in accordance with the
provisions of Regulation S; pursuant to registration of the Debentures under the
Securities Act; or pursuant to an available exemption from the registration
requirements under the Act.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Defined terms used herein without
definition have the respective meanings provided in Regulation S under the
Securities Act.
Very truly yours,
____________________________
[Name of Transferor]
By:________________________
[Authorized Signature]
Upon transfer, the Debentures would be registered in the name of beneficial
owner as follows:
Name:______________________________
Address:___________________________
Taxpayer ID Number:________________
<PAGE>
Exhibit 10.27
Execution Copy
SEPRACOR INC.
TO
THE CHASE MANHATTAN BANK
Trustee
INDENTURE
Dated as of February 14, 2000
5% Convertible Subordinated Debentures due 2007
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS 1
SECTION 1.1. DEFINITIONS ................................... 1
ARTICLE II
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF
DEBENTURES 10
SECTION 2.1. DESIGNATION AMOUNT AND ISSUE OF DEBENTURES .... 10
SECTION 2.2. FORM OF DEBENTURES ............................ 10
SECTION 2.3. DATE AND DENOMINATION OF DEBENTURES;
PAYMENTS OF INTEREST .......................... 11
SECTION 2.4. EXECUTION OF DEBENTURES ....................... 13
SECTION 2.5. EXCHANGE AND REGISTRATION OF TRANSFER OF
DEBENTURES; RESTRICTIONS ON TRANSFER;
DEPOSITARY .................................... 13
SECTION 2.6. MUTILATED, DESTROYED, LOST OR STOLEN
DEBENTURES. ................................... 20
SECTION 2.7. TEMPORARY DEBENTURES .......................... 21
SECTION 2.8. CANCELLATION OF DEBENTURES PAID, ETC. ......... 22
SECTION 2.9. CUSIP NUMBERS ................................. 22
ARTICLE III
REDEMPTION OF DEBENTURES 22
SECTION 3.1. (A) PROVISIONAL REDEMPTION BY THE COMPANY
PRIOR TO FEBRUARY 15, 2003 .................... 22
SECTION 3.2. NOTICE OF REDEMPTION; SELECTION OF
DEBENTURES .................................... 23
SECTION 3.3. PAYMENT OF DEBENTURES CALLED FOR REDEMPTION ... 25
SECTION 3.4. CONVERSION ARRANGEMENT ON CALL FOR
REDEMPTION .................................... 26
SECTION 3.5. REDEMPTION AT OPTION OF HOLDERS ............... 27
ARTICLE IV
SUBORDINATION OF DEBENTURES 29
SECTION 4.1. AGREEMENT OF SUBORDINATION .................... 29
SECTION 4.2. PAYMENTS TO DEBENTUREHOLDERS .................. 29
SECTION 4.3. SUBROGATION OF DEBENTURES ..................... 32
SECTION 4.4. AUTHORIZATION TO EFFECT SUBORDINATION ......... 33
SECTION 4.5. NOTICE TO TRUSTEE ............................. 33
SECTION 4.6. TRUSTEE'S RELATION TO SENIOR OBLIGATIONS ...... 34
SECTION 4.7. NO IMPAIRMENT OF SUBORDINATION ................ 34
SECTION 4.8. CERTAIN CONVERSIONS NOT DEEMED PAYMENT ........ 34
SECTION 4.9. ARTICLE APPLICABLE TO PAYING AGENTS ........... 35
SECTION 4.10. SENIOR OBLIGATIONS ENTITLED TO RELY ........... 35
SECTION 4.11. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE
OF LIQUIDATING AGENT .......................... 35
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY 35
SECTION 5.1. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST .... 35
-2-
<PAGE>
SECTION 5.2. MAINTENANCE OF OFFICE OR AGENCY ............... 36
SECTION 5.3. APPOINTMENTS TO FILL VACANCIES IN TRUSTEE'S
OFFICE ........................................ 36
SECTION 5.5. EXISTENCE ..................................... 38
SECTION 5.6. MAINTENANCE OF PROPERTIES ..................... 38
SECTION 5.7. PAYMENT OF TAXES AND OTHER CLAIMS ............. 38
SECTION 5.8. RULE 144A INFORMATION REQUIREMENT ............. 38
SECTION 5.9. STAY, EXTENSION AND USURY LAWS ................ 39
SECTION 5.10. COMPLIANCE CERTIFICATE ........................ 39
ARTICLE VI
DEBENTUREHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE 40
SECTION 6.1. DEBENTUREHOLDERS' LISTS ....................... 40
SECTION 6.2. PRESERVATION AND DISCLOSURE OF LISTS .......... 40
SECTION 6.3. REPORTS BY TRUSTEE ............................ 40
SECTION 6.4. REPORTS BY COMPANY ............................ 41
ARTICLE VII
REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS
ON AN EVENT OF DEFAULT 41
SECTION 7.1. EVENTS OF DEFAULT ............................. 41
SECTION 7.2. PAYMENTS OF DEBENTURES ON DEFAULT; SUIT
THEREFOR ...................................... 43
SECTION 7.3. APPLICATION OF MONIES COLLECTED BY TRUSTEE .... 45
SECTION 7.4. PROCEEDINGS BY DEBENTUREHOLDER ................ 45
SECTION 7.5. PROCEEDINGS BY TRUSTEE ........................ 46
SECTION 7.6. REMEDIES CUMULATIVE AND CONTINUING ............ 46
SECTION 7.7. DIRECTION OF PROCEEDINGS AND WAIVER OF
DEFAULTS BY MAJORITY OF DEBENTUREHOLDERS ...... 47
SECTION 7.8. NOTICE OF DEFAULTS ............................ 47
SECTION 7.9. UNDERTAKING TO PAY COSTS ...................... 47
ARTICLE VIII
CONCERNING THE TRUSTEE 48
SECTION 8.1. DUTIES AND RESPONSIBILITIES OF TRUSTEE ........ 48
SECTION 8.2. RELIANCE ON DOCUMENTS, OPINIONS, ETC .......... 50
SECTION 8.3. NO RESPONSIBILITY FOR RECITALS, ETC ........... 50
SECTION 8.4. TRUSTEE, PAYING AGENTS, CONVERSION AGENTS OR
REGISTRAR MAY OWN DEBENTURES .................. 51
SECTION 8.5. MONIES TO BE HELD IN TRUST .................... 51
SECTION 8.6. COMPENSATION AND EXPENSES OF TRUSTEE .......... 51
SECTION 8.7. OFFICERS' CERTIFICATE AS EVIDENCE ............. 52
SECTION 8.8. CONFLICTING INTERESTS OF TRUSTEE .............. 52
SECTION 8.9. ELIGIBILITY OF TRUSTEE ........................ 52
SECTION 8.10. RESIGNATION OR REMOVAL OF TRUSTEE ............. 52
SECTION 8.11. ACCEPTANCE BY SUCCESSOR TRUSTEE ............... 53
SECTION 8.12. SUCCESSION BY MERGER, ETC ..................... 54
SECTION 8.13. PREFERENTIAL COLLECTION OF CLAIMS ............. 55
SECTION 8.14. TRUSTEE'S APPLICATION FOR INSTRUCTIONS FROM
THE COMPANY ................................... 55
-3-
<PAGE>
ARTICLE IX
CONCERNING THE DEBENTUREHOLDERS 55
SECTION 9.1. ACTION BY DEBENTUREHOLDERS .................... 55
SECTION 9.2. PROOF OF EXECUTION BY DEBENTUREHOLDERS ........ 56
SECTION 9.3. WHO ARE DEEMED ABSOLUTE OWNERS ................ 56
SECTION 9.4. COMPANY-OWNED DEBENTURES DISREGARDED .......... 56
SECTION 9.5. REVOCATION OF CONSENTS; FUTURE HOLDERS BOUND .. 57
ARTICLE X
DEBENTUREHOLDERS' MEETINGS 57
SECTION 10.1. PURPOSE OF MEETINGS ........................... 57
SECTION 10.2. CALL OF MEETINGS BY TRUSTEE ................... 57
SECTION 10.3. CALL OF MEETINGS BY COMPANY OR
DEBENTUREHOLDERS .............................. 58
SECTION 10.4. QUALIFICATIONS FOR VOTING ..................... 58
SECTION 10.5. REGULATIONS ................................... 58
SECTION 10.6. VOTING ........................................ 59
SECTION 10.7. NO DELAY OF RIGHTS BY MEETING ................. 59
ARTICLE XI
SUPPLEMENTAL INDENTURES 59
SECTION 11.1. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF
DEBENTUREHOLDERS. ............................. 59
SECTION 11.2. SUPPLEMENTAL INDENTURES WITH CONSENT OF
DEBENTUREHOLDERS .............................. 61
SECTION 11.3. EFFECT OF SUPPLEMENTAL INDENTURE .............. 62
SECTION 11.4. NOTATION ON DEBENTURES ........................ 62
SECTION 11.5. EVIDENCE OF COMPLIANCE OF SUPPLEMENTAL
INDENTURE TO BE FURNISHED TRUSTEE ............. 62
ARTICLE XII
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE 62
SECTION 12.1. COMPANY MAY CONSOLIDATE ETC. ON CERTAIN
TERMS ......................................... 62
SECTION 12.2. SUCCESSOR CORPORATION TO BE SUBSTITUTED ....... 63
SECTION 12.3. OPINION OF COUNSEL TO BE GIVEN TRUSTEE ........ 64
ARTICLE XIII
SATISFACTION AND DISCHARGE OF INDENTURE 64
SECTION 13.1. DISCHARGE OF INDENTURE ........................ 64
SECTION 13.2. DEPOSITED MONIES TO BE HELD IN TRUST BY
TRUSTEE ....................................... 64
SECTION 13.3. PAYING AGENT TO REPAY MONIES HELD ............. 65
SECTION 13.4. RETURN OF UNCLAIMED MONIES .................... 65
SECTION 13.5. REINSTATEMENT ................................. 65
ARTICLE XIV
-4-
<PAGE>
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS 65
SECTION 14.1. INDENTURE AND DEBENTURES SOLELY CORPORATE
OBLIGATIONS ................................... 65
ARTICLE XV
CONVERSION OF DEBENTURES 66
SECTION 15.1. RIGHT TO CONVERT .............................. 66
SECTION 15.2. EXERCISE OF CONVERSION PRIVILEGE; ISSUANCE
OF COMMON STOCK ON CONVERSION; NO ADJUSTMENT
FOR INTEREST OR DIVIDENDS ..................... 66
SECTION 15.3. CASH PAYMENTS IN LIEU OF FRACTIONAL SHARES .... 68
SECTION 15.4. CONVERSION PRICE .............................. 68
SECTION 15.5. ADJUSTMENT OF CONVERSION PRICE ................ 68
SECTION 15.6. EFFECT OF RECLASSIFICATION, CONSOLIDATION,
MERGER OR SALE ................................ 77
SECTION 15.7. TAXES ON SHARES ISSUED ........................ 78
SECTION 15.8. RESERVATION OF SHARES; SHARES TO BE FULLY
PAID; COMPLIANCE WITH GOVERNMENTAL
REQUIREMENTS; LISTING OF COMMON STOCK ......... 78
SECTION 15.9. RESPONSIBILITY OF TRUSTEE ..................... 79
SECTION 15.10. NOTICE TO HOLDERS PRIOR TO CERTAIN ACTIONS .... 79
ARTICLE XVI
MISCELLANEOUS PROVISIONS 80
SECTION 16.1. PROVISIONS BINDING ON COMPANY'S SUCCESSORS .... 80
SECTION 16.2. OFFICIAL ACTS BY SUCCESSOR CORPORATION ........ 80
SECTION 16.3. ADDRESSES FOR NOTICES, ETC .................... 81
SECTION 16.4. GOVERNING LAW ................................. 81
SECTION 16.5. EVIDENCE OF COMPLIANCE WITH CONDITIONS
PRECEDENT; CERTIFICATES TO TRUSTEE ............ 81
SECTION 16.6. LEGAL HOLIDAYS ................................ 82
SECTION 16.7. TRUST INDENTURE ACT ........................... 82
SECTION 16.8. NO SECURITY INTEREST CREATED .................. 82
SECTION 16.9. BENEFITS OF INDENTURE ......................... 82
SECTION 16.10. TABLE OF CONTENTS, HEADINGS, ETC .............. 82
SECTION 16.11. AUTHENTICATING AGENT .......................... 82
SECTION 16.12. EXECUTION IN COUNTERPARTS ..................... 83
EXHIBIT A FORM OF DEBENTURE ................................................A-1
-5-
<PAGE>
INDENTURE
INDENTURE, dated as of February 14, 2000, between Sepracor Inc., a
Delaware corporation (hereinafter sometimes called the "Company", as more fully
set forth in Section 1.1), and The Chase Manhattan Bank, a New York banking
corporation, as trustee hereunder (hereinafter sometimes called the "Trustee",
as more fully set forth in Section 1.1).
WITNESSETH:
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issue of its 5% Convertible Subordinated Debentures due 2007
(hereinafter sometimes called the "Debentures"), in an aggregate principal
amount not to exceed $400,000,000, and additional Debentures in an aggregate
principal amount not to exceed $60,000,000 at the option of the Initial
Purchaser pursuant to Section 2 of the Purchase Agreement, and, to provide the
terms and conditions upon which the Debentures are to be authenticated, issued
and delivered, the Company has duly authorized the execution and delivery of
this Indenture; and
WHEREAS, the Debentures, the certificate of authentication to be
borne by the Debentures, a form of assignment, a form of option to elect
repayment upon a Fundamental Change, and a form of conversion notice to be borne
by the Debentures are to be substantially in the forms hereinafter provided for;
and
WHEREAS, all acts and things necessary to make the Debentures, when
executed by the Company and authenticated and delivered by the Trustee or a duly
authorized authenticating agent, as in this Indenture provided, the valid,
binding and legal obligations of the Company, and to constitute these presents a
valid agreement according to its terms, have been done and performed, and the
execution of this Indenture and the issue hereunder of the Debentures have in
all respects been duly authorized.
NOW THEREFORE THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the Debentures are,
and are to be, authenticated, issued and delivered, and in consideration of the
premises and of the purchase and acceptance of the Debentures by the holders
thereof, the Company covenants and agrees with the Trustee for the equal and
proportionate benefit of the respective holders from time to time of the
Debentures (except as otherwise provided below) as follows:
ARTICLE I
DEFINITIONS
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Section 1.1. Definitions. The terms defined in this Section 1.1 (except as
herein otherwise expressly provided or unless the context otherwise requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective meanings specified in this Section 1.1. All other
terms used in this Indenture that are defined in the Trust Indenture Act or
which are by reference therein defined in the Securities Act (except as herein
otherwise expressly provided or unless the context otherwise requires) shall
have the meanings assigned to such terms in said Trust Indenture Act and in said
Securities Act as in force at the date of the execution of this Indenture. The
words "herein," "hereof," "hereunder" and words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
Subdivision. The terms defined in this Article include the plural as well as the
singular.
Affiliate: The term "Affiliate" of any specified Person shall mean
any other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person. For the purposes
of this definition, "control," when used with respect to any specified Person
means, the power to direct or cause the direction of the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
Board of Directors: The term "Board of Directors" shall mean the
Board of Directors of the Company or a committee of such Board duly authorized
to act for it hereunder.
Business Day: The term "Business Day" shall mean each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which the banking
institutions in The City of New York or the city in which the Corporate Trust
Office is located are authorized or obligated by law or executive order to close
or be closed.
Closing Price: The term "Closing Price" shall have the meaning
specified in Section 15.5(h)(1).
Commission: The term "Commission" shall mean the Securities and
Exchange Commission.
Common Stock: The term "Common Stock" shall mean any stock of any
class of the Company which has no preference in respect of dividends or of
amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company and which is not subject to redemption
by the Company. Subject to the provisions of Section 15.6, however, shares
issuable on conversion of Debentures shall include only shares of the class
designated as common stock of the Company at the date of this Indenture or
shares of any class or classes resulting from any reclassification or
reclassifications thereof and which have no preference in respect of dividends
or of amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company and which are not subject to redemption
by the Company; provided that if at any time there shall be more than one such
resulting class, the shares of each such class then so issuable shall be
substantially in the proportion
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which the total number of shares of such class resulting from all such
reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.
Company: The term "Company" shall mean Sepracor Inc., a Delaware
corporation, having its principal office at 111 Locke Drive, Marlborough, MA
01752 and subject to the provisions of Article XII, shall include its successors
and assigns.
Conversion Price: The term "Conversion Price" shall have the meaning
specified in Section 15.4.
Corporate Trust Office: The term "Corporate Trust Office" or other
similar term, shall mean the principal corporate trust office of the Trustee at
which at any particular time its corporate trust business shall be principally
administered, which office is, at the date as of which this Indenture is dated,
located at The Chase Manhattan Bank, 450 West 33rd Street, 15th Floor, New York,
New York 10001-2697, Attention: Global Trust Services.
Credit Agreement: The term "Credit Agreement" shall mean that
certain Second Amended and Restated Revolving Credit Agreement, dated as of
December 22, 1999, among the Company, Biosphere Medical, Inc. and Fleet National
Bank, as amended through the date hereof, as further amended, amended and
restated, supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing, consolidating or
otherwise restructuring (including any guaranty agreements and security
documents and any documents adding subsidiaries of the Company as additional
borrowers or guarantors thereunder) all or any portion of the Indebtedness under
such agreement or any replacement or successor agreement, and whether by Fleet
National Bank, individually or as agent for itself and other lenders, and
whether or not increasing the amount of Indebtedness that may be incurred
thereunder. The term "Credit Agreement" shall also include the Company's
obligations under the put agreement with Fleet National Bank to purchase up to
$2.0 million of Indebtedness of a former wholly owned Subsidiary in the event of
a default thereof by such Subsidiary, the guarantee by the Company of up to $5.0
million of Indebtedness of HemaSure to Fleet National Bank and the guarantee by
the Company of up to $2.0 million of Indebtedness of Biosphere Medical, Inc.
pursuant to a Guaranty Agreement in favor of Fleet National Bank dated December
22, 1999.
Custodian: The term "Custodian" shall mean The Chase Manhattan Bank,
as custodian with respect to the Debentures in global form, or any successor
entity thereto.
Debenture or Debentures: The terms "Debenture" or "Debentures" shall
mean any Debenture or Debentures, as the case may be, authenticated and
delivered under this Indenture.
Debentureholder or holder: The terms "Debentureholder" or "holder"
as applied to any Debenture, or other similar terms (but excluding the term
"beneficial holder"), shall mean any Person in whose name at the time a
particular Debenture is registered on the Debenture registrar's books.
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Debenture register: The term "Debenture register" shall have the
meaning specified in Section 2.5.
Default: The term "default" shall mean any event that is, or after
notice or passage of time, or both, would be, an Event of Default.
Defaulted Interest: The term "Defaulted Interest" shall have the
meaning specified in Section 2.3.
Depositary: The term "Depositary" shall mean, with respect to the
Debentures issuable or issued in whole or in part in global form, the person
specified in Section 2.5(d) as the Depositary with respect to such Debentures,
until a successor shall have been appointed and become such pursuant to the
applicable provisions of this Indenture, and thereafter, "Depositary" shall mean
or include such successor.
Designated Senior Obligations: The term "Designated Senior
Obligations" shall mean Senior Obligations under the Credit Agreement or any
other Senior Obligations in which the instrument creating or evidencing the same
or the assumption or guarantee thereof (or related agreements or documents to
which the Company is a party) expressly provides that such Senior Obligations
shall be "Designated Senior Obligations" for purposes of this Indenture
(provided that such instrument, agreement or other document may place
limitations and conditions on the right of such Senior Obligations to exercise
the rights of Designated Senior Obligations). If any payment made to any holder
of any Designated Senior Obligations or its Representative with respect to such
Designated Senior Obligations is rescinded or must otherwise be returned by such
holder or Representative upon the insolvency, bankruptcy or reorganization of
the Company or otherwise, the reinstated Indebtedness of the Company arising as
a result of such rescission or return shall constitute Designated Senior
Obligations effective as of the date of such rescission or return.
Exchange Act: The term "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder, as in effect from time to time.
Event of Default: The term "Event of Default" shall mean any event
specified in Section 7.1(a), (b), (c), (d) or (e).
Fundamental Change: The term "Fundamental Change" shall mean the
occurrence of any transaction or event in connection with which all or
substantially all the Common Stock shall be exchanged for, be converted into, be
acquired for, or constitute in all material respects solely the right to
receive, consideration which is not all or substantially all common stock which
is (or, upon consummation of or immediately following such transaction or event,
will be) listed on a United States national securities exchange or approved for
quotation on the Nasdaq National Market or any similar United States system of
automated dissemination of quotations of securities prices (whether by means of
an exchange offer, liquidation, tender offer, consolidation, merger,
combination, reclassification, recapitalization or otherwise).
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Global Debenture: The term "Global Debenture" shall have the meaning
set forth in Section 2.5(b).
Indebtedness: The term "Indebtedness" shall mean, with respect to
any Person, and without duplication, (a) all indebtedness, obligations and other
liabilities (contingent or otherwise) of such Person for borrowed money
(including obligations of the Company in respect of overdrafts, foreign exchange
contracts, currency exchange agreements, interest rate protection agreements,
and any loans or advances from banks, whether or not evidenced by notes or
similar instruments, and all commitment, stand by and other fees due and payable
to financial institutions with respect to credit facilities available to such
Person) or evidenced by bonds, debentures, notes or similar instruments (whether
or not the recourse of the lender is to the whole of the assets of such Person
or to only a portion thereof) (other than any account payable or other accrued
current liability or obligation incurred in the ordinary course of business in
connection with the obtaining of materials or services); (b) all reimbursement
obligations and other liabilities (contingent or otherwise) of such Person with
respect to letters of credit, bank guarantees or bankers' acceptances; (c) all
obligations and liabilities (contingent or otherwise) in respect of leases of
real or personal property or other assets of such Person required, in conformity
with generally accepted accounting principles, to be accounted for as
capitalized lease obligations on the balance sheet of such Person and all
obligations and other liabilities (contingent or otherwise) under any lease or
related document (including a purchase agreement) in connection with the lease
of real property which provides that such Person is contractually obligated to
purchase or cause a third party to purchase the leased property and thereby
guarantee a minimum residual value of the leased property to the lessor and the
obligations of such Person under such lease or related document to purchase or
to cause a third party to purchase such leased property; (d) all obligations of
such Person (contingent or otherwise) with respect to an interest rate or other
swap, cap or collar agreement or other similar instrument or agreement or
foreign currency hedge, exchange, purchase or similar instrument or agreement;
(e) all direct or indirect guaranties or similar agreements by such Person in
respect of, and obligations or liabilities (contingent or otherwise) of such
Person to purchase or otherwise acquire or otherwise assure a creditor against
loss in respect of indebtedness, obligations or liabilities of another Person of
the kind described in clauses (a) through (d); (f) any indebtedness or other
obligations described in clauses (a) through (e) secured by any mortgage,
pledge, lien or other encumbrance existing on property which is owned or held by
such Person, regardless of whether the indebtedness or other obligation secured
thereby shall have been assumed by such Person; and (g) any and all deferrals,
renewals, extensions and refundings of, or amendments, modifications or
supplements to, any indebtedness, obligation or liability of the kind described
in clauses (a) through (f).
Indenture: The term "Indenture" shall mean this instrument as
originally executed or, if amended or supplemented as herein provided, as so
amended or supplemented.
Initial Purchaser: The term "Initial Purchaser" shall mean Deutsche
Bank Securities Inc.
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Institutional Accredited Investor: The term "Institutional
Accredited Investor" shall mean an institutional "accredited investor" within
the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
Liquidated Damages: The term "Liquidated Damages" shall have the
meaning specified in Section 2(f) of the Registration Rights Agreement.
Make-Whole Payment: The term "Make-Whole Payment" shall have the
meaning specified in Section 3.1(a).
Non-U.S. Person: The term "Non-U.S. Person" shall mean a person
other than a U.S. Person (as defined in Regulation S).
Notice Date: The term "Notice Date" shall have the meaning specified
in Section 3.1(a).
Officers' Certificate: The term "Officers' Certificate," when used
with respect to the Company, shall mean a certificate signed by both (a) the
President or Chief Executive Officer or any Executive or Senior Vice President
or any Vice President (whether or not designated by a number or numbers or word
or words added before or after the title "Vice President") and (b) by the
Treasurer or any Assistant Treasurer or Secretary or any Assistant Secretary of
the Company.
Opinion of Counsel: The term "Opinion of Counsel" shall mean an
opinion in writing signed by legal counsel, who may be an employee of or counsel
to the Company, or other counsel reasonably acceptable to the Trustee.
Optional Redemption: The term "Optional Redemption" shall have the
meaning specified in Section 3.1(b).
Outstanding: The term "outstanding," when used with reference to
Debentures, shall, subject to the provisions of Section 9.4, mean, as of any
particular time, all Debentures authenticated and delivered by the Trustee under
this Indenture, except
(a) Debentures theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(b) Debentures, or portions thereof, (i) for the redemption of which
monies in the necessary amount shall have been deposited in trust with the
Trustee or with any paying agent (other than the Company) or (ii) which shall
have been otherwise defeased in accordance with Article XIII;
(c) Debentures in lieu of which, or in substitution for which, other
Debentures shall have been authenticated and delivered pursuant to the terms of
Section 2.6; and
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(d) Debentures converted into Common Stock pursuant to Article XV
and Debentures deemed not outstanding pursuant to Article III.
Payment Blockage Notice: The term "Payment Blockage Notice" shall
have the meaning specified in Section 4.2.
Person: The term "Person" shall mean a corporation, an association,
a partnership, a limited liability company, an individual, a joint venture, a
joint stock company, a trust, an unincorporated organization or a government or
an agency or a political subdivision thereof.
Portal Market: The term "The Portal Market" shall mean The Portal
Market operated by the National Association of Securities Dealers, Inc. or any
successor thereto.
Predecessor Debenture: The term "Predecessor Debenture" of any
particular Debenture shall mean every previous Debenture evidencing all or a
portion of the same debt as that evidenced by such particular Debenture; and,
for the purposes of this definition, any Debenture authenticated and delivered
under Section 2.6 in lieu of a lost, destroyed or stolen Debenture shall be
deemed to evidence the same debt as the lost, destroyed or stolen Debenture that
it replaces.
Provisional Redemption: The term "Provisional Redemption" shall have
the meaning specified in Section 3.1(a).
Provisional Redemption Date: The term "Provisional Redemption Date"
shall have the meaning specified in Section 3.1(a).
QIB: The term "QIB" shall mean a "qualified institutional buyer" as
defined in Rule 144A.
Registration Rights Agreement: The term "Registration Rights
Agreement" shall mean that certain Registration Rights Agreement, dated as of
February 8, 2000, between the Company and the Initial Purchaser, as amended from
time to time in accordance with its terms, a copy of which is attached as
Exhibit C hereto.
Regulation S: The term "Regulation S" shall mean Regulation S as
promulgated under the Securities Act.
Representative: The term "Representative" shall mean the (a)
indenture trustee or other trustee, agent or representative for any Senior
Obligations or (b) with respect to any Senior Obligations that do not have any
such trustee, agent or other representative, (i) in the case of such Senior
Obligations issued pursuant to an agreement providing for voting arrangements as
among the holders or owners of such Senior Obligations, any holder or owner of
such Senior Obligations acting with the consent of the required
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persons necessary to bind such holders or owners of such Senior Obligations and
(ii) in the case of all other such Senior Obligations, the holder or owner of
such Senior Obligations.
Responsible Officer: The term "Responsible Officer," when used with
respect to the Trustee, shall mean an officer assigned to the Corporate Trust
Office, including any managing director, vice president, assistant vice
president, assistant treasurer, assistant secretary or any other officer of the
Trustee customarily performing functions similar to those performed by any of
the above designated officers and having direct responsibility for the
administration of this Indenture, and also, with respect to a particular matter,
any other officer to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject.
Restricted Securities: The term "Restricted Securities" shall have
the meaning specified in Section 2.5.
Rule 144A: The term "Rule 144A" shall mean Rule 144A as promulgated
under the Securities Act.
Securities Act: The term "Securities Act" shall mean the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder,
as in effect from time to time.
Senior Obligations: The term "Senior Obligations" shall mean the
principal of, premium, if any, interest (including all interest accruing
subsequent to the commencement of any bankruptcy or similar proceeding, whether
or not a claim for post-petition interest is allowable as a claim in any such
proceeding) and rent payable on or in connection with, and all fees, costs,
expenses and other amounts accrued or due on or in connection with, Indebtedness
of the Company, whether outstanding on the date of this Indenture or thereafter
created, incurred, assumed, guaranteed or in effect guaranteed by the Company
(including all deferrals, renewals, extensions or refundings of, or amendments,
modifications or supplements to, the foregoing), unless in the case of any
particular Indebtedness the instrument creating or evidencing the same or the
assumption or guarantee thereof expressly provides that such Indebtedness shall
not be senior in right of payment to the Debentures or expressly provides that
such Indebtedness is "pari passu" or "junior" to the Debentures. Notwithstanding
the foregoing, the term Senior Obligations shall not include (a) the aggregate
principal amount of $189,475,000 in 6 1/4% Convertible Subordinated Debentures
due 2005, (b) the aggregate principal amount of $300,000,000 in 7% Convertible
Subordinated Debentures due 2005, or (c) any Indebtedness of the Company to any
subsidiary of the Company, a majority of the voting stock of which is owned,
directly or indirectly, by the Company. If any payment made to any holder of any
Senior Obligations or its Representative with respect to such Senior Obligations
is rescinded or must otherwise be returned by such holder or Representative upon
the insolvency, bankruptcy or reorganization of the Company or otherwise, the
reinstated Indebtedness of the Company arising as a result of such rescission or
return shall constitute Senior Obligations effective as of the date of such
rescission or return. Notwithstanding anything else to the contrary in this
Indenture, the term "Senior Obligations" shall include Indebtedness under the
Credit Agreement.
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Significant Subsidiary: The term "Significant Subsidiary" shall
mean, as of any date of determination, a subsidiary of the Company, a majority
of the voting stock or other voting power of which is owned directly or
indirectly by the Company, if as of such date of determination either (a) the
assets of such subsidiary equal 10% or more of the Company's total consolidated
assets or (b) the total revenue of which represented 10% or more of the
Company's consolidated total revenue for the most recently completed fiscal
year; provided, however, for purposes of this Indenture, BioSepra, Inc. shall
not be deemed to be a Significant Subsidiary.
Subsidiary: The term "Subsidiary" shall mean, with respect to any
Person, (i) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of capital stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other subsidiaries
of that Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or managing general partner of which is such Person or a
subsidiary of such Person or (b) the only general partners of which are such
Person or one or more subsidiaries of such Person (or any combination thereof).
Trading Day: The term "Trading Day" shall have the meaning specified
in Section 15.5(h)(5).
Trigger Event: The term "Trigger Event" shall have the meaning
specified in Section 15.5(d).
Trust Indenture Act: The term "Trust Indenture Act" shall mean the
Trust Indenture Act of 1939, as amended, as it was in force at the date of
execution of this Indenture, except as provided in Sections 11.3 and 15.6;
provided, however, that in the event the Trust Indenture Act of 1939 is amended
after the date hereof, the term "Trust Indenture Act" shall mean, to the extent
required by such amendment, the Trust Indenture Act of 1939 as so amended.
Trustee: The term "Trustee" shall mean The Chase Manhattan Bank, and
its successors and any corporation resulting from or surviving any consolidation
or merger to which it or its successors be a party and any successor trustee at
the time serving as successor trustee hereunder.
The definitions of certain other terms are as specified in Sections
2.5 and 3.5 and Article XV.
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ARTICLE II
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF DEBENTURES
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Section 2.1. Designation Amount and Issue of Debentures. The Debentures
shall be designated as "5% Convertible Subordinated Debentures due 2007."
Debentures not to exceed the aggregate principal amount of $400,000,000 (or
$460,000,000 if the over-allotment option set forth in Section 2 of the Purchase
Agreement dated February 8, 2000 by and between the Company and the Initial
Purchaser is exercised in full) (except pursuant to Sections 2.5, 2.6, 3.3, 3.5
and 15.2 hereof) upon the execution of this Indenture, or from time to time
thereafter, may be executed by the Company and delivered to the Trustee for
authentication, and the Trustee shall thereupon authenticate and deliver said
Debentures to or upon the written order of the Company, signed by its (a) Chief
Executive Officer, President, any Executive or Senior Vice President or any Vice
President (whether or not designated by a number or numbers or word or words
added before or after the title "Vice President") and (b) Treasurer or Assistant
Treasurer or its Secretary or any Assistant Secretary, without any further
action by the Company hereunder.
In authenticating any Debentures, the Trustee shall be entitled to receive
prior to the first authentication of any Debentures, and shall be fully
protected in relying upon, unless and until such documents have been superseded
or revoked:
(1) an Officers' Certificate setting forth the form or forms and terms of
the Debentures, stating that the form or forms and terms of the Debentures
have been, or will be when established in accordance with such procedures
as shall be referred to therein, established in compliance with this
Indenture; and
(2) an Opinion of Counsel substantially to the effect that the form or
forms and terms of the Debentures have been, or will be when established
in accordance with such procedures as shall be referred to therein,
established in compliance with this Indenture and that the supplemental
indenture, to the extent applicable, and Debentures have been duly
authorized and, if executed and authenticated in accordance with the
provisions of the Indenture and delivered to and duly paid for by the
purchasers thereof on the date of such opinion, would be entitled to the
benefits of the Indenture and would be valid and binding obligations of
the Company, enforceable against the Company in accordance with their
respective terms, subject to bankruptcy, insolvency, reorganization,
receivership, moratorium and other similar laws affecting creditors'
rights generally, general principles of equity, and such other matters as
shall be specified therein.
Section 2.2. Form of Debentures. The Debentures and the Trustee's
certificate of authentication to be borne by such Debentures shall be
substantially in the form set forth in Exhibit A, which is incorporated in and
made a part of this Indenture.
Any of the Debentures may have such letters, numbers or other marks
of identification and such notations, legends and endorsements as the officers
executing the same may approve (execution thereof to be conclusive evidence of
such approval) and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant
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thereto or with any rule or regulation of any securities exchange or automated
quotation system on which the Debentures may be listed, or to conform to usage.
Any Debenture in global form shall represent such of the outstanding
Debentures as shall be specified therein and shall provide that it shall
represent the aggregate amount of outstanding Debentures from time to time
endorsed thereon and that the aggregate amount of outstanding Debentures
represented thereby may from time to time be increased or reduced to reflect
transfers or exchanges permitted hereby. Any endorsement of a Debenture in
global form to reflect the amount of any increase or decrease in the amount of
outstanding Debentures represented thereby shall be made by the Trustee or the
Custodian, at the direction of the Trustee, in such manner and upon written
instructions given by the holder of such Debentures in accordance with this
Indenture. Payment of principal of and interest and premium, if any, on any
Debenture in global form shall be made to the holder of such Debenture on the
date of such payment, unless a record date or other means of determining holders
eligible to receive payment is provided for herein.
The terms and provisions contained in the form of Debenture attached
as Exhibit A hereto shall constitute, and are hereby expressly made, a part of
this Indenture and the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
Section 2.3. Date and Denomination of Debentures; Payments of Interest.
The Debentures shall be issuable in registered form without coupons in
denominations of $1,000 principal amount and integral multiples thereof. Every
Debenture shall be dated the date of its authentication and shall bear interest
from the applicable date in each case as specified on the face of the form of
Debenture attached as Exhibit A hereto. Interest on the Debentures shall be
computed on the basis of a 360-day year comprised of twelve (12) 30-day months
and shall be payable semi-annually on each of February 15 and August 15 of each
year.
The Person in whose name any Debenture (or its Predecessor Debenture) is
registered on the Debenture register at the close of business on any record date
with respect to any interest payment date shall be entitled to receive the
interest payable on such interest payment date, except (i) that the interest
payable upon redemption (unless the date of redemption is an interest payment
date) will be payable to the person to whom principal is payable, and (ii) in
the case of any Debenture (or portion thereof) which is converted into Common
Stock of the Company during the period from (but excluding) a record date for
any interest payment date to (but excluding) such interest payment date: either
(a) if such Debenture (or portion thereof) has been called for
redemption on a redemption date which occurs during such period, or is to be
redeemed in connection with a Fundamental Change on a Repurchase Date (as
defined in Section 3.5) which occurs during such period, the Company shall not
be required to pay interest on such interest payment date in respect of any such
Debenture (or portion thereof) except to the extent required to be paid upon
redemption of such Debenture or portion thereof pursuant to Section 3.3 or 3.5
hereof; or
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(b) if such Debenture is not subject to redemption as
described in (a) above, the Debenture (or portion thereof) submitted for
conversion during such period shall be accompanied by funds equal to the
interest payable on such interest payment date on the principal amount so
converted. Interest may, as the Company shall specify to the paying agent
in writing by each record date, be paid either (i) by check mailed to the
address of the person entitled thereto as it appears in the Debenture
register (provided that a holder of Debentures with an aggregate principal
amount in excess of $2,000,000 shall, at the written election of such
holder, be paid by wire transfer in immediately available funds) or (ii)
by transfer to an account maintained by such person located in the United
States; provided, however, that payments to the Depositary will be made by
wire transfer of immediately available funds to the account of the
Depositary or its nominee. The term "record date" with respect to any
interest payment date shall mean the January 31 or July 31 preceding said
February 15 or August 15, respectively.
Any interest on any Debenture which is payable, but is not
punctually paid or duly provided for, on any said February 15 or August 15
(herein called "Defaulted Interest") shall forthwith cease to be payable to the
Debentureholder on the relevant record date by virtue of his having been such
Debentureholder; and such Defaulted Interest shall be paid by the Company, at
its election in each case, as provided in clause (1) or (2) below;
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Debentures (or their respective
Predecessor Debentures) are registered at the close of business on a
special record date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest to be paid on each
Debenture and the date of the payment (which shall be not less than
twenty-five (25) days after the receipt by the Trustee of such notice,
unless the Trustee shall consent to an earlier date), and at the same time
the Company shall deposit with the Trustee an amount of money equal to the
aggregate amount to be paid in respect of such Defaulted Interest or shall
make arrangements satisfactory to the Trustee for such deposit prior to
the date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted Interest
as in this clause provided. Thereupon the Trustee shall fix a special
record date for the payment of such Defaulted Interest which shall be not
more than fifteen (15) days and not less than ten (10) days prior to the
date of the proposed payment, and not more than ten (10) days after the
receipt by the Trustee of the notice of the proposed payment, the Trustee
shall promptly notify the Company of such special record date and, in the
name and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the special record date therefor to
be mailed, first-class postage prepaid, to each Debentureholder at his
address as it appears in the Debenture register, not less than ten (10)
days prior to such special record date. Notice of the proposed payment of
such Defaulted Interest and the special record date therefor having been
so mailed, such Defaulted Interest shall be paid to the Persons in whose
names the Debentures (or their respective
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Predecessor Debentures) were registered at the close of business on such
special record date and shall no longer be payable pursuant to the
following clause (2) of this Section 2.3.
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange or automated quotation system on which the Debentures
may be listed or designated for issuance, and upon such notice as may be
required by such exchange or automated quotation system, if, after written
notice given by the Company to the Trustee of the proposed payment
pursuant to this clause, such manner of payment shall be deemed
practicable by the Trustee.
Section 2.4. Execution of Debentures. The Debentures shall be signed in
the name and on behalf of the Company by the facsimile signature of its Chief
Executive Officer or President or any Executive or Senior Vice President or any
Vice President (whether or not designated by a number or numbers or word or
words added before or after the title "Vice President") and attested by the
facsimile signature of its Secretary or any of its Assistant Secretaries or
Treasurer or any of its Assistant Treasurers (which may be printed, engraved or
otherwise reproduced thereon, by facsimile or otherwise). Only such Debentures
as shall bear thereon a certificate of authentication substantially in the form
set forth on the form of Debenture attached as Exhibit A hereto, manually
executed by the Trustee (or an authenticating agent appointed by the Trustee as
provided by Section 16.11), shall be entitled to the benefits of this Indenture
or be valid or obligatory for any purpose. Such certificate by the Trustee (or
such an authenticating agent) upon any Debenture executed by the Company shall
be conclusive evidence that the Debenture so authenticated has been duly
authenticated and delivered hereunder and that the holder is entitled to the
benefits of this Indenture.
In case any officer of the Company who shall have signed any of the
Debentures shall cease to be such officer before the Debentures so signed shall
have been authenticated and delivered by the Trustee, or disposed of by the
Company, such Debentures nevertheless may be authenticated and delivered or
disposed of as though the person who signed such Debentures had not ceased to be
such officer of the Company; and any Debenture may be signed on behalf of the
Company by such persons as, at the actual date of the execution of such
Debenture, shall be the proper officers of the Company, although at the date of
the execution of this Indenture any such person was not such an officer.
Section 2.5. Exchange and Registration of Transfer of Debentures;
Restrictions on Transfer; Depositary.
(a) The Company shall cause to be kept at the Corporate Trust Office
a register (the register maintained in such office and in any other office or
agency of the Company designated pursuant to Section 5.2 being herein sometimes
collectively referred to as the "Debenture register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Debentures and of transfers of Debentures. The Debenture
register shall be in written form or in any form capable of being converted into
written form within a reasonably prompt period of time. The Trustee is
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hereby appointed "Debenture registrar" for the purpose of registering Debentures
and transfers of Debentures as herein provided. The Company may appoint one or
more co-registrars in accordance with Section 5.2.
Upon surrender for registration of transfer of any Debenture to the
Debenture registrar or any co-registrar, and satisfaction of the requirements
for such transfer set forth in this Section 2.5, the Company shall execute, and
the Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Debentures of any authorized
denominations and of a like aggregate principal amount and bearing such
restrictive legends as may be required by this Indenture.
Debentures may be exchanged for other Debentures of any authorized
denominations and of a like aggregate principal amount, upon surrender of the
Debentures to be exchanged at any such office or agency maintained by the
Company pursuant to Section 5.2. Whenever any Debentures are so surrendered for
exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Debentures which the Debentureholder making the exchange is
entitled to receive bearing registration numbers not contemporaneously
outstanding.
All Debentures issued upon any registration of transfer or exchange
of Debentures shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Debentures
surrendered upon such registration of transfer or exchange.
All Debentures presented or surrendered for registration of transfer
or for exchange, redemption or conversion shall (if so required by the Company
or the Debenture registrar) be duly endorsed, or be accompanied by a written
instrument or instruments of transfer in form satisfactory to the Company, and
the Debentures shall be duly executed by the Debentureholder thereof or his
attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Debentures, but the Company may require payment of a sum sufficient
to cover any tax, assessment or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Debentures.
Neither the Company nor the Trustee nor any Debenture registrar or
any Company registrar shall be required to exchange or register a transfer of
(a) any Debentures for a period of fifteen (15) days next preceding any
selection of Debentures to be redeemed or (b) any Debentures or portions thereof
called for redemption pursuant to Section 3.2 or (c) any Debentures or portion
thereof surrendered for conversion pursuant to Article XV or (d) any Debentures
or portions thereof tendered for redemption (and not withdrawn) pursuant to
Section 3.5.
(b) So long as the Debentures are eligible for book-entry settlement
with the Depositary, or unless otherwise required by law, all Debentures that
upon initial issuance are beneficially
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owned by QIBs and all Debentures that are beneficially owned by Non-U.S. Persons
who acquired such Debentures in accordance with Regulation S will be represented
by a Debenture in global form registered in the name of the Depositary or the
nominee of the Depositary (the "Global Debenture"). The transfer and exchange of
beneficial interests in the Global Debenture shall be effected through the
Depositary in accordance with this Indenture and the procedures of the
Depositary therefor. The Trustee shall make appropriate endorsements to reflect
increases or decreases in the principal amounts of the Global Debenture as set
forth on the face of the Debenture ("Principal Amount") to reflect any such
transfers. Except as provided below, beneficial owners of the Global Debenture
shall not be entitled to have certificates registered in their names, will not
receive or be entitled to receive physical delivery of certificates in
definitive form and will not be considered holders of such Debentures in global
form.
(c) So long as the Debentures are eligible for book-entry
settlement, or unless otherwise required by law, upon any transfer of a
definitive Debenture to a QIB in accordance with Rule 144A or to a Non-U.S.
Person in accordance with Regulation S, and upon receipt of the definitive
Debenture or Debentures being so transferred, together with a certification,
substantially in the form on the reverse of the Debenture, from the transferor
that the transfer is being made in compliance with Rule 144A or to a Non-U.S.
Person in accordance with Regulation S (or other evidence satisfactory to the
Trustee), the Trustee shall make an endorsement on the applicable Global
Debenture to reflect an increase in the aggregate Principal Amount of the
Debentures represented by such Debenture in global form, the Trustee shall
cancel such definitive Debenture or Debentures in accordance with the standing
instructions and procedures of the Depositary, the aggregate Principal Amount of
Debentures represented by such Debenture in global form to be increased
accordingly; provided that no definitive Debenture, or portion thereof, in
respect of which the Company or an Affiliate of the Company held any beneficial
interest shall be included in such Debenture in global form until such
definitive Debenture is freely tradable in accordance with Rule 144(k); provided
further that the Trustee shall issue Debentures in definitive form upon any
transfer of a beneficial interest in the Debenture in global form to the Company
or any Affiliate of the Company.
Any Debenture in global form may be endorsed with or have
incorporated in the text thereof such legends or recitals or changes not
inconsistent with the provisions of this Indenture as may be required by the
Custodian, the Depositary or by the National Association of Securities Dealers,
Inc. in order for the Debentures to be tradeable on The Portal Market or as may
be required for the Debentures to be tradeable on any other market developed for
trading of securities pursuant to Rule 144A or Regulation S or required to
comply with any applicable law or any regulation thereunder or with the rules
and regulations of any securities exchange or automated quotation system upon
which the Debentures may be listed or traded or to conform with any usage with
respect thereto, or to indicate any special limitations or restrictions to which
any particular Debentures are subject.
(d) Every Debenture that bears or is required under this Section
2.5(d) to bear the legend set forth in this Section 2.5(d) (together with any
Common Stock issued upon conversion of the Debentures and required to bear the
legend set forth in Section 2.5(e), collectively, the "Restricted
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Securities") shall be subject to the restrictions on transfer set forth in this
Section 2.5(d) (including those set forth in the legend set forth below) unless
such restrictions on transfer shall be waived by written consent of the Company,
and the holder of each such Restricted Security, by such holder's acceptance
thereof, agrees to be bound by all such restrictions on transfer. As used in
Sections 2.5(d) and 2.5(e), the term "transfer" encompasses any sale, pledge,
transfer or other disposition whatsoever of any Restricted Security.
Until the expiration of the holding period applicable to sales
thereof under Rule 144(k) under the Securities Act (or any successor provision),
any certificate evidencing such Debenture (and all securities issued in exchange
therefor or substitution thereof, other than Common Stock, if any, issued upon
conversion thereof, which shall bear the legend set forth in Section 2.5(e), if
applicable) shall bear a legend in substantially the following form, unless such
Debenture has been sold pursuant to a registration statement that has been
declared effective under the Securities Act (and which continues to be effective
at the time of such transfer), or unless otherwise agreed by the Company in
writing, with written notice thereof to the Trustee:
THE DEBENTURE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR
FOREIGN SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR
THE BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH BELOW. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT),
OR (B) IT IS NOT A "UNITED STATES PERSON" (AS DEFINED IN RULE 902 OF
REGULATION S) AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S; (2) AGREES THAT IT WILL NOT, PRIOR TO THE
DATE THAT IS TWO YEARS AFTER THE LATER OF THE INITIAL ISSUANCE OF THE
DEBENTURE EVIDENCED HEREBY AND THE LAST DATE ON WHICH SEPRACOR (THE
"COMPANY") OR ANY "AFFILIATE" (AS DEFINED IN RULE 144 UNDER THE SECURITIES
ACT) OF THE COMPANY WAS THE OWNER OF THE DEBENTURE (THE "RESTRICTION
TERMINATION DATE") RESELL OR OTHERWISE TRANSFER THE DEBENTURE EVIDENCED
HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH DEBENTURE
EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED
INSTITUTIONAL BUYER IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 144A
UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH
RULE 904 OF REGULATION S, (D) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION
FROM REGISTRATION PROVIDED BY THE SECURITIES ACT (IF AVAILABLE) OR (E)
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PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME
OF SUCH TRANSFER); AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THE DEBENTURE EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE
DEBENTURE EVIDENCED HEREBY BEFORE THE RESTRICTION TERMINATION DATE, THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE
CHASE MANHATTAN BANK, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE).
THE HOLDER MUST, PRIOR TO SUCH TRANSFER (OTHER THAN A TRANSFER PURSUANT TO
CLAUSE 2(E) ABOVE), FURNISH TO THE CHASE MANHATTAN BANK AS TRUSTEE (OR A
SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS SUCH TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON ANY TRANSFER OF THE
DEBENTURE EVIDENCED HEREBY UPON OR AFTER THE RESTRICTION TERMINATION DATE.
Any Debenture (or security issued in exchange or substitution
therefor) as to which such restrictions on transfer shall have expired in
accordance with their terms or as to which the conditions for removal of the
foregoing legend set forth therein have been satisfied may, upon surrender of
such Debenture for exchange to the Debenture registrar in accordance with the
provisions of this Section 2.5, be exchanged for a new Debenture or Debentures,
of like tenor and aggregate principal amount, which shall not bear the
restrictive legend required by this Section 2.5(d).
Notwithstanding any other provisions of this Indenture (other than
the provisions set forth in Section 2.5(c) and in this Section 2.5(d)), the
Global Debenture may not be transferred as a whole or in part except by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary.
The Depositary shall be a clearing agency registered under the
Exchange Act. The Company initially appoints The Depository Trust Company to act
as Depositary with respect to the Global Debenture. Initially, the Global
Debenture shall be issued to the Depositary, registered in the name of Cede &
Co., as the nominee of the Depositary, and deposited with the Custodian for Cede
& Co. The Global Debenture, to the extent that it represents the interests of
Non-U.S> Persons, will be held by Cede & Co.
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for the accounts of designated agents on behalf of the Euroclear System
("Euroclear") and Clearstream Banking, Societe Anonyme ("Clearstream"). Non-U.S.
Persons holding beneficial interests in the Global Debenture may do so only
through Euroclear or Clearstream, and any resale or transfer of any such
interest to a U.S. Person shall only be permitted if such Person is a qualified
institutional buyer as defined in Rule 144A under the Securities Act or is the
Company or an Affiliate of the Company.
If at any time the Depositary for the Global Debenture notifies the
Company that it is unwilling or unable to continue as Depositary for such Global
Debenture, the Company may appoint a successor Depositary with respect to such
Global Debenture. If a successor Depositary is not appointed by the Company
within ninety (90) days after the Company receives such notice, the Company will
execute, and the Trustee, upon receipt of an Officers' Certificate for the
authentication and delivery of Debentures, will authenticate and deliver,
Debentures in certificated form, in aggregate principal amount equal to the
principal amount of the Global Debenture, in exchange for such Global Debenture.
If a Debenture in certificated form is issued in exchange for any
portion of the Global Debenture after the close of business at the office or
agency where such exchange occurs on any record date and before the opening of
business at such office or agency on the next succeeding interest payment date,
interest will not be payable on such interest payment date in respect of such
Debenture, but will be payable on such interest payment date, subject to the
provisions of Section 2.3, only to the person to whom interest in respect of
such portion of the Global Debenture is payable in accordance with the
provisions of this Indenture.
Debentures in certificated form issued in exchange for all or a part
of the Global Debenture pursuant to this Section 2.5 shall be registered in such
names and in such authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. Upon execution and authentication, the Trustee shall
deliver such Debentures in certificated form to the persons in whose names such
Debentures in certificated form are so registered.
At such time as all interests in the Global Debenture have been
redeemed, converted, canceled, exchanged for Debentures in certificated form, or
transferred to a transferee who receives Debentures in certificated form
thereof, such Global Debenture shall, upon receipt thereof, be canceled by the
Trustee in accordance with standing procedures and instructions existing between
the Depositary and the Custodian. At any time prior to such cancellation, if any
interest in the Global Debenture is exchanged for Debentures in certificated
form, redeemed, converted, repurchased or canceled, exchanged for Debentures in
certificated form or transferred to a transferee who receives Debentures in
certificated form therefor or any Debenture in certificated form is exchanged or
transferred for part of the Global Debenture, the principal amount of the Global
Debenture shall, in accordance with the standing procedures and instructions
existing between the Depositary and the Custodian, be appropriately reduced or
increased, as the case may be, and an endorsement shall be made on such Global
Debenture, by the Trustee or the Custodian, at the direction of the Trustee, to
reflect such reduction or increase.
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(e) Until the expiration of the holding period applicable to sales
thereof under Rule 144(k) under the Securities Act (or any successor provision),
any stock certificate representing Common Stock issued upon conversion of such
Debenture shall bear a legend in substantially the following form, unless such
Common Stock has been sold pursuant to a registration statement that has been
declared effective under the Securities Act (and which continues to be effective
at the time of such transfer) or such Common Stock has been issued upon
conversion of Debentures that have been transferred pursuant to a registration
statement that has been declared effective under the Securities Act, or unless
otherwise agreed by the Company in writing with written notice thereof to the
transfer agent:
THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR
FOREIGN SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT AS SET FORTH BELOW. THE HOLDER HEREOF AGREES THAT PRIOR TO THE DATE
THAT IS TWO YEARS AFTER THE LATER OF THE INITIAL ISSUANCE OF THE DEBENTURE
UPON THE CONVERSION OF WHICH THE COMMON STOCK EVIDENCED HEREBY WAS ISSUED
AND THE LAST DATE ON WHICH SEPRACOR (THE "COMPANY") OR ANY "AFFILIATE" (AS
DEFINED IN RULE 144 UNDER THE SECURITIES ACT) OF THE COMPANY WAS THE OWNER
OF SUCH DEBENTURE OR THE COMMON STOCK EVIDENCED HEREBY (THE "RESTRICTION
TERMINATION DATE"): (1) IT WILL NOT RESELL OR OTHERWISE TRANSFER THE
COMMON STOCK EVIDENCED HEREBY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY
THEREOF, (B) TO A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN COMPLIANCE WITH RULE 144A, (C) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 904 OF
REGULATION S, (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM
REGISTRATION PROVIDED UNDER THE SECURITIES ACT (IF AVAILABLE), OR (E)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME
OF SUCH TRANSFER); (2) PRIOR TO SUCH TRANSFER BEFORE THE TRANSFER
RESTRICTION DATE (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 1(E) ABOVE), IT
WILL FURNISH TO EQUISERVE L.P., AS TRANSFER AGENT (OR A SUCCESSOR TRANSFER
AGENT, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND (3) IT WILL DELIVER TO EACH PERSON TO WHOM THE COMMON
STOCK EVIDENCED HEREBY IS TRANSFERRED
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(OTHER THAN A TRANSFER PURSUANT TO CLAUSE 1(E) ABOVE) A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS LEGEND WILL BE REMOVED
UPON THE EARLIER OF THE TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY
PURSUANT TO CLAUSE 1(E) ABOVE OR UPON ANY TRANSFER OF THE COMMON STOCK
EVIDENCED HEREBY OR UPON THE RESTRICTION TERMINATION DATE.
Any such Common Stock as to which such restrictions on transfer
shall have expired in accordance with their terms or as to which the conditions
for removal of the foregoing legend set forth therein have been satisfied may,
upon surrender of the certificates representing such shares of Common Stock for
exchange in accordance with the procedures of the transfer agent for the Common
Stock, be exchanged for a new certificate or certificates for a like number of
shares of Common Stock, which shall not bear the restrictive legend required by
this Section 2.5(e).
(f) Any Debenture or Common Stock issued upon the conversion or
exchange of a Debenture that, prior to the expiration of the holding period
applicable to sales thereof under Rule 144(k) under the Securities Act (or any
successor provision), is purchased or owned by the Company or any Affiliate
thereof may not be resold by the Company or such Affiliate unless registered
under the Securities Act or resold pursuant to an exemption from the
registration requirements of the Securities Act in a transaction which results
in such Debentures or Common Stock, as the case may be, no longer being
"restricted securities" (as defined under Rule 144).
Section 2.6. Mutilated, Destroyed, Lost or Stolen Debentures. In case any
Debenture shall become mutilated or be destroyed, lost or stolen, the Company in
its discretion may execute, and upon its written request the Trustee or an
authenticating agent appointed by the Trustee shall authenticate and make
available for delivery, a new Debenture, bearing a number not contemporaneously
outstanding, in exchange and substitution for the mutilated Debenture, or in
lieu of and in substitution for the Debenture so destroyed, lost or stolen. In
every case the applicant for a substituted Debenture shall furnish to the
Company, to the Trustee and, if applicable, to such authenticating agent such
security or indemnity as may be required by them to save each of them harmless
for any loss, liability, cost or expense caused by or connected with such
substitution, and, in every case of destruction, loss or theft, the applicant
shall also furnish to the Company, to the Trustee and, if applicable, to such
authenticating agent evidence to their satisfaction of the destruction, loss or
theft of such Debenture and of the ownership thereof.
Following receipt by the Trustee or such authenticating agent, as
the case may be, of satisfactory security or indemnity and evidence, as
described in the preceding paragraph, the Trustee or such authenticating agent
may authenticate any such substituted Debenture and make available for delivery
such Debenture. Upon the issuance of any substituted Debenture, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses connected
therewith. In case any Debenture which has matured or is about to mature or has
been called for redemption or has been tendered for redemption (and not
withdrawn) or is
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about to be converted into Common Stock shall become mutilated or be destroyed,
lost or stolen, the Company may, instead of issuing a substitute Debenture, pay
or authorize the payment of or convert or authorize the conversion of the same
(without surrender thereof except in the case of a mutilated Debenture), as the
case may be, if the applicant for such payment or conversion shall furnish to
the Company, to the Trustee and, if applicable, to such authenticating agent
such security or indemnity as may be required by them to save each of them
harmless for any loss, liability, cost or expense caused by or connected with
such substitution, and, in case of destruction, loss or theft, evidence
satisfactory to the Company, the Trustee and, if applicable, any paying agent or
conversion agent of the destruction, loss or theft of such Debenture and of the
ownership thereof.
Every substitute Debenture issued pursuant to the provisions of this
Section 2.6 by virtue of the fact that any Debenture is destroyed, lost or
stolen shall constitute an additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Debenture shall be found at any
time, and shall be entitled to all the benefits of (but shall be subject to all
the limitations set forth in) this Indenture equally and proportionately with
any and all other Debentures duly issued hereunder. To the extent permitted by
law, all Debentures shall be held and owned upon the express condition that the
foregoing provisions are exclusive with respect to the replacement or payment or
conversion of mutilated, destroyed, lost or stolen Debentures and shall preclude
any and all other rights or remedies notwithstanding any law or statute existing
or hereafter enacted to the contrary with respect to the replacement or payment
or conversion of negotiable instruments or other securities without their
surrender.
Section 2.7. Temporary Debentures. Pending the preparation of Debentures
in certificated form, the Company may execute and the Trustee or an
authenticating agent appointed by the Trustee shall, upon the written request of
the Company, authenticate and deliver temporary Debentures (printed or
lithographed). Temporary Debentures shall be issuable in any authorized
denomination, and substantially in the form of the Debentures in certificated
form, but with such omissions, insertions and variations as may be appropriate
for temporary Debentures, all as may be determined by the Company. Every such
temporary Debenture shall be executed by the Company and authenticated by the
Trustee or such authenticating agent upon the same conditions and in
substantially the same manner, and with the same effect, as the Debentures in
certificated form. Without unreasonable delay the Company will execute and
deliver to the Trustee or such authenticating agent Debentures in certificated
form (other than in the case of Debentures in global form) and thereupon any or
all temporary Debentures (other than any such Debenture in global form) may be
surrendered in exchange therefor, at each office or agency maintained by the
Company pursuant to Section 5.2 and the Trustee or such authenticating agent
shall authenticate and make available for delivery in exchange for such
temporary Debentures an equal aggregate principal amount of Debentures in
certificated form. Such exchange shall be made by the Company at its own expense
and without any charge therefor. Until so exchanged, the temporary Debentures
shall in all respects be entitled to the same benefits and subject to the same
limitations under this Indenture as Debentures in certificated form
authenticated and delivered hereunder.
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Section 2.8. Cancellation of Debentures Paid, Etc. All Debentures
surrendered for the purpose of payment, redemption, conversion, exchange or
registration of transfer, shall, if surrendered to the Company or any paying
agent or any Debenture registrar or any conversion agent, be surrendered to the
Trustee and promptly canceled by it, or, if surrendered to the Trustee, shall be
promptly canceled by it, and no Debentures shall be issued in lieu thereof
except as expressly permitted by any of the provisions of this Indenture. The
Trustee shall return such canceled Debentures to the Company. If the Company
shall acquire any of the Debentures, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such Debentures
unless and until the same are delivered to the Trustee for cancellation.
Section 2.9. CUSIP Numbers. The Company in issuing the Debentures may use
"CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Debentureholders;
provided that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Debentures or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Debentures, and any such redemption shall
not be affected by any defect in or omission of such numbers. The Company will
promptly notify the Trustee in writing of any change in the CUSIP numbers.
ARTICLE III
REDEMPTION OF DEBENTURES
Section 3.1. (a) Provisional Redemption by the Company prior to February
15, 2003. The Debentures may be redeemed by the Company (a "Provisional
Redemption"), in whole or in part, at any time prior to February 15, 2003, upon
notice as set forth in Section 3.2, at a redemption price equal to $1,000 per
Debenture to be redeemed plus accrued and unpaid interest, if any (including
Liquidated Damages Amount, if any), to the date of redemption (the "Provisional
Redemption Date") if (i) the closing price of the Common Stock shall have
exceeded 150% of the Conversion Price then in effect for at least 20 Trading
Days in any consecutive 30-Trading Day period ending on the Trading Day prior to
the date of mailing of the notice of redemption pursuant to Section 3.2 (the
"Notice Date") and (ii) (A) the shelf registration statement covering resales of
the Debentures and the Common Stock issuable upon conversion of the Debentures
is effective and available for use and is expected to remain effective and
available for use for the 30 days immediately following the Provisional
Redemption Date, or (B) the Company is no longer required under the terms of the
Registration Rights Agreement to maintain the effectiveness of such registration
statement.
Upon any such Provisional Redemption, the Company shall make an additional
payment (the "Make-Whole Payment") with respect to the Debentures called for
redemption to holders on the Notice Date in an amount equal to $230.77 per
$1,000 Debenture, less the amount of any interest actually paid on such
Debenture prior to or in connection with the Provisional Redemption. The Company
shall make
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the Make-Whole Payment on all Debentures called for Provisional Redemption,
including any Debentures converted into Common Stock pursuant to the terms
hereof after the Notice Date and prior to the Provisional Redemption Date.
(b) Redemption by the Company after February 15, 2003. At any time on or
after February 15, 2003, and prior to maturity, if (i) the closing price of the
Common Stock shall have exceeded 120% of the Conversion Price then in effect for
at least 20 Trading Days in any consecutive 30-Trading Day period ending on the
Trading Day prior to the date of mailing of the notice of redemption pursuant to
Section 3.2 and (ii) the shelf registration statement covering resales of the
Debentures and the Common Stock issuable upon conversion of the Debentures is
effective and available for use and is expected to remain effective and
available for use for the 30 days immediately following the date of redemption
(the "Optional Redemption Date"), the Company may, at its option (an "Optional
Redemption"), redeem all or from time to time any part of the Debentures on any
date prior to maturity, upon notice as set forth in Section 3.2, and at the
optional redemption prices set forth in the form of Debenture attached as
Exhibit A hereto, together with accrued interest to, but excluding, the date
fixed for redemption.
Section 3.2. Notice of Redemption; Selection of Debentures. In case the
Company shall desire to exercise the right to redeem all or, as the case may be,
any part of the Debentures pursuant to Section 3.1 (Provisional Redemption or
Optional Redemption), it shall fix a date for redemption and it or, at its
written request received by the Trustee not fewer than forty-five (45) days
prior (or such shorter period of time as may be acceptable to the Trustee) to
the date fixed for redemption, the Trustee in the name of and at the expense of
the Company, shall mail or cause to be mailed a notice of such redemption not
less than thirty (30) nor more than sixty (60) days prior to the date fixed for
redemption to the holders of Debentures so to be redeemed as a whole or in part
at their last addresses as the same appear on the Debenture register; provided
that if the Company shall give such notice, it shall also give written notice,
and written notice of the Debentures to be redeemed, to the Trustee. Such
mailing shall be by first class mail. The notice if mailed in the manner herein
provided shall be conclusively presumed to have been duly given, whether or not
the holder receives such notice. In any case, failure to give such notice by
mail or any defect in the notice to the holder of any Debenture designated for
redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Debenture.
Each such notice of redemption shall specify the aggregate principal
amount of Debentures to be redeemed, the CUSIP numbers, the date fixed for
redemption (which shall be a Business Day), whether or not such redemption is a
Provisional Redemption or an Optional Redemption, the redemption price at which
Debentures are to be redeemed, the place or places of payment, that payment will
be made upon presentation and surrender of such Debentures, that interest
accrued to the date fixed for redemption will be paid as specified in said
notice, and that on and after said date interest thereon or on the portion
thereof to be redeemed will cease to accrue. Such notice shall also state the
current Conversion Price and the date on which the right to convert such
Debentures or portions thereof into Common Stock will expire. If such redemption
is a Provisional Redemption, such notice shall also state the amount of the
Make-Whole Payment. If fewer than all the Debentures are to be redeemed, the
notice of redemption shall identify the
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Debentures to be redeemed (including CUSIP numbers, if any). In case any
Debenture is to be redeemed in part only, the notice of redemption shall state
the portion of the principal amount thereof to be redeemed and shall state that
on and after the date fixed for redemption, upon surrender of such Debenture, a
new Debenture or Debentures in principal amount equal to the unredeemed portion
thereof will be issued.
On or prior to the redemption date specified in the notice of
redemption given as provided in this Section 3.2, the Company will deposit with
the Trustee or with one or more paying agents (or, if the Company is acting as
its own paying agent, set aside, segregate and hold in trust as provided in
Section 5.4) (i) an amount of money sufficient to redeem on the redemption date
all the Debentures (or portions thereof) so called for redemption (other than
those theretofore surrendered for conversion into Common Stock) at the
appropriate redemption price, together with accrued interest to, but excluding,
the date fixed for redemption, (ii) with respect to Debentures called for
Provisional Redemption pursuant to Section 3.1(a), an amount of money sufficient
to pay the Make-Whole Payment for all the Debentures (or portions thereof)
called for redemption (including those surrendered for conversion into Common
Stock after the Notice Date and prior to the Provisional Redemption Date);
provided that if such payment is made on the redemption date it must be received
by the Trustee or paying agent, as the case may be, by 10:00 a.m. New York City
time, on such date. If any Debenture called for redemption is converted pursuant
hereto, any money deposited with the Trustee or any paying agent or so
segregated and held in trust for the redemption of such Debenture shall be paid
to the Company upon its written request, or, if then held by the Company, shall
be discharged from such trust; provided that, with respect to a Provisional
Redemption, any money so deposited for payment of the Make-Whole Payment shall
remain segregated and held in trust for payment of the Make-Whole Payment which
shall be made on all Debentures called for Provisional Redemption, including
Debentures converted into shares of Common Stock after the Notice Date and prior
to the Provisional Redemption Date. Whenever any Debentures are to be redeemed,
the Company will give the Trustee written notice in the form of an Officers'
Certificate not fewer than forty-five (45) days (or such shorter period of time
as may be acceptable to the Trustee) prior to the redemption date as to the
aggregate principal amount of Debentures to be redeemed.
If fewer than all the Debentures are to be redeemed, the Trustee
shall select the Debentures or portions thereof of the Global Debenture or the
Debentures in certificated form to be redeemed (in principal amounts of $1,000
or integral multiples thereof), by lot, on a pro rata basis or by another method
the Trustee deems fair and appropriate. If any Debenture selected for partial
redemption is converted in part after such selection, the converted portion of
such Debenture shall be deemed (so far as may be) to be the portion to be
selected for redemption. The Debentures (or portions thereof) so selected shall
be deemed duly selected for redemption for all purposes hereof, notwithstanding
that any such Debenture is converted as a whole or in part before the mailing of
the notice of redemption.
Upon any redemption of less than all Debentures, the Company and the
Trustee may (but need not) treat as outstanding any Debentures surrendered for
conversion during the period of fifteen (15) days next preceding the mailing of
a notice of redemption and may (but need not) treat as outstanding any
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Debenture authenticated and delivered during such period in exchange for the
unconverted portion of any Debenture converted in part during such period.
Section 3.3. Payment of Debentures Called for Redemption. If notice of
redemption has been given as above provided, the Debentures or portion of
Debentures with respect to which such notice has been given shall, unless
converted into Common Stock pursuant to the terms hereof, become due and payable
on the date fixed for redemption and at the place or places stated in such
notice at the applicable redemption price, together with interest accrued to
(but excluding) the date fixed for redemption and, with respect Debentures
called for Provisional Redemption (including Debentures converted into Common
Stock pursuant to the terms hereof after the Notice Date and prior to the
Provisional Redemption Date), the Make-Whole Payment, and on and after said date
(unless the Company shall default in the payment of such Debentures at the
redemption price, together with interest accrued to said date), interest on the
Debentures or portion of Debentures so called for redemption shall cease to
accrue and such Debentures shall cease after the close of business on the
Business Day next preceding the date fixed for redemption to be convertible into
Common Stock and, except as provided in Sections 8.5 and 13.4, to be entitled to
any benefit or security under this Indenture, and the holders thereof shall have
no right in respect of such Debentures except the right to receive the
redemption price thereof and unpaid interest to (but excluding) the date fixed
for redemption and, with respect Debentures called for Provisional Redemption
(including Debentures converted into Common Stock pursuant to the terms hereof
after the Notice Date and prior to the Provisional Redemption Date), the
Make-Whole Payment. On presentation and surrender of such Debentures at a place
of payment in said notice specified, the said Debentures or the specified
portions thereof shall be paid and redeemed by the Company at the applicable
redemption price, together with interest accrued thereon to (but excluding) the
date fixed for redemption and with respect to Debentures called for Provisional
Redemption (including Debentures converted into Common Stock pursuant to the
terms hereof after the Notice Date and prior to the Provisional Redemption
Date), the Make-Whole Payment; provided that, if the applicable redemption date
is an interest payment date, the semi-annual payment of interest becoming due on
such date shall be payable to the holders of such Debentures registered as such
on the relevant record date instead of the holders surrendering such Debentures
for redemption on such date.
Upon presentation of any Debenture redeemed in part only, the
Company shall execute and the Trustee shall authenticate and make available for
delivery to the holder thereof, at the expense of the Company, a new Debenture
or Debentures, of authorized denominations, in principal amount equal to the
unredeemed portion of the Debentures so presented.
Notwithstanding the foregoing, the Trustee shall not redeem any
Debentures or mail any notice of optional redemption during the continuance of a
default in payment of interest or premium on the Debentures or of any Event of
Default of which, in the case of any Event of Default other than under Sections
7.1 (a) or 7.1 (b), a Responsible Officer of the Trustee has actual knowledge.
If any Debenture called for redemption shall not be so paid upon surrender
thereof for redemption, the principal and premium, if any (including the
Make-Whole Payment, if any), shall, until paid or duly provided for, bear
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interest from the date fixed for redemption at the rate borne by the Debenture
and such Debenture shall remain convertible into Common Stock until the
principal and premium, if any (including the Make-Whole Payment, if any), shall
have been paid or duly provided for.
Section 3.4. Conversion Arrangement on Call for Redemption. In connection
with any redemption of Debentures, the Company may arrange for the purchase and
conversion of any Debentures by an agreement with one or more investment bankers
or other purchasers to purchase such Debentures by paying to the Trustee in
trust for the Debentureholders, on or before the date fixed for redemption, an
amount not less than the applicable redemption price, together with interest
accrued to (but excluding) the date fixed for redemption, of such Debentures
and, in connection with a Provisional Redemption, the Make-Whole Payment.
Notwithstanding anything to the contrary contained in this Article III, the
obligation of the Company to pay the redemption price of such Debentures,
together with interest accrued to (but excluding) the date fixed for redemption
and, in connection with a Provisional Redemption, the Make-Whole Payment, shall
be deemed to be satisfied and discharged to the extent such amount is so paid by
such purchasers. If such an agreement is entered into, a copy of which will be
filed with the Trustee prior to the date fixed for redemption, any Debentures
not duly surrendered for conversion by the holders thereof may, at the option of
the Company, be deemed, to the fullest extent permitted by law, acquired by such
purchasers from such holders and (notwithstanding anything to the contrary
contained in Article XV) surrendered by such purchasers for conversion, all as
of immediately prior to the close of business on the date fixed for redemption
(and the right to convert any such Debentures shall be extended through such
time), subject to payment of the above amount as aforesaid (including the
Make-Whole Payment, if any, with respect to all Debentures called for
Provisional Redemption). At the written direction of the Company, the Trustee
shall hold and dispose of any such amount paid to it in the same manner as it
would monies deposited with it by the Company for the redemption of Debentures.
Without the Trustee's prior written consent, no arrangement between the Company
and such purchasers for the purchase and conversion of any Debentures shall
increase or otherwise affect any of the powers, duties, responsibilities or
obligations of the Trustee as set forth in this Indenture.
Section 3.5. Redemption at Option of Holders.
(a) If there shall occur a Fundamental Change, then each
Debentureholder shall have the right, at such holder's option, to require the
Company to redeem all of such holder's Debentures, or any portion thereof that
is an integral multiple of $1,000 principal amount, on the date (the "Repurchase
Date") that is thirty (30) days after the date of the Company Notice (as defined
in Section 3.5(b) below) of such Fundamental Change (or, if such 30th day is not
a Business Day, the next succeeding Business Day) at a redemption price equal to
100% of the principal amount thereof, together with accrued interest to the date
of redemption ; provided that, if such Repurchase Date is February 15 or August
15, then the interest payable on such date shall be paid to the holders of
record of the Debentures on the next preceding January 31 or July 31,
respectively.
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Upon presentation of any Debenture redeemed in part only, the
Company shall execute and, upon the Company's written direction to the Trustee,
the Trustee shall authenticate and deliver to the holder thereof, at the expense
of the Company, a new Debenture or Debentures, of authorized denominations, in
principal amount equal to the unredeemed portion of the Debentures so presented.
(b) On or before the tenth day after the occurrence of a Fundamental
Change, the Company, or, at its written request (which must be received by the
Trustee at least five (5) Business Days prior to the date the Trustee is
requested to give notice as described below), the Trustee in the name of and at
the expense of the Company, shall mail or cause to be mailed to all holders of
record on the date of the Fundamental Change a notice (the "Company Notice") of
the occurrence of such Fundamental Change and of the redemption right at the
option of the holders arising as a result thereof. Such notice shall be mailed
in the manner and with the effect set forth in the first paragraph of Section
3.2. The Company shall also deliver a copy of the Company Notice to the Trustee
at such time as it is mailed to Debentureholders.
Each Company Notice shall specify the circumstances constituting the
Fundamental Change, the Repurchase Date, the price at which the Company shall be
obligated to redeem Debentures, the latest time on the Repurchase Date by which
the holder must exercise the redemption right (the "Fundamental Change
Expiration Time"), that the holder shall have the right to withdraw any
Debentures surrendered prior to the Fundamental Change Expiration Time, a
description of the procedure which a Debentureholder must follow to exercise
such redemption right and to withdraw any surrendered Debentures, the place or
places where the holder is to surrender such holder's Debentures, and the amount
of interest accrued on each Debenture to the Repurchase Date.
No failure of the Company to give the foregoing notices and no
defect therein shall limit the Debentureholders' redemption rights or affect the
validity of the proceedings for the repurchase of the Debentures pursuant to
this Section 3.5.
(c) For a Debenture to be so redeemed at the option of the holder,
the Company must receive at the office or agency of the Company maintained for
that purpose or, at the option of such holder, the Corporate Trust Office, such
Debenture with the form entitled "Option to Elect Repayment Upon A Fundamental
Change" on the reverse thereof duly completed, together with such Debentures
duly endorsed for transfer, on or before the Fundamental Change Expiration Time.
All questions as to the validity, eligibility (including time of receipt) and
acceptance of any Debenture for repayment shall be determined by the Company,
whose determination shall be final and binding absent manifest error.
(d) On or prior to the Repurchase Date, the Company will deposit
with the Trustee or with one or more paying agents (or, if the Company is acting
as its own paying agent, set aside, segregate and hold in trust as provided in
Section 5.4) an amount of money sufficient to repay on the Repurchase Date all
the Debentures to be repaid on such date at the redemption price, together with
accrued interest to (but excluding) the Repurchase Date; provided that if such
payment is made on the Repurchase Date it must be received by the Trustee or
paying agent, as the case may be, by 10:00 a.m.
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New York City time, on such date. Payment for Debentures surrendered for
redemption (and not withdrawn) prior to the Fundamental Change Expiration Time
will be made promptly (but in no event more than five (5) Business Days)
following the Repurchase Date by mailing checks for the amount payable to the
holders of such Debentures entitled thereto as they shall appear on the
Debenture register of the Company.
(e) In the case of a reclassification, change of the outstanding
shares of Common Stock, consolidation, merger, combination, sale or conveyance
to which Section 15.6 applies, in which the Common Stock of the Company is
changed or exchanged as a result into the right to receive stock, securities or
other property or assets (including cash), which includes shares of Common Stock
of the Company or another Person that are, or upon issuance will be, traded on a
United States national securities exchange or approved for trading on an
established automated over-the-counter trading market in the United States and
such shares constitute at the time such change or exchange becomes effective in
excess of 50% of the aggregate fair market value of such stock, securities or
other property or assets (including cash), then the Person formed by such
consolidation or resulting from such merger or which acquires such assets, as
the case may be, shall execute and deliver to the Trustee a supplemental
indenture (accompanied by an Opinion of Counsel that such supplemental indenture
complies with the Trust Indenture Act as in force at the date of execution of
such supplemental indenture) modifying the provisions of this Indenture relating
to the right of holders of the Debentures to cause the Company to repurchase the
Debentures following a Fundamental Change, including without limitation the
applicable provisions of this Section 3.5 and the definitions of Common Stock
and Fundamental Change, as appropriate, as determined in good faith by the
Company, to make such provisions apply to the common stock and the issuer
thereof if different from the Company and Common Stock of the Company (in lieu
of the Company and the Common Stock of the Company).
(f) The Company will comply with the provisions of Rule 13e-4 and
any other tender offer rules under the Exchange Act to the extent then
applicable in connection with the redemption rights of the holders of Debentures
in the event of a Fundamental Change.
ARTICLE IV
SUBORDINATION OF DEBENTURES
Section 4.1. Agreement of Subordination. The Company covenants and
agrees, and each holder of Debentures issued hereunder by its acceptance thereof
likewise covenants and agrees, that all Debentures shall be issued subject to
the provisions of this Article IV; and each Person holding any Debenture,
whether upon original issue or upon transfer, assignment or exchange thereof,
accepts and agrees to be bound by such provisions.
The payment of the principal of, premium, if any, and interest
(including Liquidated Damages, if any) on all Debentures (including, but not
limited to, the redemption price and Make-Whole
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Payment, if any, with respect to the Debentures called for redemption in
accordance with Section 3.2 or submitted for redemption in accordance with
Section 3.5, as the case may be, as provided in the Indenture) issued hereunder
shall, to the extent and in the manner hereinafter set forth, be subordinated
and subject in right of payment to the prior payment in full of all Senior
Obligations, whether outstanding at the date of this Indenture or thereafter
incurred.
No provision of this Article IV shall prevent the occurrence of any
default or Event of Default hereunder.
Section 4.2. Payments to Debentureholders. No payment shall be made with
respect to the principal of, premium, if any, or interest (including Liquidated
Damages, if any) on the Debentures (including, but not limited to, the
redemption price and Make-Whole Payment, if any, with respect to the Debentures
to be called for redemption in accordance with Section 3.2 or submitted for
redemption in accordance with Section 3.5, as the case may be, as provided in
this Indenture), except payments and distributions made by the Trustee as
permitted by the first or second paragraph of Section 4.5, if:
(i) a default in the payment of principal, premium, if any,
interest, rent or other obligations in respect of Senior Obligations occurs and
is continuing (a "Payment Default"), unless and until such Payment Default shall
have been cured or waived or shall have ceased to exist; or
(ii) a default, other than a Payment Default, on any Designated
Senior Obligations occurs and is continuing that then permits holders of such
Designated Senior Obligations to accelerate its maturity and the Trustee
receives a written notice of the default (a "Payment Blockage Notice") from a
holder of Designated Senior Obligations, a Representative of Designated Senior
Obligations or the Company (a "Non-Payment Default").
If the Trustee receives any Payment Blockage Notice pursuant to
clause (ii) above, no subsequent Payment Blockage Notice shall be effective for
purposes of this Section 4.2 unless and until at least 365 days shall have
elapsed since the initial effectiveness of the immediately prior Payment
Blockage Notice. No Non-Payment Default that existed or was continuing on the
date of delivery of any Payment Blockage Notice to the Trustee shall be, or be
made, the basis for a subsequent Payment Blockage Notice.
The Company may and shall resume payments on and distributions in
respect of the Debentures, including any past scheduled payments of the
principal of, premium, if any, and interest (including Liquidated Damages, if
any) on such Debentures (including, but not limited to, the redemption price and
Make-Whole Payment, if any, with respect to the Debentures to be called for
redemption in accordance with Section 3.2 or submitted for redemption in
accordance with Section 3.5, as the case may be, as provided in this Indenture),
to which the holders of the Debentures would have been entitled but for the
provisions of this Article IV:
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(1) in the case of a Payment Default, on the date upon which such
Payment Default is cured or waived or ceases to exist, and
(2) in the case of a Non-Payment Default, the earlier of (a) the
date upon which such default is cured or waived or ceases to
exist or (b) 179 days after the Payment Blockage Notice is
received by the Trustee if the maturity of such Designated
Senior Obligations has not been accelerated and no Payment
Default with respect to any Senior Obligations has occurred
which has not been cured or waived or ceased to exist (in such
event clause (1) above shall instead be applicable),
unless this Article IV otherwise prohibits the payment or distribution at the
time of such payment or distribution.
Upon any payment by the Company, or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding up or liquidation or reorganization of
the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become due upon all
Senior Obligations shall first be paid in full in cash or other payment
satisfactory to the holders of such Senior Obligations, or payment thereof in
accordance with its terms provided for in cash or other payment satisfactory to
the holders of such Senior Obligations before any payment is made on account of
the principal of, premium, if any, or interest (including Liquidated Damages, if
any) on the Debentures (except payments made pursuant to Article XIII from
monies deposited with the Trustee pursuant thereto prior to commencement of
proceedings for such dissolution, winding up, liquidation or reorganization);
and upon any such dissolution or winding up or liquidation or reorganization of
the Company or bankruptcy, insolvency, receivership or other proceeding, any
payment by the Company, or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to which the holders of the
Debentures or the Trustee would be entitled, except for the provision of this
Article IV, shall (except as aforesaid) be paid by the Company or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, or by the holders of the Debentures or by
the Trustee under this Indenture if received by them or it, directly to the
holders of Senior Obligations (pro rata to such holders on the basis of the
respective amounts of Senior Obligations held by such holders, or as otherwise
required by law or a court order) or their representative or representatives, or
to the trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Obligations may have been issued, as their respective
interests may appear, to the extent necessary to pay all Senior Obligations in
full, in cash or other payment satisfactory to the holders of such Senior
Obligations, after giving effect to any concurrent payment or distribution to or
for the holders of Senior Obligations, before any payment or distribution is
made to the holders of the Debentures or to the Trustee.
For purposes of this Article IV, the words, "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment
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of which is subordinated at least to the extent provided in this Article IV with
respect to the Debentures to the payment of all Senior Obligations which may at
the time be outstanding; provided that (i) the Senior Obligations are assumed by
the new corporation, if any, resulting from any reorganization or readjustment,
and (ii) the rights of the holders of Senior Obligations are not, without the
consent of such holders, altered by such reorganization or readjustment. The
consolidation of the Company with, or the merger of the Company into, another
corporation or the liquidation or dissolution of the Company following the
conveyance or transfer of its property as an entirety, or substantially as an
entirety, to another corporation upon the terms and conditions provided for in
Article XII shall not be deemed a dissolution, winding-up, liquidation or
reorganization for the purposes of this Section 4.2 if such other corporation
shall, as a part of such consolidation, merger, conveyance or transfer, comply
with the conditions stated in Article XII.
In the event of the acceleration of the Debentures because of an
Event of Default, no payment or distribution shall be made to the Trustee or any
holder of Debentures in respect of the principal of, premium, if any, or
interest (including Liquidated Damages, if any) on the Debentures (including,
but not limited to, the redemption price and the Make-Whole Payment, if any,
with respect to the Debentures called for redemption in accordance with Section
3.2 or submitted for redemption in accordance with Section 3.5, as the case may
be, as provided in the Indenture), except payments and distributions made by the
Trustee as permitted by the first or second paragraph of Section 4.5, until all
Senior Obligations have been paid in full in cash or other payment satisfactory
to the holders of Senior Obligations or such acceleration is rescinded in
accordance with the terms of this Indenture. If payment of the Debentures is
accelerated because of an Event of Default, the Company shall promptly notify
holders of Senior Obligations of the acceleration.
In the event that, notwithstanding the foregoing provisions, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities (including, without limitation, by way
of setoff or otherwise), prohibited by the foregoing provisions in this Section
4.2, shall be received by the Trustee or the holders of the Debentures before
all Senior Obligations are paid in full in cash or other payment satisfactory to
the holders of such Senior Obligations, or provision is made for such payment
thereof in accordance with its terms in cash or other payment satisfactory to
the holders of such Senior Obligations, such payment or distribution shall be
held in trust for the benefit of and shall be paid over or delivered to the
holders of Senior Obligations or their representative or representatives, or to
the trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Obligations may have been issued, as their respective
interests may appear, as calculated by the Company, for application to the
payment of any Senior Obligations remaining unpaid to the extent necessary to
pay all Senior Obligations in full in cash or other payment satisfactory to the
holders of such Senior Obligations, after giving effect to any concurrent
payment or distribution to or for the holders of such Senior Obligations.
Nothing in this Section 4.2 shall apply to claims of, or payments
to, the Trustee under or pursuant to Section 8.6. This Section 4.2 shall be
subject to the further provisions of Section 4.5.
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Section 4.3. Subrogation of Debentures. Subject to the payment in full of
all Senior Obligations, the rights of the holders of the Debentures shall be
subrogated to the extent of the payments or distributions made to the holders of
such Senior Obligations pursuant to the provisions of this Article IV (equally
and ratably with the holders of all indebtedness of the Company which by its
express terms is subordinated to other indebtedness of the Company to
substantially the same extent as the Debentures are subordinated and is entitled
to like rights of subrogation) to the rights of the holders of Senior
Obligations to receive payments or distributions of cash, property or securities
of the Company applicable to the Senior Obligations until the principal,
premium, if any, and interest (including Liquidated Damages, if any) on the
Debentures shall be paid in full; and, for the purposes of such subrogation, no
payments or distributions to the holders of the Senior Obligations of any cash,
property or securities to which the holders of the Debentures or the Trustee
would be entitled except for the provisions of this Article IV, and no payment
over pursuant to the provisions of this Article IV, to or for the benefit of the
holders of Senior Obligations by holders of the Debentures or the Trustee,
shall, as between the Company, its creditors other than holders of Senior
Obligations, and the holders of the Debentures, be deemed to be a payment by the
Company to or on account of the Senior Obligations; and no payments or
distributions of cash, property or securities to or for the benefit of the
holders of the Debentures pursuant to the subrogation provisions of this Article
IV, which would otherwise have been paid to the holders of Senior Obligations
shall be deemed to be a payment by the Company to or for the account of the
Debentures. It is understood that the provisions of this Article IV are and are
intended solely for the purposes of defining the relative rights of the holders
of the Debentures, on the one hand, and the holders of the Senior Obligations,
on the other hand.
Nothing contained in this Article IV or elsewhere in this Indenture
or in the Debentures is intended to or shall impair, as among the Company, its
creditors other than the holders of Senior Obligations, and the holders of the
Debentures, the obligation of the Company, which is absolute and unconditional,
to pay to the holders of the Debentures the principal of, premium, if any, and
interest (including Liquidated Damages, if any) on the Debentures as and when
the same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the holders of the Debentures
and creditors of the Company other than the holders of the Senior Obligations,
nor shall anything herein or therein prevent the Trustee or the holder of any
Debenture from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article IV of the holders of Senior Obligations in respect of cash, property or
securities of the Company received upon the exercise of any such remedy.
Section 4.4. Authorization to Effect Subordination. Each holder of a
Debenture by the holder's acceptance thereof authorizes and directs the Trustee
on the holder's behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in this Article IV and appoints the
Trustee to act as the holder's attorney-in-fact for any and all such purposes.
If the Trustee does not file a proper proof of claim or proof of debt in the
form required in any proceeding referred to in the second paragraph of Section
7.2 hereof at least thirty (30) days before the expiration of the time to file
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such claim, the holders of any Senior Obligations or their representatives are
hereby authorized to file an appropriate claim for and on behalf of the holders
of the Debentures.
Section 4.5. Notice to Trustee. The Company shall give prompt written
notice in the form of an Officers' Certificate to a Responsible Officer of the
Trustee and to any paying agent of any fact known to the Company which would
prohibit the making of any payment of monies to or by the Trustee or any paying
agent in respect of the Debentures pursuant to the provisions of this Article
IV. Notwithstanding the provisions of this Article IV or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the existence
of any facts which would prohibit the making of any payment of monies to or by
the Trustee in respect of the Debentures pursuant to the provisions of this
Article IV, unless and until a Responsible Officer of the Trustee shall have
received written notice thereof at the Corporate Trust Office from the Company
(in the form of an Officers' Certificate) or a Representative or a holder or
holders of Senior Obligations or from any trustee thereof; and before the
receipt of any such written notice, the Trustee shall be entitled in all
respects to assume that no such facts exist; provided that if on a date not less
than two (2) Business Days prior to the date upon which by the terms hereof any
such monies may become payable for any purpose (including, without limitation,
the payment of the principal of, or premium, if any, or interest (including
Liquidated Damages, if any) on any Debenture) the Trustee shall not have
received, with respect to such monies, the notice provided for in this Section
4.5, then, anything herein contained to the contrary notwithstanding, the
Trustee shall have full power and authority to apply monies received to the
purpose for which they were received, and shall not be affected by any notice to
the contrary which may be received by it on or after such prior date.
Notwithstanding anything in this Article IV to the contrary, nothing
shall prevent any payment by the Trustee to the Debentureholders of monies
deposited with it pursuant to Section 13.1, provided such deposit was not in
violation of this Article IV, and any such payment shall not be subject to the
provisions of Section 4.1 or 4.2.
The Trustee shall be entitled to conclusively rely on the delivery
to it of a written notice by a Representative or a person representing himself
to be a holder of Senior Obligations (or a trustee on behalf of such holder) to
establish that such notice has been given by a Representative or a holder of
Senior Obligations or a trustee on behalf of any such holder or holders. The
Trustee shall not be required to make any payment or distribution to or on
behalf of a holder of Senior Obligations pursuant to this Article IV unless it
has received reasonably satisfactory evidence as to the amount of Senior
Obligations held by such person, the extent to which such person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such person under this Article IV.
Section 4.6. Trustee's Relation to Senior Obligations. The Trustee in its
individual capacity shall be entitled to all the rights set forth in this
Article IV in respect of any Senior Obligations at any time held by it, to the
same extent as any other holder of Senior Obligations, and nothing in Section
8.13 or elsewhere in this Indenture shall deprive the Trustee of any of its
rights as such holder.
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With respect to the holders of Senior Obligations, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article IV, and no implied covenants or
obligations with respect to the holders of Senior Obligations shall be read into
this Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Obligations.
Section 4.7. No Impairment of Subordination. No right of any present or
future holder of any Senior Obligations to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Company with the
terms, provisions and covenants of this Indenture, regardless of any knowledge
thereof which any such holder may have or otherwise be charged with.
Section 4.8. Certain Conversions Not Deemed Payment. For the purposes of
this Article IV only, (1) the issuance and delivery of junior securities upon
conversion of Debentures in accordance with Article XV shall not be deemed to
constitute a payment or distribution on account of the principal of, premium, if
any, or interest (including Liquidated Damages, if any) on Debentures or on
account of the purchase or other acquisition of Debentures, and (2) the payment,
issuance or delivery of cash (except in satisfaction of fractional shares
pursuant to Section 15.3), property or securities (other than junior securities)
upon conversion of a Debenture shall be deemed to constitute payment on account
of the principal of, premium, if any, or interest (including Liquidated Damages,
if any) on such Debenture. For the purposes of this Section 4.8, the term
"junior securities" means (a) shares of any stock of any class of the Company or
(b) securities of the Company that are subordinated in right of payment to all
Senior Obligations that may be outstanding at the time of issuance or delivery
of such securities to substantially the same extent as, or to a greater extent
than, the Debentures are so subordinated as provided in this Article. Nothing
contained in this Article IV or elsewhere in this Indenture or in the Debentures
is intended to or shall impair, as among the Company, its creditors (other than
holders of Senior Obligations) and the Debentureholders, the right, which is
absolute and unconditional, of the Holder of any Debenture to convert such
Debenture in accordance with Article XV.
Section 4.9. Article Applicable to Paying Agents. If at any time any
paying agent other than the Trustee shall have been appointed by the Company and
be then acting hereunder, the term "Trustee" as used in this Article shall
(unless the context otherwise requires) be construed as extending to and
including such paying agent within its meaning as fully for all intents and
purposes as if such paying agent were named in this Article in addition to or in
place of the Trustee; provided, however, that the first paragraph of Section 4.5
shall not apply to the Company or any Affiliate of the Company if it or such
Affiliate acts as paying agent.
The Trustee shall not be responsible for the actions or inactions of
any other paying agents (including the Company if acting as its own paying
agent) and shall have no control of any funds held by such other paying agents.
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Section 4.10. Senior Obligations Entitled to Rely. The holders of Senior
Obligations (including, without limitation, Designated Senior Obligations) shall
have the right to rely upon this Article IV, and no amendment or modification of
the provisions contained herein shall diminish the rights of such holders unless
such holders shall have agreed in writing thereto.
Section 4.11. Reliance on Judicial Order or Certificate of Liquidating
Agent. Upon any payment or distribution of assets of the Company referred to in
this Article, the Trustee and the Debentureholders shall be entitled to
conclusively rely upon any order or decree entered by any court of competent
jurisdiction in which such insolvency, bankruptcy, receivership, liquidation,
reorganization, dissolution, winding up or similar case or proceeding is
pending, or a certificate of the trustee in bankruptcy, liquidating trustee,
custodian, receiver, assignee for the benefit of creditors, agent or other
person making such payment or distribution, delivered to the Trustee or to the
Debentureholders, for the purpose of ascertaining the persons entitled to
participate in such payment or distribution, the holders of Senior Obligations
and other indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article.
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
Section 5.1. Payment of Principal, Premium and Interest. The Company
covenants and agrees that it will duly and punctually pay or cause to be paid
the principal of and premium, if any (including the redemption price and
Make-Whole Payment upon redemption pursuant to Article III), and interest
(including Liquidated Damages, if any) on each of the Debentures at the places,
at the respective times and in the manner provided herein and in the Debentures.
Each installment of interest on the Debentures due on any semi-annual interest
payment date may be paid either (i) by check mailed to the address of the person
entitled thereto as it appears in the Debenture register; provided that the
holder of Debentures with an aggregate principal amount in excess of $2,000,000
shall, at the written election of such holder, be paid by wire transfer in
immediately available funds; or (ii) by transfer to an account maintained by
such person located in the United States; provided, however, that payments to
the Depositary will be made by wire transfer of immediately available funds to
the account of Depositary or its nominee.
Section 5.2. Maintenance of Office or Agency. The Company will maintain
an office or agency in The Borough of Manhattan, The City of New York, where the
Debentures may be surrendered for registration of transfer or exchange or for
presentation for payment or for conversion or redemption and where notices and
demands to or upon the Company in respect of the Debentures and this Indenture
may be served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency not
designated or appointed by the Trustee. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office or the office or agency of
the Trustee in The Borough of Manhattan, The City of
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New York (which shall initially be located at 450 West 33rd Street, 15th Floor,
New York, New York 10001-2697).
The Company may also from time to time designate co-registrars and
one or more other offices or agencies where the Debentures may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations. The Company will give prompt written notice of any such
designation or rescission and of any change in the location of any such other
office or agency.
The Company hereby initially designates the Trustee as paying agent,
Debenture registrar, Custodian and conversion agent and each of the Corporate
Trust Office of the Trustee and the office or agency of the Trustee in The
Borough of Manhattan, The City of New York (which shall initially be located at
The Chase Manhattan Bank, 450 West 33rd Street, 15th Floor, New York, New York
10001-2697), shall be considered as one such office or agency of the Company for
each of the aforesaid purposes.
So long as the Trustee is the Debenture registrar, the Trustee
agrees to mail, or cause to be mailed, the notice set forth in Section 8.10(a)
and, if requested by the Company, the notice set forth in the third paragraph of
Section 8.11. If co-registrars have been appointed in accordance with this
Section, the Trustee shall mail such notices only to the Company and the holders
of Debentures it can identify from its records.
Section 5.3. Appointments to Fill Vacancies in Trustee's Office. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 8.10, a Trustee, so that there
shall at all times be a Trustee hereunder.
Section 5.4 Provisions as to Paying Agent.
(a) If the Company shall appoint a paying agent other than the
Trustee, or if the Trustee shall appoint such a paying agent, it will cause such
paying agent to execute and deliver to the Trustee an instrument in which such
agent shall agree with the Trustee, subject to the provisions of this Section
5.4:
(1) that it will hold all sums held by it as such agent for
the payment of the principal of and premium, if any, or interest on the
Debentures (whether such sums have been paid to it by the Company or by
any other obligor on the Debentures) in trust for the benefit of the
holders of the Debentures;
(2) that it will give the Trustee written notice of any
failure by the Company (or by any other obligor on the Debentures) to make
any payment of the principal of and premium, if any, or interest on the
Debentures when the same shall be due and payable; and
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(3) that at any time during the continuance of an Event of
Default, upon request of the Trustee, it will forthwith pay to the Trustee
all sums so held in trust.
The Company shall, on or before each due date of the principal of,
premium, if any, or interest on the Debentures, deposit with the paying agent a
sum sufficient to pay such principal, premium, if any, or interest, and (unless
such paying agent is the Trustee) the Company will promptly notify the Trustee
of any failure to take such action; provided that if such deposit is made on the
due date, such deposit shall be received by the paying agent by 10:00 a.m. New
York City time, on such date.
(b) If the Company shall act as its own paying agent, it will, on or
before each due date of the principal of, premium, if any, or interest
(including Liquidated Damages, if any) on the Debentures, set aside, segregate
and hold in trust for the benefit of the holders of the Debentures a sum
sufficient to pay such principal, premium, if any, or interest (including
Liquidated Damages, if any) so becoming due and will notify the Trustee in
writing of any failure to take such action and of any failure by the Company (or
any other obligor under the Debentures) to make any payment of the principal of,
premium, if any, or interest (including Liquidated Damages, if any) on the
Debentures when the same shall become due and payable.
(c) Anything in this Section 5.4 to the contrary notwithstanding,
the Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust by the Company or any paying agent hereunder
as required by this Section 5.4, such sums to be held by the Trustee upon the
trusts herein contained and upon such payment by the Company or any paying agent
to the Trustee, the Company or such paying agent shall be released from all
further liability with respect to such sums.
(d) Anything in this Section 5.4 to the contrary notwithstanding,
the agreement to hold sums in trust as provided in this Section 5.4 is subject
to Sections 13.3 and 13.4.
The Trustee shall not be responsible for the actions of any other paying
agents (including the Company if acting as its own paying agent) and shall have
no control of any funds held by such other paying agents.
Section 5.5. Existence. Subject to Article XII, the Company will do or
cause to be done all things necessary to preserve and keep in full force and
effect its existence and rights (charter and statutory); provided, however, that
the Company shall not be required to preserve any such right if the Company
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company and that the loss thereof is not
disadvantageous in any material respect to the holders.
Section 5.6. Maintenance of Properties. The Company will cause all
properties used or useful in the conduct of its business or the business of any
Significant Subsidiary to be maintained and kept in good condition, repair and
working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the
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judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section shall prevent the Company from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, in the judgment of the Company, desirable in the conduct of
its business or the business of any Significant Subsidiary and not
disadvantageous in any material respect to the holders.
Section 5.7. Payment of Taxes and Other Claims. The Company will pay or
discharge, or cause to be paid or discharged, before the same become delinquent,
(i) all taxes, assessments and governmental charges levied or imposed upon the
Company or any Significant Subsidiary or upon the income, profits or property of
the Company or any Significant Subsidiary, (ii) all claims for labor, materials
and supplies which, if unpaid, might by law become a lien or charge upon the
property of the Company or any Significant Subsidiary and (iii) all stamps and
other duties, if any, which may be imposed by the United States or any political
subdivision thereof or therein in connection with the issuance, transfer,
exchange or conversion of any Debentures or with respect to this Indenture;
provided, however, that, in the case of clauses (i) and (ii), the Company shall
not be required to pay or discharge or cause to be paid or discharged any such
tax, assessment, charge or claim (A) if the failure to do so will not, in the
aggregate, have a material adverse impact on the Company, or (B) if the amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
Section 5.8. Rule 144A Information Requirement. Within the period prior
to the expiration of the holding period applicable to sales thereof under Rule
144(k) under the Securities Act (or any successor provision), the Company
covenants and agrees that it shall, during any period in which it is not subject
to Section 13 or 15(d) under the Exchange Act, make available to any holder or
beneficial holder of Debentures or any Common Stock issued upon conversion
thereof (other than a holder or beneficial holder of Debentures or any Common
Stock issued upon conversion thereof that is an Affiliate of the Company) which
continue to be Restricted Securities in connection with any sale thereof and any
prospective purchaser of Debentures or such Common Stock from such holder or
beneficial holder, the information required pursuant to Rule 144A(d)(4) under
the Securities Act upon the request of any holder or beneficial holder of the
Debentures or such Common Stock and it will take such further action as any
holder or beneficial holder of such Debentures or such Common Stock may
reasonably request, all to the extent required from time to time to enable such
holder or beneficial holder to sell its Debentures or Common Stock without
registration under the Securities Act within the limitation of the exemption
provided by Rule 144A, as such Rule may be amended from time to time. Upon the
request of any holder or any beneficial holder of the Debentures or such Common
Stock, the Company will deliver to such holder a written statement as to whether
it has complied with such requirements.
Section 5.9. Stay, Extension and Usury Laws. The Company covenants (to
the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would prohibit or
forgive the Company from paying all or any portion of the principal of, premium,
if any, or interest (including Liquidated Damages, if any) on the Debentures as
contemplated herein, wherever enacted, now or at any
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time hereafter in force, or which may affect the covenants or the performance of
this Indenture and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law has been enacted.
Section 5.10. Compliance Certificate. The Company shall deliver to the
Trustee, within one hundred twenty (120) days after the end of each fiscal year
of the Company, a certificate signed by either the principal executive officer,
principal financial officer or principal accounting officer of the Company,
stating whether or not to the best knowledge of the signer thereof the Company
is in default in the performance and observance of any of the terms, provisions
and conditions of this Indenture (without regard to any period of grace or
requirement of notice provided hereunder) and, if the Company shall be in
default, specifying all such defaults and the nature and status thereof of which
the signer may have knowledge.
The Company will deliver to a Responsible Officer of the Trustee,
forthwith upon becoming aware of any default in the performance or observance of
any covenant, agreement or condition contained in this Indenture, or any Event
of Default, an Officers' Certificate specifying with particularity such default
or Event of Default and further stating what action the Company has taken, is
taking or proposes to take with respect thereto.
Any notice required to be given under this Section 5.10 shall be
delivered to the Trustee at its Corporate Trust Office.
ARTICLE VI
DEBENTUREHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
Section 6.1. Debentureholders' Lists. The Company covenants and agrees
that it will furnish or cause to be furnished to the Trustee, semiannually, not
more than fifteen (15) days after each January 31 and July 31 in each year
beginning on July 31, 2000, and at such other times as the Trustee may request
in writing, within thirty (30) days after receipt by the Company of any such
request (or such lesser time as the Trustee may reasonably request in order to
enable it to timely provide any notice to be provided by it hereunder), a list
in such form as the Trustee may reasonably require of the names and addresses of
the holders of Debentures as of a date not more than fifteen (15) days (or such
other date as the Trustee may reasonably request in order to so provide any such
notices) prior to the time such information is furnished, except that no such
list need be furnished by the Company to the Trustee so long as the Trustee is
acting as the sole Debenture registrar.
Section 6.2. Preservation and Disclosure of Lists.
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(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and addresses of the
holders of Debentures contained in the most recent list furnished to it as
provided in Section 6.1 or maintained by the Trustee in its capacity as
Debenture registrar or co-registrar in respect of the Debentures, if so acting.
The Trustee may destroy any list furnished to it as provided in Section 6.1 upon
receipt of a new list so furnished.
(b) The rights of Debentureholders to communicate with other holders
of Debentures with respect to their rights under this Indenture or under the
Debentures, and the corresponding rights and duties of the Trustee, shall be as
provided by the Trust Indenture Act.
(c) Every Debentureholder, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of holders of Debentures
made pursuant to the Trust Indenture Act.
Section 6.3. Reports by Trustee
(a) Within sixty (60) days after August 15 of each year commencing
with the year 2000, the Trustee shall transmit to holders of Debentures such
reports dated as of August 15 of the year in which such reports are made
concerning the Trustee and its actions under this Indenture as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant thereto.
(b) A copy of such report shall, at the time of such transmission to
holders of Debentures, be filed by the Trustee with each stock exchange and
automated quotation system upon which the Debentures are listed and with the
Company. The Company will notify the Trustee in writing within a reasonable time
when the Debentures are listed on any stock exchange or automated quotation
system.
Section 6.4. Reports by Company. The Company shall file with the Trustee
(and the Commission if at any time after the Indenture becomes qualified under
the Trust Indenture Act), and transmit to holders of Debentures, such
information, documents and other reports and such summaries thereof, as may be
required pursuant to the Trust Indenture Act at the times and in the manner
provided pursuant to such Act, whether or not the Debentures are governed by
such Act; provided that any such information, documents or reports required to
be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act
shall be filed with the Trustee within fifteen (15) days after the same is so
required to be filed with the Commission. Delivery of such reports, information
and documents to the Trustee is for informational purposes only and the
Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to conclusively rely exclusively on
Officers' Certificates).
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ARTICLE VII
REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERSON AN EVENT OF DEFAULT
Section 7.1. Events of Default. In case one or more of the following
Events of Default (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body) shall have occurred and be
continuing:
(a) default in the payment of any installment of interest (including
Liquidated Damages, if any) upon any of the Debentures as and when the same
shall become due and payable, and continuance of such default for a period of
thirty (30) days, whether or not such payment is permitted under Article IV
hereof; or
(b) default in the payment of the principal of or premium, if any
(including the Make-Whole Payment, if any), on any of the Debentures as and when
the same shall become due and payable either at maturity or in connection with
any redemption pursuant to Article III, by acceleration or otherwise, whether or
not such payment is permitted under Article IV hereof; or
(c) failure on the part of the Company duly to observe or perform
any other of the covenants or agreements on the part of the Company in the
Debentures or in this Indenture (other than a covenant or agreement a default in
whose performance or whose breach is elsewhere in this Section 7.1 specifically
dealt with) continued for a period of sixty (60) days after the date on which
written notice of such failure, requiring the Company to remedy the same, shall
have been given to the Company by the Trustee, or to the Company and a
Responsible Officer of the Trustee by the holders of at least twenty-five
percent (25%) in aggregate principal amount of the Debentures at the time
outstanding determined in accordance with Section 9.4; or
(d) the Company or any Significant Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or any Significant Subsidiary or its or such
Significant Subsidiary's debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
Significant Subsidiary or any substantial part of the property of the Company or
any Significant Subsidiary, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it or any Significant Subsidiary, or shall
make a general assignment for the benefit of creditors, or shall fail generally
to pay its debts as they become due; provided that a liquidation or winding up
of a Significant Subsidiary pursuant to applicable corporate law shall not be
deemed an Event of Default hereunder; or
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(e) an involuntary case or other proceeding shall be commenced
against the Company or any Significant Subsidiary seeking liquidation,
reorganization or other relief with respect to it or any Significant Subsidiary
or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any Significant
Subsidiary or any substantial part of the property of the Company or any
Significant Subsidiary, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of ninety (90) consecutive days;
then, and in each and every such case (other than an Event of Default specified
in Section 7.1 (d) or (e) with respect to the Company), unless the principal of
all of the Debentures shall have already become due and payable, either the
Trustee or the holders of not less than twenty-five percent (25%) in aggregate
principal amount of the Debentures then outstanding hereunder determined in
accordance with Section 9.4, by notice in writing to the Company (and to the
Trustee if given by Debentureholders), may declare the principal of and premium,
if any, on all the Debentures and the interest accrued thereon (including
Liquidated Damages, if any) to be due and payable immediately, and upon any such
declaration the same shall become and shall be immediately due and payable,
anything in this Indenture or in the Debentures contained to the contrary
notwithstanding. If an Event of Default specified in Section 7. 1(d) or (e) with
respect to the Company occurs, the principal of all the Debentures and the
interest accrued thereon (including Liquidated Damages, if any) shall be
immediately and automatically due and payable without necessity of further
action on the part of the Trustee or the Debentureholders. This provision,
however, is subject to the conditions that if, at any time after the principal
of the Debentures shall have been so declared due and payable, and before any
judgment or decree for the payment of the monies due shall have been obtained or
entered as hereinafter provided, the Company shall pay or shall deposit with the
Trustee a sum sufficient to pay all matured installments of interest upon
(including Liquidated Damages, if any) all Debentures and the principal of and
premium, if any, on any and all Debentures which shall have become due otherwise
than by acceleration (with interest on overdue installments of interest
(including Liquidated Damages, if any) (to the extent that payment of such
interest is enforceable under applicable law) and on such principal and premium,
if any, at the rate borne by the Debentures, to the date of such payment or
deposit) and amounts due to the Trustee pursuant to Section 8.6, and if any and
all defaults under this Indenture, other than the nonpayment of principal of and
premium, if any, and accrued interest on (including Liquidated Damages, if any)
Debentures which shall have become due by acceleration, shall have been cured or
waived pursuant to Section 7.7 -- then and in every such case the holders of a
majority in aggregate principal amount of the Debentures then outstanding, by
written notice to the Company and to the Trustee, may waive all defaults or
Events of Default and rescind and annul such declaration and its consequences;
but no such waiver or rescission and annulment shall extend to or shall affect
any subsequent default or Event of Default, or shall impair any right consequent
thereon. The Company shall notify, in writing, a Responsible Officer of the
Trustee, promptly upon becoming aware thereof, of any Event of Default.
In case the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned because
of such waiver or rescission and
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annulment or for any other reason or shall have been determined adversely to the
Trustee, then and in every such case the Company, the holders of Debentures, and
the Trustee shall be restored respectively to their several positions and rights
hereunder, and all rights, remedies and powers of the Company, the holders of
Debentures, and the Trustee shall continue as though no such proceeding had been
taken.
Section 7.2. Payments of Debentures on Default; Suit Therefor. In the
event that the Trustee or the holders of not less than twenty-five percent (25%)
in aggregate principal amount of the Debentures then outstanding hereunder
determined in accordance with Section 9.4 have declared the principal of and
premium, if any, on all the Debentures and the interest accrued thereon
(including Liquidated Damages, if any) to be due and payable immediately in
accordance with Section 7.1, and the Company shall have failed forthwith to pay
such amounts, the Trustee, in its own name and as trustee of an express trust,
shall be entitled and empowered to institute any actions or proceedings at law
or in equity for the collection of the sums so due and unpaid (including such
further amounts as shall be sufficient to cover the costs and expenses of
collection, including compensation to the Trustee, its agents, attorneys,
custodians, nominees and counsel, and any expenses or liabilities incurred by
the Trustee hereunder other than through its negligence or bad faith), and may
prosecute any such action or proceeding to judgment or final decree, and may
enforce any such judgment or final decree against the Company or any other
obligor on the Debentures and collect in the manner provided by law out of the
property of the Company or any other obligor on the Debentures wherever situated
the monies adjudged or decreed to be payable.
In the case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Debentures under
Title 11 of the United States Code, or any other applicable law, or in case a
receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
sequestrator or similar official shall have been appointed for or taken
possession of the Company or such other obligor, the property of the Company or
such other obligor, or in the case of any other judicial proceedings relative to
the Company or such other obligor upon the Debentures, or to the creditors or
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal of the Debentures shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section 7.2, shall
be entitled and empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or claims for the whole amount of principal, premium, if
any, and interest (including Liquidated Damages, if any) owing and unpaid in
respect of the Debentures, and, in case of any judicial proceedings, to file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements, and advances of the
Trustee, its agents, and counsel) and of the Debentureholders allowed in such
judicial proceedings relative to the Company or any other obligor on the
Debentures, its or their creditors, or its or their property, and to collect and
receive any monies or other property payable or deliverable on any such claims,
and to distribute the same after the deduction of any amounts due the Trustee
under Section 8.6; and any receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, custodian or similar official in any such judicial
proceeding, is hereby authorized by each of the Debentureholders to make such
payments to the Trustee as administrative expenses associated with any
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such proceeding, and, in the event that the Trustee shall consent to the making
of such payments directly to the Debentureholders, to pay to the Trustee any
amount due it for reasonable compensation, expenses, advances and disbursements
of the Trustee and its agents, including counsel fees incurred by it up to the
date of such distribution and any other amounts due to the Trustee under Section
8.6 hereof. To the extent that such payment of reasonable compensation,
expenses, advances and disbursements of the Trustee, its agents, and counsel,
and any other amounts due to the Trustee under Section 8.6 hereof out of the
estate in any such proceedings shall be denied for any reason, payment of the
same shall be secured by a lien on, and shall be paid out of, any and all
distributions, dividends, monies, securities and other property which the
holders of the Debentures may be entitled to receive in such proceedings,
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Debentureholder any
plan of reorganization, arrangement, adjustment or composition affecting the
Debentureholder or the rights of any Debentureholder thereof, or to authorize
the Trustee to vote in respect of the claim of any Debentureholder in any such
proceeding.
All rights of action and of asserting claims under this Indenture, or
under any of the Debentures, may be enforced by the Trustee without the
possession of any of the Debentures, or the production thereof at any trial or
other proceeding relative thereto, and any such suit or proceeding instituted by
the Trustee shall be brought in its own name as trustee of an express trust, and
any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents, attorneys, custodians, nominees and counsel, be for the ratable
benefit of the holders of the Debentures.
In any proceedings brought by the Trustee (and in any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the holders
of the Debentures, and it shall not be necessary to make any holders of the
Debentures parties to any such proceedings.
Section 7.3. Application of Monies Collected by Trustee. Any monies
collected by the Trustee pursuant to this Article VII shall be applied in the
order following, at the date or dates fixed by the Trustee for the distribution
of such monies, upon presentation of the several Debentures, and stamping
thereon the payment, if only partially paid, and upon surrender thereof, if
fully paid:
First: To the payment of all amounts due the Trustee under Section
8.6;
Second: Subject to the provisions of Article IV, in case the
principal of the outstanding Debentures shall not have become due and be unpaid,
to the payment of interest on (including Liquidated Damages, if any) the
Debentures in default in the order of the maturity of the installments of such
interest, with interest (to the extent that such interest has been collected by
the Trustee) upon the overdue installments of interest (including Liquidated
Damages, if any) at the rate borne by the Debentures, such payments to be made
ratably to the persons entitled thereto;
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Third: Subject to the provisions of Article IV, in case the
principal of the outstanding Debentures shall have become due, by declaration or
otherwise, and be unpaid to the payment of the whole amount then owing and
unpaid upon the Debentures for principal and premium, if any, and interest
(including Liquidated Damages, if any), with interest on the overdue principal
and premium, if any, and (to the extent that such interest has been collected by
the Trustee) upon overdue installments of interest (including Liquidated
Damages, if any) at the rate borne by the Debentures; and in case such monies
shall be insufficient to pay in full the whole amounts so due and unpaid upon
the Debentures, then to the payment of such principal and premium, if any, and
interest (including Liquidated Damages, if any) without preference or priority
of principal and premium, if any, over interest (including Liquidated Damages,
if any), or of interest (including Liquidated Damages, if any) over principal
and premium, if any, or of any installment of interest over any other
installment of interest, or of any Debenture over any other Debenture, ratably
to the aggregate of such principal and premium, if any, and accrued and unpaid
interest; and
Fourth: Subject to the provisions of Article IV, to the payment of
the remainder, if any, to the Company or any other person lawfully entitled
thereto.
Section 7.4. Proceedings by Debentureholder. No holder of any Debenture
shall have any right by virtue of or by availing of any provision of this
Indenture to institute any suit, action or proceeding in equity or at law upon
or under or with respect to this Indenture, or for the appointment of a
receiver, trustee, liquidator, custodian or other similar official, or for any
other remedy hereunder, unless such holder previously shall have given to the
Trustee written notice of an Event of Default and of the continuance thereof, as
hereinbefore provided, and unless also the holders of not less than twenty-five
percent (25%) in aggregate principal amount of the Debentures then outstanding
shall have made written request upon the Trustee to institute such action, suit
or proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee for sixty (60)
days after its receipt of such notice, request and offer of indemnity, shall
have neglected or refused to institute any such action, suit or proceeding and
no direction inconsistent with such written request shall have been given to the
Trustee pursuant to Section 7.7; it being understood and intended, and being
expressly covenanted by the taker and holder of every Debenture with every other
taker and holder and the Trustee, that no one or more holders of Debentures
shall have any right in any manner whatever by virtue of or by availing of any
provision of this Indenture to affect, disturb or prejudice the rights of any
other holder of Debentures, or to obtain or seek to obtain priority over or
preference to any other such holder, or to enforce any right under this
Indenture, except in the manner herein provided and for the equal, ratable and
common benefit of all holders of Debentures (except as otherwise provided
herein). For the protection and enforcement of this Section 7.4, each and every
Debentureholder and the Trustee shall be entitled to such relief as can be given
either at law or in equity.
Notwithstanding any other provision of this Indenture and any
provision of any Debenture, the right of any holder of any Debenture to receive
payment of the principal of and premium, if any (including upon redemption
pursuant to Article III), and accrued interest on (including Liquidated Damages,
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if any) such Debenture, on or after the respective due dates expressed in such
Debenture or in the event of redemption, or to institute suit for the
enforcement of any such payment on or after such respective dates against the
Company shall not be impaired or affected without the consent of such holder.
Anything in this Indenture or the Debentures to the contrary
notwithstanding, the holder of any Debenture, without the consent of either the
Trustee or the holder of any other Debenture, in its own behalf and for its own
benefit, may enforce, and may institute and maintain any proceeding suitable to
enforce, its rights of conversion as provided herein.
Section 7.5. Proceedings by Trustee. In case of an Event of Default the
Trustee may in its discretion proceed to protect and enforce the rights vested
in it by this Indenture by such appropriate judicial proceedings as the Trustee
shall deem most effectual to protect and enforce any of such rights, either by
suit in equity or by action at law or by proceeding in bankruptcy or otherwise,
whether for the specific enforcement of any covenant or agreement contained in
this Indenture or in aid of the exercise of any power granted in this Indenture,
or to enforce any other legal or equitable right vested in the Trustee by this
Indenture or by law.
Section 7.6. Remedies Cumulative and Continuing. Except as provided in
Section 2.6, all powers and remedies given by this Article VII to the Trustee or
to the Debentureholders shall, to the extent permitted by law, be deemed
cumulative and not exclusive of any thereof or of any other powers and remedies
available to the Trustee or the holders of the Debentures, by judicial
proceedings or otherwise, to enforce the performance or observance of the
covenants and agreements contained in this Indenture, and no delay or omission
of the Trustee or of any holder of any of the Debentures to exercise any right
or power accruing upon any default or Event of Default occurring and continuing
as aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such default or any acquiescence therein; and, subject to the
provisions of Section 7.4, every power and remedy given by this Article VII or
by law to the Trustee or to the Debentureholders may be exercised from time to
time, and as often as shall be deemed expedient, by the Trustee or by the
Debentureholders.
Section 7.7. Direction of Proceedings and Waiver of Defaults by Majority
of Debentureholders. The holders of a majority in aggregate principal amount of
the Debentures at the time outstanding determined in accordance with Section 9.4
shall have the right to direct in writing the time, method, and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee; provided, however, that (a) such
direction shall not be in conflict with any rule of law or with this Indenture,
(b) the Trustee may take any other action deemed proper by the Trustee which is
not inconsistent with such direction and (c) the Trustee may decline to take any
action that would benefit some Debentureholder to the detriment of other
Debentureholders. The holders of a majority in aggregate principal amount of the
Debentures at the time outstanding determined in accordance with Section 9.4 may
on behalf of the holders of all of the Debentures waive any past default or
Event of Default hereunder and its consequences except (i) a default in the
payment of interest or premium, if any, on, or the principal of, the Debentures
which has not been cured pursuant to the provisions of Section 7.1,
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(ii) a failure by the Company to convert any Debentures into Common Stock, (iii)
a default in the payment of redemption price or Make-Whole Payment pursuant to
Article III or (iv) a default in respect of a covenant or provisions hereof
which under Article XI cannot be modified or amended without the consent of the
holders of all Debentures then outstanding. Upon any such waiver, the Company,
the Trustee and the holders of the Debentures shall be restored to their former
positions and rights hereunder; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon. Whenever any default or Event of Default hereunder shall have been
waived as permitted by this Section 7.7, said default or Event of Default shall
for all purposes of the Debentures and this Indenture be deemed to have been
cured and to be not continuing; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.
Section 7.8. Notice of Defaults. The Trustee shall, within ninety (90)
days after a Responsible Officer of the Trustee has actual knowledge of the
occurrence of a default, mail to all Debentureholders, as the names and
addresses of such holders appear upon the Debenture register, notice of all
defaults actually known to a Responsible Officer, unless such defaults shall
have been cured or waived before the giving of such notice; and provided that,
except in the case of default in the payment of the principal of, or premium, if
any, or interest (including Liquidated Damages, if any) on any of the
Debentures, the Trustee shall be protected in withholding such notice if and so
long as a trust committee of directors and/or Responsible Officers of the
Trustee in good faith determine that the withholding of such notice is in the
interests of the Debentureholders.
Section 7.9. Undertaking to Pay Costs. All parties to this Indenture
agree, and each holder of any Debenture by his acceptance thereof shall be
deemed to have agreed, that any court may, in its discretion, require, in any
suit for the enforcement of any right or remedy under this Indenture, or in any
suit against the Trustee for any action taken or omitted by it as Trustee, the
filing by any party litigant in such suit of an undertaking to pay the costs of
such suit and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; provided that the provisions of this Section 7.9 (to the
extent permitted by law) shall not apply to any suit instituted by the Trustee,
to any suit instituted by any Debentureholder, or group of Debentureholders,
holding in the aggregate more than ten percent in principal amount of the
Debentures at the time outstanding determined in accordance with Section 9.4, or
to any suit instituted by any Debentureholder for the enforcement of the payment
of the principal of or premium, if any, or interest on any Debenture on or after
the due date expressed in such Debenture or to any suit for the enforcement of
the right to convert any Debenture in accordance with the provisions of Article
XV.
ARTICLE VIII
CONCERNING THE TRUSTEE
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Section 8.1. Duties and Responsibilities of Trustee. The Trustee, prior
to the occurrence of an Event of Default with respect to the Debentures and
after the curing of all Events of Default with respect to the Debentures which
may have occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture. In case an Event of Default with
respect to the Debentures has occurred (which has not been cured or waived) the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
No provision of this Indenture shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own willful misconduct, except that
(a) prior to the occurrence of an Event of Default and after the curing or
waiving of all Events of Default which may have occurred:
(1) the duties and obligations of the Trustee shall be determined
solely by the express provisions of this Indenture and the Trust Indenture Act,
and the Trustee shall not be liable except for the performance of such duties
and obligations as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture and the Trust
Indenture Act against the Trustee; and
(2) in the absence of bad faith and willful misconduct on the part
of the Trustee, the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture; but, in the case of any such certificates or
opinions which by any provisions hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under a duty to examine the same
to determine whether or not they conform to the requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer or Officers of the Trustee, unless the Trustee
was negligent in ascertaining the pertinent facts;
(c) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the written direction
of the holders of not less than a majority in principal amount of the Debentures
at the time outstanding determined as provided in Section 9.4 relating to the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred upon the Trustee, under
this Indenture with respect to the Debentures;
(d) whether or not therein provided, every provision of this Indenture
relating to the conduct or affecting the liability of, or affording protection
to, the Trustee shall be subject to the provisions of this Section;
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(e) the Trustee shall not be liable in respect of any payment (as to the
correctness of amount, entitlement to receive or any other matters relating to
payment) or notice effected by the Company or any paying agent or any records
maintained by any co-registrar with respect to the Debentures;
(f) if any party fails to deliver a notice relating to an event the fact
of which, pursuant to this Indenture, requires notice to be sent to the Trustee,
the Trustee may conclusively rely on its failure to receive such notice as
reason to act as if no such event occurred;
(g) in no event shall the Trustee be liable for the selection of
investments or for investment losses incurred thereon or for losses incurred as
a result of the liquidation of any such investment prior to its stated maturity
or the failure of the party directing such investment to provide timely written
investment direction, and the Trustee shall have no obligation to invest or
reinvest any amounts held hereunder in the absence of such written investment
direction; and
(h) in the event that the Trustee is also acting as Custodian, Debenture
registrar, paying agent, conversion agent or transfer agent hereunder, the
rights and protections afforded to the Trustee pursuant to this Article VIII
shall also be afforded to such Custodian, Debenture registrar, paying agent,
conversion agent or transfer agent.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there is reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk or liability is
not assured to it.
Section 8.2. Reliance on Documents, Opinions, Etc. Except as otherwise
provided in Section 8.1:
(a) the Trustee may conclusively rely and shall be fully protected in
acting upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, bond, note, debenture, coupon or other paper or
document believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties and the Trustee need not investigate
any fact or matter stated in the document;
(b) any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless other
evidence in respect thereof be herein specifically prescribed); and any
resolution of the Board of Directors may be evidenced to the Trustee by a copy
thereof certified by the Secretary or an Assistant Secretary of the Company;
(c) before the Trustee acts or refrains from acting, the Trustee may
consult with counsel and require an Opinion of Counsel and any advice or Opinion
of Counsel shall be full and complete
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authorization and protection in respect of any action taken or omitted by it
hereunder in good faith and in accordance with such advice or Opinion of
Counsel;
(d) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request, order or direction of
any of the Debentureholders pursuant to the provisions of this Indenture, unless
such Debentureholders shall have offered to the Trustee security or indemnity
satisfactory to it against the costs, expenses and liabilities which may be
incurred therein or thereby;
(e) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, may consent, order, bond, debenture
or other paper or document, but the Trustee, in its discretion, make such
further inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Company, personally or by agent or attorney;
(f) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents, attorneys,
custodians or nominees and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent, attorney, custodian or
nominee appointed by it with due care hereunder; and
(g) before the Trustee acts or refrains from acting, it may require an
Officers' Certificate and the Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on such Officer's Certificate.
Section 8.3. No Responsibility for Recitals, Etc. The recitals contained
herein and in the Debentures (except in the Trustee's certificate of
authentication) shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Debentures. The Trustee shall not be accountable for the use or application by
the Company of any Debentures or the proceeds of any Debentures authenticated
and delivered by the Trustee in conformity with the provisions of this
Indenture.
Section 8.4. Trustee, Paying Agents, Conversion Agents or Registrar May
Own Debentures. The Trustee, any paying agent, any conversion agent or
Debenture registrar, in its individual or any other capacity, may become the
owner or pledgee of Debentures with the same rights it would have if it were not
Trustee, paying agent, conversion agent or Debenture registrar.
Section 8.5. Monies to Be Held in Trust. Subject to the provisions of
Section 13.4 and Section 4.2, all monies received by the Trustee shall, until
used or applied as herein provided, be held in trust for the purposes for which
they were received. Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no
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liability for interest on any money received by it hereunder except as may be
agreed from time to time by the Company and the Trustee.
Section 8.6. Compensation and Expenses of Trustee. The Company covenants
and agrees to pay to the Trustee from time to time, and the Trustee shall be
entitled to, reasonable compensation for all services rendered by it hereunder
in any capacity (which shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust) as mutually agreed to in
writing between the Company and the Trustee, and the Company will pay or
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances reasonably incurred or made by the Trustee in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence, willful misconduct, recklessness or
bad faith. The Company also covenants to indemnify the Trustee (or any officer,
director, agent or employee of the Trustee) in any capacity under this Indenture
and any other documents and transactions entered into in connection therewith
and its agents and any authenticating agent for, and to hold them harmless
against, any loss, liability or expense incurred without negligence, willful
misconduct, recklessness, or bad faith on the part of the Trustee or such
officers, directors, employees and agent or authenticating agent, as the case
may be, and arising out of or in connection with the acceptance or
administration of this trust or in any other capacity hereunder, including the
costs and expenses of defending themselves against any claim of liability in the
premises. The obligations of the Company under this Section 8.6 to compensate or
indemnify the Trustee and to pay or reimburse the Trustee for expenses,
disbursements and advances shall be secured by a lien prior to that of the
Debentures upon all property and funds held or collected by the Trustee as such,
except funds held in trust for the benefit of the holders of particular
Debentures. The Trustee's right to receive payment of any amounts due under this
Section 8.6 shall not be subordinate to any other liability or indebtedness of
the Company (even though the Debentures may be so subordinated). The obligation
of the Company under this Section shall survive the satisfaction and discharge
of this Indenture and the earlier removal or resignation of the Trustee.
When the Trustee and its agents and any authenticating agent incur
expenses or render services after an Event of Default specified in Section
7.1(d) or (e) with respect to the Company occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any bankruptcy, insolvency or similar laws.
Section 8.7. Officers' Certificate as Evidence. Whenever in the
administration of the provisions of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking or
omitting any action hereunder, such matter (unless other evidence in respect
thereof be herein specifically prescribed) may, in the absence of negligence,
willful misconduct, recklessness, or bad faith on the part of the Trustee, be
deemed to be conclusively proved and established by an Officers' Certificate
delivered to the Trustee.
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Section 8.8. Conflicting Interests of Trustee. If the Trustee has or
shall acquire a conflicting interest within the meaning of the Trust Indenture
Act, the Trustee shall either eliminate such interest or resign, to the extent
and in the manner provided by, and subject to the provisions of, the Trust
Indenture Act and this Indenture.
Section 8.9. Eligibility of Trustee. There shall at all times be a
Trustee hereunder which shall be a Person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of at least
$50,000,000 (or if such Person is a member of a bank holding company system, its
bank holding company shall have a combined capital and surplus of at least
$50,000,000). If such person publishes reports of condition at least annually,
pursuant to law or to the requirements of any supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Trustee shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
Section 8.10. Resignation or Removal of Trustee.
(a) The Trustee may at any time resign by giving written notice of
such resignation to the Company and to the holders of Debentures. Upon receiving
such notice of resignation, the Company shall promptly appoint a successor
trustee by written instrument, in duplicate, executed by order of the Board of
Directors, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor trustee. If no successor trustee shall
have been so appointed and have accepted appointment sixty (60) days after the
mailing of such notice of resignation to the Debentureholders, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor trustee, or any Debentureholder who has been a bona fide holder of a
Debenture or Debentures for at least six (6) months may, subject to the
provisions of Section 7.9, on behalf of himself and all others similarly
situated, petition any such court for the appointment of a successor trustee.
Such court may thereupon, after such notice, if any, as it may deem proper and
prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with Section 8.8 after
written request therefor by the Company or by any Debentureholder who has
been a bona fide holder of a Debenture or Debentures for at least six (6)
months; or
(2) the Trustee shall cease to be eligible in accordance with
the provisions of Section 8.9 and shall fail to resign after written
request therefor by the Company or by any such Debentureholder; or
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(3) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its
property shall be appointed, or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation;
then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee, or, subject to the
provisions of Section 7.9, any Debentureholder who has been a bona fide holder
of a Debenture or Debentures for at least six (6) months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
trustee; provided that if no successor Trustee shall have been appointed and
have accepted appointment sixty (60) days after either the Company or the
Debentureholders has removed the Trustee, the Trustee so removed may petition
any court of competent jurisdiction for an appointment of a successor trustee.
Such court may thereupon, after such notice, if any, as it deem proper and
prescribe, remove the Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal amount of the
Debentures at the time outstanding may at any time remove the Trustee and
nominate a successor trustee which shall be deemed appointed as successor
trustee unless within ten (10) days after notice to the Company of such
nomination the Company objects thereto, in which case the Trustee so removed or
any Debentureholder, upon the terms and conditions and otherwise as in Section
8.10(a) provided, may petition any court of competent jurisdiction for an
appointment of a successor trustee.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 8.10 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 8.11.
Section 8.11. Acceptance by Successor Trustee. Any successor trustee
appointed as provided in Section 8.10 shall execute, acknowledge and deliver to
the Company and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee herein; but, nevertheless, on the written request
of the Company or of the successor trustee, the trustee ceasing to act shall,
upon payment of any and all amounts then due and owing to it hereunder, execute
and deliver an instrument transferring to such successor trustee all the rights
and powers of the trustee so ceasing to act. Upon request of any such successor
trustee, the Company shall execute any and all instruments in writing for more
fully and certainly vesting in and confirming to such successor trustee all such
rights and powers. Any trustee ceasing to act shall, nevertheless, retain a lien
upon all property and funds held or collected by such trustee as such,
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except for funds held in trust for the benefit of holders of particular
Debentures, to secure any amounts then due it hereunder.
No successor trustee shall accept appointment as provided in this
Section 8.11 unless at the time of such acceptance such successor trustee shall
be qualified under the provisions of Section 8.8 and be eligible under the
provisions of Section 8.9.
Upon acceptance of appointment by a successor trustee as provided in
this Section 8.11, the Company (or the former trustee, at the written direction
and at the expense of the Company) shall mail or cause to be mailed notice of
the succession of such trustee hereunder to the holders of Debentures at their
addresses as they shall appear on the Debenture register. If the Company fails
to mail such notice within ten (10) days after acceptance of appointment by the
successor trustee, the successor trustee shall cause such notice to be mailed at
the expense of the Company.
Section 8.12. Succession by Merger, Etc. Any corporation into which the
Trustee may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation succeeding to all or substantially
all of the corporate trust business of the Trustee (including any trust created
by this Indenture), shall be the successor to the Trustee hereunder without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that in the case of any corporation succeeding to all
or substantially all of the corporate trust business of the Trustee such
corporation shall be qualified under the provisions of Section 8.8 and eligible
under the provisions of Section 8.9.
In case at the time such successor to the Trustee shall succeed to
the trusts created by this Indenture, any of the Debentures shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor trustee or authenticating agent
appointed by such predecessor trustee, and deliver such Debentures so
authenticated; and in case at that time any of the Debentures shall not have
been authenticated, any successor to the Trustee or an authenticating agent
appointed by such successor trustee may authenticate such Debentures either in
the name of any predecessor trustee hereunder or in the name of the successor
trustee; and in all such cases such certificates shall have the full force which
it is anywhere in the Debentures or in this Indenture provided that the
certificate of the Trustee shall have; provided, however, that the right to
adopt the certificate of authentication of any predecessor Trustee or
authenticate Debentures in the name of any predecessor Trustee shall apply only
to its successor or successors by merger, conversion or consolidation.
Section 8.13. Preferential Collection of Claims. If and when the Trustee
shall be or become a creditor of the Company (or any other obligor upon the
Debentures), the Trustee shall be subject to the provisions of the Trust
Indenture Act regarding the collection of the claims against the Company (or any
such other obligor).
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Section 8.14. Trustee's Application for Instructions from the Company.
Any application by the Trustee for written instructions from the Company (other
than with regard to any action proposed to be taken or omitted to be taken by
the Trustee that affects the rights of the holders of the Debentures or holders
of Senior Obligations under this Indenture, including, without limitation, under
Article IV hereof) may, at the option of the Trustee, set forth in writing any
action proposed to be taken or omitted by the Trustee under this Indenture and
the date on and/or after which such action shall be taken or such omission shall
be effective. The Trustee shall not be liable for any action taken by, or
omission of, the Trustee in accordance with a proposal included in such
application on or after the date specified in such application (which date shall
not be less than three (3) Business Days after the date any officer of the
Company actually receives such application, unless any such officer shall have
consented in writing to any earlier date) unless prior to taking any such action
(or the effective date in the case of an omission), the Trustee shall have
received written instructions in response to such application specifying the
action to be taken or omitted.
ARTICLE IX
CONCERNING THE DEBENTUREHOLDERS
Section 9.1. Action by Debentureholders. Whenever in this Indenture it is
provided that the holders of a specified percentage in aggregate principal
amount of the Debentures may take any action (including the making of any demand
or request, the giving of any notice, consent or waiver or the taking of any
other action), the fact that at the time of taking any such action, the holders
of such specified percentage have joined therein may be evidenced (a) by any
instrument or any number of instruments of similar tenor executed by
Debentureholders in person or by agent or proxy appointed in writing, or (b) by
the record of the holders of Debentures voting in favor thereof at any meeting
of Debentureholders duly called and held in accordance with the provisions of
Article X, or (c) by a combination of such instrument or instruments and any
such record of such a meeting of Debentureholders. Whenever the Company or the
Trustee solicits the taking of any action by the holders of the Debentures, the
Company or the Trustee may fix in advance of such solicitation, a date as the
record date for determining holders entitled to take such action. The record
date shall be not more than fifteen (15) days prior to the date of commencement
of solicitation of such action.
Section 9.2. Proof of Execution by Debentureholders. Subject to the
provisions of Sections 8.1, 8.2 and 10.5, proof of the execution of any
instrument by a Debentureholder or its agent or proxy shall be sufficient if
made in accordance with such reasonable rules and regulations as may be
prescribed by the Trustee or in such manner as shall be satisfactory to the
Trustee. The holding of Debentures shall be proved by the registry of such
Debentures or by a certificate of the Debenture registrar.
The record of any Debentureholders' meeting shall be proved in the
manner provided in Section 10.6.
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Section 9.3. Who Are Deemed Absolute Owners. Subject to Section 2.3, the
Company, the Trustee, any paying agent, any conversion agent and any Debenture
registrar may deem the person in whose name such Debenture shall be registered
upon the Debenture register to be, and may treat it as, the absolute owner of
such Debenture (whether or not such Debenture shall be overdue and
notwithstanding any notation of ownership or other writing thereon) for the
purpose of receiving payment of or on account of the principal of, premium, if
any, and interest on such Debenture, for conversion of such Debenture and for
all other purposes; and neither the Company nor the Trustee nor any paying agent
nor any conversion agent nor any Debenture registrar shall be affected by any
notice to the contrary. All such payments so made to any holder for the time
being, or upon his order, shall be valid, and, to the extent of the sum or sums
so paid, effectual to satisfy and discharge the liability for monies payable
upon any such Debenture.
Section 9.4. Company-Owned Debentures Disregarded. In determining whether
the holders of the requisite aggregate principal amount of Debentures have
concurred in any direction, consent, waiver or other action under this
Indenture, Debentures which are owned by the Company or any other obligor on the
Debentures or any Affiliate of the Company or any other obligor on the
Debentures shall be disregarded and deemed not to be outstanding for the purpose
of any such determination; provided that for the purposes of determining whether
the Trustee shall be protected in relying on any such direction, consent, waiver
or other action only Debentures which a Responsible Officer actually knows are
so owned shall be so disregarded. Debentures so owned which have been pledged in
good faith may be regarded as outstanding for the purposes of this Section 9.4
if the pledgee shall establish to the satisfaction of the Trustee the pledgee's
right to vote such Debentures and that the pledgee is not the Company, any other
obligor on the Debentures or any Affiliate of the Company or any such other
obligor. In the case of a dispute as to such right, any decision by the Trustee
taken upon the advice of counsel shall be full protection to the Trustee. Upon
request of the Trustee, the Company shall furnish to the Trustee promptly an
Officers' Certificate listing and identifying all Debentures, if any, known by
the Company to be owned or held by or for the account of any of the above
described persons; and, subject to Section 8.1, the Trustee shall be entitled to
accept such Officers' Certificate as conclusive evidence of the facts therein
set forth and of the fact that all Debentures not listed therein are outstanding
for the purpose of any such determination.
Section 9.5. Revocation of Consents; Future Holders Bound. At any time
prior to (but not after) the evidencing to the Trustee, as provided in Section
9.1, of the taking of any action by the holders of the percentage in aggregate
principal amount of the Debentures specified in this Indenture in connection
with such action, any holder of a Debenture which is shown by the evidence to be
included in the Debentures the holders of which have consented to such action
may, by filing written notice with the Trustee at its Corporate Trust Office and
upon proof of holding as provided in Section 9.2, revoke such action so far as
concerns such Debenture. Except as aforesaid, any such action taken by the
holder of any Debenture shall be conclusive and binding upon such holder and
upon all future holders and owners of such Debenture and of any Debentures
issued in exchange or substitution therefor, irrespective of whether any
notation in regard thereto is made upon such Debenture or any Debenture issued
in exchange or substitution therefor.
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ARTICLE X
DEBENTUREHOLDERS' MEETINGS
Section 10.1. Purpose of Meetings. A meeting of Debentureholders may be
called at any time and from time to time pursuant to the provisions of this
Article X for any of the following purposes:
(1) to give any notice to the Company or to the Trustee or to
give any directions to the Trustee permitted under this Indenture, or to
consent to the waiving of any default or Event of Default hereunder and
its consequences, or to take any other action authorized to be taken by
Debentureholders pursuant to any of the provisions of Article VII;
(2) to remove the Trustee and nominate a successor trustee
pursuant to the provisions of Article VIII;
(3) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 11.2; or
(4) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal amount of the
Debentures under any other provision of this Indenture or under applicable
law.
Section 10.2. Call of Meetings by Trustee. The Trustee may, at the
expense of the Company, at any time call a meeting of Debentureholders to take
any action specified in Section 10.1, to be held at such time and at such place
as the Trustee shall determine. Notice of every meeting of the Debentureholders,
setting forth the time and the place of such meeting and in general terms the
action proposed to be taken at such meeting and the establishment of any record
date pursuant to Section 9.1, shall be mailed to holders of Debentures at their
addresses as they shall appear on the Debenture register. Such notice shall also
be mailed to the Company. Such notices shall be mailed not less than twenty (20)
nor more than ninety (90) days prior to the date fixed for the meeting.
Any meeting of Debentureholders shall be valid without notice if the
holders of all Debentures then outstanding are present in person or by proxy or
if notice is waived before or after the meeting by the holders of all Debentures
outstanding, and if the Company and the Trustee are either present by duly
authorized representatives or have, before or after the meeting, waived notice.
Section 10.3. Call of Meetings by Company or Debentureholders. In case at
any time the Company, pursuant to a resolution of its Board of Directors, or the
holders of at least ten percent (10%) in aggregate principal amount of the
Debentures then outstanding, shall have requested the Trustee to call a meeting
of Debentureholders, by written request setting forth in reasonable detail the
action proposed to be taken at the meeting, and the Trustee shall not have
mailed the notice of such meeting within twenty (20)
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days after receipt of such request, then the Company or such Debentureholders
may determine the time and the place for such meeting and call such meeting to
take any action authorized in Section 10.1, by mailing notice thereof as
provided in Section 10.2.
Section 10.4. Qualifications for Voting. To be entitled to vote at any
meeting of Debentureholders a person shall (a) be a holder of one or more
Debentures on the record date pertaining to such meeting or (b) be a person
appointed by an instrument in writing as proxy by a holder of one or more
Debentures. The only persons who shall be entitled to be present or to speak at
any meeting of Debentureholders shall be the persons entitled to vote at such
meeting and their counsel and any representatives of the Trustee and its counsel
and any representatives of the Company and its counsel.
Section 10.5. Regulations. Notwithstanding any other provisions of this
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Debentureholders, in regard to proof of the holding
of Debentures and of the appointment of proxies, and in regard to the
appointment and duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Debentureholders as provided in Section 10.3, in which case the
Company or the Debentureholders calling the meeting, as the case may be, shall
in like manner appoint a temporary chairman. A permanent chairman and a
permanent secretary of the meeting shall be elected by vote of the holders of a
majority in principal amount of the Debentures represented at the meeting and
entitled to vote at the meeting.
Subject to the provisions of Section 9.4, at any meeting each
Debentureholder or proxyholder shall be entitled to one vote for each $1,000
principal amount of Debentures held or represented by him; provided, however,
that no vote shall be cast or counted at any meeting in respect of any Debenture
challenged as not outstanding and ruled by the chairman of the meeting to be not
outstanding. The chairman of the meeting shall have no right to vote other than
by virtue of Debentures held by him or instruments in writing as aforesaid duly
designating him as the proxy to vote on behalf of other Debentureholders. Any
meeting of Debentureholders duly called pursuant to the provisions of Section
10.2 or 10.3 may be adjourned from time to time by the holders of a majority of
the aggregate principal amount of Debentures represented at the meeting, whether
or not constituting a quorum, and the meeting may be held as so adjourned
without further notice.
Section 10.6. Voting. The vote upon any resolution submitted to any
meeting of Debentureholders shall be by written ballot on which shall be
subscribed the signatures of the holders of Debentures or of their
representatives by proxy and the principal amount of the Debentures held or
represented by them. The permanent chairman of the meeting shall appoint two
inspectors of votes who shall count all votes cast at the meeting for or against
any resolution and who shall make and file with the
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secretary of the meeting their verified written reports in duplicate of all
votes cast at the meeting. A record in duplicate of the proceedings of each
meeting of Debentureholders shall be prepared by the secretary of the meeting
and there shall be attached to said record the original reports of the
inspectors of votes on any vote by ballot taken thereat and affidavits by one or
more persons having knowledge of the facts setting forth a copy of the notice of
the meeting and showing that said notice was mailed as provided in Section 10.2.
The record shall show the principal amount of the Debentures voting in favor of
or against any resolution. The record shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one of the
duplicates shall be delivered to the Company and the other to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots voted
at the meeting.
Any record so signed and verified shall be conclusive evidence of
the matters therein stated.
Section 10.7. No Delay of Rights by Meeting. Nothing in this Article X
contained shall be deemed or construed to authorize or permit, by reason of any
call of a meeting of Debentureholders or any rights expressly or impliedly
conferred hereunder to make such call, any hindrance or delay in the exercise of
any right or rights conferred upon or reserved to the Trustee or to the
Debentureholders under any of the provisions of this Indenture or of the
Debentures.
ARTICLE XI
SUPPLEMENTAL INDENTURES
Section 11.1. Supplemental Indentures Without Consent of Debentureholders.
The Company, when authorized by the resolutions of the Board of Directors, and
the Trustee, at the Company's expense, may from time to time and at any time
enter into an indenture or indentures supplemental hereto for one or more of the
following purposes:
(a) to make provision with respect to the conversion rights of the
holders of Debentures pursuant to the requirements of Section 15.6 and the
redemption obligations of the Company pursuant to the requirements of Section
3.5(e);
(b) subject to Article IV, to convey, transfer, assign, mortgage or
pledge to the Trustee as security for the Debentures, any property or assets;
(c) to evidence the succession of another corporation to the
Company, or successive successions, and the assumption by the successor
corporation of the covenants, agreements and obligations of the Company pursuant
to Article XII;
(d) to add to the covenants of the Company such further covenants,
restrictions or conditions as the Board of Directors and the Trustee shall
consider to be for the benefit of the holders of Debentures, and to make the
occurrence, or the occurrence and continuance, of a default in any such
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additional covenants, restrictions or conditions a default or an Event of
Default permitting the enforcement of all or any of the several remedies
provided in this Indenture as herein set forth; provided, however, that in
respect of any such additional covenant, restriction or condition such
supplemental indenture may provide for a particular period of grace after
default (which period may be shorter or longer than that allowed in the case of
other defaults) or may provide for an immediate enforcement upon such default or
may limit the remedies available to the Trustee upon such default;
(e) to provide for the issuance under this Indenture of Debentures
in coupon form (including Debentures registrable as to principal only) and to
provide for exchangeability of such Debentures with the Debentures issued
hereunder in fully registered form and to make all appropriate changes for such
purpose;
(f) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture, or to make such other provisions in regard to matters or questions
arising under this Indenture which shall not materially adversely affect the
interests of the holders of the Debentures;
(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Debentures; or
(h) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to effect the qualification of this
Indenture under the Trust Indenture Act, or under any similar federal statute
hereafter enacted.
Upon the written request of the Company, accompanied by a copy of
the resolutions of the Board of Directors certified by its Secretary or
Assistant Secretary authorizing the execution of any supplemental indenture, the
Trustee is hereby authorized to join with the Company in the execution of any
such supplemental indenture, to make any further appropriate agreements and
stipulations which may be therein contained and to accept the conveyance,
transfer and assignment of any property thereunder, but the Trustee shall not be
obligated to, but may in its discretion, enter into any supplemental indenture
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this
Section 11.1 may be executed by the Company and the Trustee without the consent
of the holders of any of the Debentures at the time outstanding, notwithstanding
any of the provisions of Section 11.2.
Notwithstanding any other provision of the Indenture or the
Debentures, the Registration Rights Agreement and the obligation to pay
Liquidated Damages thereunder may be amended, modified or waived in accordance
with the provisions of the Registration Rights Agreement.
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Section 11.2. Supplemental Indentures with Consent of Debentureholders.
With the consent (evidenced as provided in Article IX) of the holders of not
less than a majority in aggregate principal amount of the Debentures at the time
outstanding, the Company, when authorized by the resolutions of the Board of
Directors, and the Trustee may, at the Company's expense, from time to time and
at any time enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or any supplemental indenture or of
modifying in any manner the rights of the holders of the Debentures; provided,
however, that no such supplemental indenture shall (i) extend the fixed maturity
of any Debenture, or reduce the rate or extend the time of payment of interest
thereon, or reduce the principal amount thereof or premium, if any, thereon, or
reduce any amount payable on redemption thereof, or impair the right of any
Debentureholder to institute suit for the payment thereof, or make the principal
thereof or interest or premium, if any, thereon payable in any coin or currency
other than that provided in the Debentures, or modify the provisions of this
Indenture with respect to the subordination of the Debentures in a manner
adverse to the Debentureholders in any material respect, or change the
obligation of the Company to redeem any Debenture upon the happening of a
Fundamental Change in a manner adverse to the holder of Debentures, or impair
the right to convert the Debentures into Common Stock subject to the terms set
forth herein including Section 15.6, in each case, without the consent of the
holder of each Debenture so affected, or (ii) reduce the aforesaid percentage of
Debentures, the holders of which are required to consent to any such
supplemental indenture, without the consent of the holders of all Debentures
then outstanding.
Upon the written request of the Company, accompanied by a copy of
the resolutions of the Board of Directors certified by its Secretary or
Assistant Secretary authorizing the execution of any such supplemental
indenture, and upon the filing with the Trustee of evidence of the consent of
Debentureholders as aforesaid, the Trustee shall join with the Company in the
execution of such supplemental indenture unless such supplemental indenture
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such supplemental indenture.
It shall not be necessary for the consent of the Debentureholders
under this Section 11.2 to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such consent shall approve
the substance thereof.
Section 11.3. Effect of Supplemental Indenture. Any supplemental
indenture executed pursuant to the provisions of this Article XI shall comply
with the Trust Indenture Act, as then in effect; provided that this Section 11.3
shall not require such supplemental indenture or the Trustee to be qualified
under the Trust Indenture Act prior to the time such qualification is in fact
required under the terms of the Trust Indenture Act or the Indenture has been
qualified under the Trust Indenture Act, nor shall it constitute any admission
or acknowledgment by any party to such supplemental indenture that any such
qualification is required prior to the time such qualification is in fact
required under the terms of the Trust Indenture Act or the Indenture has been
qualified under the Trust Indenture Act. Upon the execution of any supplemental
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indenture pursuant to the provisions of this Article XI, this Indenture shall be
deemed to be modified and amended in accordance therewith and the respective
rights, limitation of rights, obligations, duties and immunities under this
Indenture of the Trustee, the Company and the holders of Debentures shall
thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments and all the terms and conditions
of any such supplemental indenture shall be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
Section 11.4. Notation on Debentures. Debentures authenticated and
delivered after the execution of any supplemental indenture pursuant to the
provisions of this Article XI may bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental indenture. If the
Company or the Trustee shall so determine, new Debentures so modified as to
conform, in the opinion of the Trustee and the Board of Directors, to any
modification of this Indenture contained in any such supplemental indenture may,
at the Company's expense, be prepared and executed by the Company, authenticated
by the Trustee (or an authenticating agent duly appointed by the Trustee
pursuant to Section 16.11) and delivered in exchange for the Debentures then
outstanding, upon surrender of such Debentures then outstanding.
Section 11.5. Evidence of Compliance of Supplemental Indenture to Be
Furnished Trustee. Prior to entering into any supplemental indenture, the
Trustee may request an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant hereto
complies with the requirements of this Article XI.
ARTICLE XII
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 12.1. Company May Consolidate Etc. on Certain Terms. Subject to
the provisions of Section 12.2 and notwithstanding anything to the contrary in
this Indenture, the Company shall not consolidate or merge with or into any
other Person (whether or not affiliated with the Company), or sale, convey or
lease all or substantially all of its assets or properties to any Person unless
the Person formed by such consolidation or into which the Company is merged or
the Person which acquires by conveyance or transfer, or which leases the assets
or properties of the Company substantially as an entirety shall be a corporation
organized under the laws of the United States of America, any state thereof or
the District of Columbia. Further, upon any such consolidation, merger, sale,
conveyance or lease, the due and punctual payment of the principal of and
premium, if any, and interest (including Liquidated Damages, if any) on all of
the Debentures, according to their tenor, and the due and punctual performance
and observance of all of the covenants and conditions of this Indenture to be
performed by the Company, shall be expressly assumed by supplemental indenture
satisfactory in form to the Trustee, executed and delivered to the Trustee by
the corporation (if other than the Company) formed by such consolidation, or
into which the Company shall have been merged, or by the corporation which shall
have acquired or leased such
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property, and such supplemental indenture shall provide for the applicable
conversion rights set forth in Section 15.6.
Section 12.2. Successor Corporation to Be Substituted. In case of any
such consolidation, merger, sale, conveyance or lease and upon the assumption by
the successor corporation, by supplemental indenture, executed and delivered to
the Trustee and satisfactory in form to the Trustee, of the due and punctual
payment of the principal of and premium, if any, and interest on all of the
Debentures and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Company, such successor
corporation shall succeed to and be substituted for the Company, with the same
effect as if it had been named herein as the party of the first part. Such
successor corporation thereupon may cause to be signed, and may issue either in
its own name or in the name of Sepracor Inc. any or all of the Debentures
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee; and, upon the order of such successor corporation
instead of the Company and subject to all the terms, conditions and limitations
in this Indenture prescribed, the Trustee shall authenticate and shall deliver,
or cause to be authenticated and delivered, any Debentures which previously
shall have been signed and delivered by the officers of the Company to the
Trustee for authentication, and any Debentures which such successor corporation
thereafter shall cause to be signed and delivered to the Trustee for that
purpose. All the Debentures so issued shall in all respects have the same legal
rank and benefit under this Indenture as the Debentures theretofore or
thereafter issued in accordance with the terms of this Indenture as though all
of such Debentures had been issued at the date of the execution hereof. In the
event of any such consolidation, merger, sale, conveyance or lease, the person
named as the "Company" in the first paragraph of this Indenture or any successor
which shall thereafter have become such in the manner prescribed in this Article
XII may be dissolved, wound up and liquidated at any time thereafter and such
person shall be released from its liabilities as obligor and maker of the
Debentures and from its obligations under this Indenture.
ln case of any such consolidation, merger, sale, conveyance or
lease, such changes in phraseology and form (but not in substance) may be made
in the Debentures thereafter to be issued as may be appropriate.
Section 12.3. Opinion of Counsel to Be Given Trustee. The Trustee shall
receive an Officers' Certificate and an Opinion of Counsel as conclusive
evidence that any such consolidation, merger, sale, conveyance or lease and any
such assumption complies with the provisions of this Article XII.
ARTICLE XIII
SATISFACTION AND DISCHARGE OF INDENTURE
Section 13.1. Discharge of Indenture. When (a) the Company shall deliver
to the Trustee for cancellation all Debentures theretofore authenticated (other
than any Debentures which have been destroyed, lost or stolen and in lieu of or
in substitution for which other Debentures shall have been
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authenticated and delivered) and not theretofore canceled, or (b) all the
Debentures not theretofore canceled or delivered to the Trustee for cancellation
shall have become due and payable, or are by their terms to become due and
payable within one year or are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of redemption,
and the Company shall deposit with the Trustee, in trust, funds sufficient to
pay at maturity or upon redemption of all of the Debentures (other than any
Debentures which shall have been mutilated, destroyed, lost or stolen and in
lieu of or in substitution for which other Debentures shall have been
authenticated and delivered) not theretofore canceled or delivered to the
Trustee for cancellation, including principal and premium, if any, and interest
due or to become due to such date of maturity or redemption date, as the case
may be, accompanied by a verification report, as to the sufficiency of the
deposited amount, from an independent certified accountant or other financial
professional satisfactory to the Trustee, and if the Company shall also pay or
cause to be paid all other sums payable hereunder by the Company, then this
Indenture shall cease to be of further effect (except as to (i) remaining rights
of registration of transfer, substitution and exchange and conversion of
Debentures, (ii) rights hereunder of Debentureholders to receive payments of
principal of and premium, if any, and interest on, the Debentures and the other
rights, duties and obligations of Debentureholders, as beneficiaries hereof with
respect to the amounts, if any, so deposited with the Trustee, (iii) the rights,
obligations and immunities of the Trustee hereunder and (iv) the obligations of
the Company under Section 8.6), and the Trustee, on written demand of the
Company accompanied by an Officers' Certificate and an Opinion of Counsel as
required by Section 16.5 and at the cost and expense of the Company, shall
execute proper instruments acknowledging satisfaction of and discharging this
Indenture; the Company, however, hereby agreeing to reimburse the Trustee for
any costs or expenses thereafter reasonably and properly incurred by the Trustee
and to compensate the Trustee for any services thereafter reasonably and
properly rendered by the Trustee in connection with this Indenture or the
Debentures.
Section 13.2. Deposited Monies to Be Held in Trust by Trustee. Subject to
Section 13.4, all monies deposited with the Trustee pursuant to Section 13.1,
provided such deposit was not in violation of Article IV, shall be held in trust
for the sole benefit of the Debentureholders and shall not be subject to the
subordination provisions of Article IV, and such monies shall be applied by the
Trustee to the payment, either directly or through any paying agent (including
the Company if acting as its own paying agent), to the holders of the particular
Debentures for the payment or redemption of which such monies have been
deposited with the Trustee, of all sums due and to become due thereon for
principal and interest and premium, if any.
Section 13.3. Paying Agent to Repay Monies Held. Upon the satisfaction
and discharge of this Indenture, all monies then held by any paying agent of the
Debentures (other than the Trustee) shall, upon written request of the Company,
be repaid to it or paid to the Trustee, and thereupon such paying agent shall be
released from all further liability with respect to such monies.
Section 13.4. Return of Unclaimed Monies. Subject to the requirements of
applicable law, any monies deposited with or paid to the Trustee for payment of
the principal of, premium, if any, or interest on Debentures and not applied but
remaining unclaimed by the holders of Debentures for two years after
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the date upon which the principal of, premium, if any, or interest on such
Debentures, as the case may be, shall have become due and payable, shall be
repaid to the Company by the Trustee on written demand and all liability of the
Trustee shall thereupon cease with respect to such monies; and the holder of any
of the Debentures shall thereafter look only to the Company for any payment
which such holder may be entitled to collect unless an applicable abandoned
property law designates another Person.
Section 13.5. Reinstatement. If the Trustee or the paying agent is unable
to apply any money in accordance with Section 13.2 by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Debentures shall be revived and reinstated as though no
deposit had occurred pursuant to Section 13.1 until such time as the Trustee or
the paying agent is permitted to apply all such money in accordance with Section
13.2; provided, however, that if the Company makes any payment of interest on or
principal of any Debenture following the reinstatement of its obligations, the
Company shall be subrogated to the rights of the holders of such Debentures to
receive such payment from the money held by the Trustee or paying agent.
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
Section 14.1. Indenture and Debentures Solely Corporate Obligations. No
recourse for the payment of the principal of or premium, if any, or interest on
any Debenture, or for any claim based thereon or otherwise in respect thereof,
and no recourse under or upon any obligation, covenant or agreement of the
Company in this Indenture or in any supplemental indenture or in any Debenture,
or because of the creation of any indebtedness represented thereby, shall be had
against any incorporator, stockholder, employee, agent, officer, or director or
subsidiary, as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issue of the Debentures.
ARTICLE XV
CONVERSION OF DEBENTURES
Section 15.1. Right to Convert. Subject to and upon compliance with the
provisions of this Indenture, including without limitation Article IV, the
holder of any Debenture shall have the right, at its option, at any time after
ninety (90) days following the latest date of original issuance thereof through
the close of business on February 15, 2007 (except that, with respect to any
Debenture or portion of a Debenture which shall be called for redemption, such
right shall terminate, except as provided in Section
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15.2 or Section 3.4, at the close of business on the Business Day next preceding
the date fixed for redemption of such Debenture or portion of a Debenture unless
the Company shall default in payment due upon redemption thereof) to convert the
principal amount of any such Debenture, or any portion of such principal amount
which is $1,000 or an integral multiple thereof, into that number of fully paid
and non-assessable shares of Common Stock (as such shares shall then be
constituted) obtained by dividing the principal amount of the Debenture or
portion thereof surrendered for conversion by the Conversion Price in effect at
such time, by surrender of the Debenture so to be converted in whole or in part
in the manner provided, together with any required funds, in Section 15.2. A
Debenture in respect of which a holder is exercising its option to require
redemption upon a Fundamental Change pursuant to Section 3.5 may be converted
only if such holder withdraws its election to exercise in accordance with
Section 3.5. A holder of Debentures is not entitled to any rights of a holder of
Common Stock until such holder has converted his Debentures to Common Stock, and
only to the extent such Debentures are deemed to have been converted to Common
Stock under this Article XV.
Section 15.2. Exercise of Conversion Privilege; Issuance of Common Stock
on Conversion; No Adjustment for Interest or Dividends. In order to exercise the
conversion privilege with respect to any Debenture in certificated form, the
holder of any such Debenture to be converted in whole or in part shall surrender
such Debenture, duly endorsed, at an office or agency maintained by the Company
pursuant to Section 5.2, accompanied by the funds, if any, required by the
penultimate paragraph of this Section 15.2, and shall give written notice of
conversion in the form provided on the Debentures (or such other notice which is
acceptable to the Company) to the office or agency that the holder elects to
convert such Debenture or the portion thereof specified in said notice. Such
notice shall also state the name or names (with address or addresses) in which
the certificate or certificates for shares of Common Stock which shall be
issuable on such conversion shall be issued, and shall be accompanied by
transfer taxes, if required pursuant to Section 15.7. Each such Debenture
surrendered for conversion shall, unless the shares issuable on conversion are
to be issued in the same name as the registration of such Debenture, be duly
endorsed by, or be accompanied by instruments of transfer in form satisfactory
to the Company duly executed by, the holder or his duly authorized attorney.
In order to exercise the conversion privilege with respect to any interest
in a Debenture in global form, the holder must complete the appropriate
instruction form for conversion pursuant to the Depository's book-entry
conversion program, deliver by book-entry delivery an interest in such Debenture
in global form, furnish appropriate endorsements and transfer documents if
required by the Company or the Trustee or conversion agent, and pay the funds,
if any, required by this Section 15.2 and any transfer taxes if required
pursuant to Section 15.7.
As promptly as practicable after satisfaction of the requirements for
conversion set forth above, subject to compliance with any restrictions on
transfer if shares issuable on conversion are to be issued in a name other than
that of the Debentureholder (as if such transfer were a transfer of the
Debenture or Debentures (or portion thereof) so converted), the Company shall
issue and shall deliver to such holder at the office or agency maintained by the
Company for such purpose pursuant to Section 5.2, a certificate or
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certificates for the number of full shares of Common Stock issuable upon the
conversion of such Debenture or portion thereof in accordance with the
provisions of this Article and a check or cash in respect of any fractional
interest in respect of a share of Common Stock arising upon such conversion, as
provided in Section 15.3. In case any Debenture of a denomination greater than
$1,000 shall be surrendered for partial conversion, and subject to Section 2.3,
the Company shall execute and the Trustee shall authenticate and deliver to the
holder of the Debenture so surrendered, at the Company's expense, a new
Debenture or Debentures in authorized denominations in an aggregate principal
amount equal to the unconverted portion of the surrendered Debenture.
Each conversion shall be deemed to have been effected as to any such
Debenture (or portion thereof) on the date on which the requirements set forth
above in this Section 15.2 have been satisfied as to such Debenture (or portion
thereof), and the person in whose name any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be deemed to
have become on said date the holder of record of the shares represented thereby;
provided, however, that any such surrender on any date when the stock transfer
books of the Company shall be closed shall constitute the person in whose name
the certificates are to be issued as the record holder thereof for all purposes
on the next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date upon which
such Debenture shall be surrendered.
Any Debenture or portion thereof surrendered for conversion during
the period from (but excluding) a record date for any interest payment date to
(but excluding) such interest payment date shall (unless such Debenture or
portion thereof being converted shall have been called for redemption on a
redemption date which occurs during such period) be accompanied by payment, in
New York Clearing House funds or other funds acceptable to the Company, of an
amount equal to the interest otherwise payable on such interest payment date on
the principal amount being converted; provided, however, that no such payment
need be made if there shall exist at the time of conversion a default in the
payment of interest on the Debentures. Except as provided above in this Section
15.2, no payment or other adjustment shall be made for interest accrued on any
Debenture converted or for dividends on any shares issued upon the conversion of
such Debenture as provided in this Article.
Upon the conversion of an interest in a Debenture in global form,
the Trustee (or other conversion agent appointed by the Company), or the
Custodian at the direction of the Trustee (or other conversion agent appointed
by the Company), shall make a notation on such Debenture in global form as to
the reduction in the principal amount represented thereby. The Company shall
notify the Trustee in writing of any conversions of Debentures effected through
any conversion agent other than the Trustee.
Section 15.3. Cash Payments in Lieu of Fractional Shares. No fractional
shares of Common Stock or scrip representing fractional shares shall be issued
upon conversion of Debentures. If more than one Debenture shall be surrendered
for conversion at one time by the same holder, the number of full shares which
shall be issuable upon conversion shall be computed on the basis of the
aggregate principal amount of the Debentures (or specified portions thereof to
the extent permitted hereby) so
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surrendered. If any fractional share of stock would be issuable upon the
conversion of any Debenture or Debentures, the Company shall make an adjustment
and payment therefor in cash at the current market price thereof to the holder
of Debentures. The current market price of a share of Common Stock shall be the
Closing Price on the last Business Day immediately preceding the day on which
the Debentures (or specified portions thereof) are deemed to have been
converted.
Section 15.4. Conversion Price. The conversion price shall be as
specified in the form of Debenture (herein called the "Conversion Price")
attached as Exhibit A hereto, subject to adjustment as provided in this Article
XV.
Section 15.5. Adjustment of Conversion Price. The Conversion Price shall
be adjusted from time to time by the Company as follows:
(a) In case the Company shall hereafter pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of Common
Stock, the Conversion Price in effect at the opening of business on the date
following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be reduced by multiplying such
Conversion Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination and the denominator shall be the sum of such number of
shares and the total number of shares constituting such dividend or other
distribution, such reduction to become effective immediately after the opening
of business on the day following the date fixed for such determination. The
Company will not pay any dividend or make any distribution on shares of Common
Stock held in the treasury of the Company. If any dividend or distribution of
the type described in this Section 15.5(a) is declared but not so paid or made,
the Conversion Price shall again be adjusted to the Conversion Price which would
then be in effect if such dividend or distribution had not been declared.
(b) In case the Company shall issue rights or warrants to all
holders of its outstanding shares of Common Stock entitling them (for a period
expiring within forty-five (45) days after the date fixed for determination of
stockholders entitled to receive such rights or warrants) to subscribe for or
purchase shares of Common Stock at a price per share less than the Current
Market Price (as defined below) on the date fixed for determination of
stockholders entitled to receive such rights or warrants, the Conversion Price
shall be adjusted so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the date fixed
for determination of stockholders entitled to receive such rights or warrants by
a fraction of which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for determination of
stockholders entitled to receive such rights and warrants plus the number of
shares which the aggregate offering price of the total number of shares so
offered would purchase at such Current Market Price, and of which the
denominator shall be the number of shares of Common Stock outstanding on the
date fixed for determination of stockholders entitled to receive such rights and
warrants plus the total number of additional shares of Common Stock offered for
subscription or purchase. Such adjustment shall be successively made whenever
any such rights and warrants are issued, and shall become effective immediately
after the opening of business on the day
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following the date fixed for determination of stockholders entitled to receive
such rights or warrants. To the extent that shares of Common Stock are not
delivered after the expiration of such rights or warrants, the Conversion Price
shall be readjusted to the Conversion Price which would then be in effect had
the adjustments made upon the issuance of such rights or warrants been made on
the basis of delivery of only the number of shares of Common Stock actually
delivered. In the event that such rights or warrants are not so issued, the
Conversion Price shall again be adjusted to be the Conversion Price which would
then be in effect if such date fixed for the determination of stockholders
entitled to receive such rights or warrants had not been fixed. In determining
whether any rights or warrants entitle the holders to subscribe for or purchase
shares of Common Stock at less than such Current Market Price, and in
determining the aggregate offering price of such shares of Common Stock, there
shall be taken into account any consideration received by the Company for such
rights or warrants, the value of such consideration, if other than cash, to be
determined in good faith by the Board of Directors.
(c) In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion Price in effect
at the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately reduced, and conversely,
in case outstanding shares of Common Stock shall be combined into a smaller
number of shares of Common Stock, the Conversion Price in effect at the opening
of business on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or increase, as the
case may be, to become effective immediately after the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.
(d) In case the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock shares of any class of capital stock of the
Company (other than any dividends or distributions to which Section 15.5(a)
applies) or evidences of its indebtedness or assets (including securities, but
excluding any rights or warrants referred to in Section 15.5(b), and excluding
any dividend or distribution (x) paid exclusively in cash or (y) referred to in
Section 15.5(a) (any of the foregoing hereinafter in this Section 15.5(d) called
the "Securities")), then, in each such case (unless the Company elects to
reserve such Securities for distribution to the Debentureholders upon the
conversion of the Debentures so that any such holder converting Debentures will
receive upon such conversion, in addition to the shares of Common Stock to which
such holder is entitled, the amount and kind of such Securities which such
holder would have received if such holder had converted its Debentures into
Common Stock immediately prior to the Record Date (as defined in Section 15.5(h)
for such distribution of the Securities), the Conversion Price shall be reduced
so that the same shall be equal to the price determined by multiplying the
Conversion Price in effect on the Record Date with respect to such distribution
by a fraction of which the numerator shall be the Current Market Price per share
of the Common Stock on such Record Date less the fair market value (as
determined in good faith by the Board of Directors, whose determination shall be
conclusive, and described in a resolution of the Board of Directors) on the
Record Date of the portion of the Securities so distributed applicable to one
share of Common Stock and the denominator shall be the Current Market Price per
share of the Common Stock, such reduction to become effective immediately prior
to the opening of business on the day following such Record Date; provided,
however, that in the
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event the fair market value (as so determined) of the portion of the Securities
so distributed applicable to one share of Common Stock is equal to or greater
than the Current Market Price of the Common Stock on the Record Date, in lieu of
the foregoing adjustment, adequate provision shall be made so that each
Debentureholder shall have the right to receive upon conversion the amount of
Securities such holder would have received had such holder converted each
Debenture on the Record Date. In the event that such dividend or distribution is
not so paid or made, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such dividend or distribution
had not been declared. If the Board of Directors determines the fair market
value of any distribution for purposes of this Section 15.5(d) by reference to
the actual or when issued trading market for any securities, it must in doing so
consider the prices in such market over the same period used in computing the
Current Market Price of the Common Stock.
Rights or warrants distributed by the Company to all holders of
Common Stock entitling the holders thereof to subscribe for or purchase shares
of the Company's capital stock (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a specified
event or events ("Trigger Event"): (i) are deemed to be transferred with such
shares of Common Stock; (ii) are not exercisable; and (iii) are also issued in
respect of future issuances of Common Stock, shall be deemed not to have been
distributed for purposes of this Section 15.5 (and no adjustment to the
Conversion Price under this Section 15.5 will be required) until the occurrence
of the earliest Trigger Event, whereupon such rights and warrants shall be
deemed to have been distributed and an appropriate adjustment (if any is
required) to the Conversion Price shall be made under this Section 15.5(d). If
any such right or warrant, including any such existing rights or warrants
distributed prior to the date of this Indenture, are subject to events, upon the
occurrence of which such rights or warrants become exercisable to purchase
different securities, evidences of indebtedness or other assets, then the date
of the occurrence of any and each such event shall be deemed to be the date of
distribution and record date with respect to new rights or warrants with such
rights (and a termination or expiration of the existing rights or warrants
without exercise by any of the holders thereof). In addition, in the event of
any distribution (or deemed distribution) of rights or warrants, or any Trigger
Event or other event (of the type described in the preceding sentence) with
respect thereto that was counted for purposes of calculating a distribution
amount for which an adjustment to the Conversion Price under this Section 15.5
was made, (1) in the case of any such rights or warrants which shall all have
been redeemed or repurchased without exercise by any holders thereof, the
Conversion Price shall be readjusted upon such final redemption or repurchase to
give effect to such distribution or Trigger Event, as the case may be, as though
it were a cash distribution, equal to the per share redemption or repurchase
price received by a holder or holders of Common Stock with respect to such
rights or warrants (assuming such holder had retained such rights or warrants),
made to all holders of Common Stock as of the date of such redemption or
repurchase, and (2) in the case of such rights or warrants which shall have
expired or been terminated without exercise by any holders thereof, the
Conversion Price shall be readjusted as if such rights and warrants had not been
issued.
Notwithstanding the foregoing, in the event that the Company shall
distribute rights or warrants to subscribe for additional shares of the Common
Stock (other than rights or warrants described
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in Section 15.5(b)), pro rata to holders of Common Stock, the Company may, in
lieu of making any adjustment pursuant to this Section 15.5(d), make proper
provision so that each holder of a Debenture who converts such Debenture (or any
portion thereof) after the record date for such distribution shall be entitled
to receive upon such conversion, in addition to the shares of Common Stock
issuable upon such conversion (the "Conversion Shares"), a number of rights or
warrants to be determined as follows: (i) if such conversion occurs on or prior
to the date for the distribution to the holders of such rights or warrants of
separate certificates evidencing such rights or warrants (the "Distribution
Date"), the same number of rights or warrants to which a holder of a number of
shares of Common Stock equal to the number of Conversion Shares is entitled at
the time of such conversion in accordance with the terms and provisions of and
applicable to such rights or warrants; and (ii) if such conversion occurs after
the Distribution Date, the same number of rights or warrants to which a holder
of the number of shares of Common Stock into which the principal amount of the
Debenture so converted was convertible immediately prior to the Distribution
Date would have been entitled on the Distribution Date in accordance with the
terms and provisions of, and applicable to such rights or warrants.
For purposes of this Section 15.5(d) and Sections 15.5(a) and (b),
any dividend or distribution to which this Section 15.5(d) is applicable that
also includes shares of Common Stock, or rights or warrants to subscribe for or
purchase shares of Common Stock (or both), shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness, assets or shares of
capital stock other than such shares of Common Stock or rights or warrants (and
any Conversion Price reduction required by this Section 15.5(d) with respect to
such dividend or distribution shall then be made) immediately followed by (2) a
dividend or distribution of such shares of Common Stock or such rights or
warrants (and any further Conversion Price reduction required by Sections
15.5(a) and (b) with respect to such dividend or distribution shall then be
made), except (A) the Record Date of such dividend or distribution shall be
substituted as "the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution" and "the date fixed for such
determination" within the meaning of Sections 15.5(a) and (b) and (B) any shares
of Common Stock included in such dividend or distribution shall not be deemed
"outstanding at the close of business on the date fixed for such determination"
within the meaning of Section 15.5(a).
(e) In case the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock cash (excluding (x) any quarterly cash
dividend on the Common Stock to the extent the aggregate cash dividend per share
of Common Stock in any fiscal quarter does not exceed the greater of (A) the
amount per share of Common Stock of the next preceding quarterly cash dividend
on the Common Stock to the extent that such preceding quarterly dividend did not
require any adjustment of the Conversion Price pursuant to this Section 15.5(e)
(as adjusted to reflect subdivisions or combinations of the Common Stock), and
(B) 3.75% of the arithmetic average of the Closing Price (determined as set
forth in Section 15.5(h)) during the ten (10) Trading Days (as defined in
Section 15.5(h)) immediately prior to the date of declaration of such dividend,
and (y) any dividend or distribution in connection with the liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary),
then, in such case, the Conversion Price shall be reduced so that the same shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior to the close of business on such Record Date by a fraction of
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which the numerator shall be the Current Market Price of the Common Stock on the
Record Date less the amount of cash so distributed (and not excluded as provided
above) applicable to one share of Common Stock and the denominator shall be such
Current Market Price of the Common Stock, such reduction to be effective
immediately prior to the opening of business on the day following the Record
Date; provided, however, that in the event the portion of the cash so
distributed applicable to one share of Common Stock is equal to or greater than
the Current Market Price of the Common Stock on the Record Date, in lieu of the
foregoing adjustment, adequate provision shall be made so that each
Debentureholder shall have the right to receive upon conversion the amount of
cash such holder would have received had such holder converted each Debenture on
the Record Date. In the event that such dividend or distribution is not so paid
or made, the Conversion Price shall again be adjusted to be the Conversion Price
which would then be in effect if such dividend or distribution had not been
declared. If any adjustment is required to be made as set forth in this Section
15.5(e) as a result of a distribution that is a quarterly dividend, such
adjustment shall be based upon the amount by which such distribution exceeds the
amount of the quarterly cash dividend permitted to be excluded pursuant hereto.
If an adjustment is required to be made as set forth in this Section 15.5(e)
above as a result of a distribution that is not a quarterly dividend, such
adjustment shall be based upon the full amount of the distribution.
(f) In case a tender or exchange offer made by the Company or any
Subsidiary for all or any portion of the Common Stock (other than tender or
exchange offers for less than fifteen percent (15%) of the outstanding shares of
Common Stock of the Company) shall expire and such tender or exchange offer (as
amended upon the expiration thereof) shall require the payment to stockholders
of consideration per share of Common Stock having a fair market value (as
determined by the Board of Directors, whose determination shall be conclusive
and described in a resolution of the Board of Directors) that as of the last
time (the "Expiration Time") tenders or exchanges may be made pursuant to such
tender or exchange offer (as it may be amended) that exceeds the Current Market
Price of the Common Stock on the Trading Day next succeeding the Expiration
Time, the Conversion Price shall be reduced so that the same shall equal the
price determined by multiplying the Conversion Price in effect immediately prior
to the Expiration Time by a fraction of which the numerator shall be the number
of shares of Common Stock outstanding (including any tendered or exchanged
shares) on the Expiration Time multiplied by the Current Market Price of the
Common Stock on the Trading Day next succeeding the Expiration Time and the
denominator shall be the sum of (x) the fair market value (determined as
aforesaid) of the aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the tender or exchange
offer) of all shares validly tendered or exchanged and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such maximum, being
referred to as the "Purchased Shares") and (y) the product of the number of
shares of Common Stock outstanding (less any Purchased Shares) on the Expiration
Time and the Current Market Price of the Common Stock on the Trading Day next
succeeding the Expiration Time, such reduction to become effective immediately
prior to the opening of business on the day following the Expiration Time. In
the event that the Company is obligated to purchase shares pursuant to any such
tender or exchange offer, but the Company is permanently prevented by applicable
law from effecting any such purchases or all such purchases are
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rescinded, the Conversion Price shall again be adjusted to be the Conversion
Price which would then be in effect if such tender or exchange offer had not
been made.
(g) In case of a tender or exchange offer made by a person other
than the Company or any Subsidiary for an amount which increases the offeror's
ownership of Common Stock to more than twenty-five percent (25%) of the Common
Stock outstanding and shall involve the payment by such person of consideration
per share of Common Stock having a fair market value (as determined by the Board
of Directors, whose determination shall be conclusive, and described in a
resolution of the Board of Directors) at the last time (the "Offer Expiration
Time") tenders or exchanges may be made pursuant to such tender or exchange
offer (as it shall have been amended) that exceeds the Current Market Price of
the Common Stock on the Trading Day next succeeding the Offer Expiration Time,
and in which, as of the Offer Expiration Time the Board of Directors is not
recommending rejection of the offer, the Conversion Price shall be reduced so
that the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the Offer Expiration Time by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) on the Offer Expiration Time
multiplied by the Current Market Price of the Common Stock on the Trading Day
next succeeding the Offer Expiration Time and the denominator shall be the sum
of (x) the fair market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the acceptance (up to any maximum
specified in the terms of the tender or exchange offer) of all shares validly
tendered or exchanged and not withdrawn as of the Offer Expiration Time (the
shares deemed so accepted, up to any such maximum, being referred to as the
"Accepted Purchased Shares") and (y) the product of the number of shares of
Common Stock outstanding (less any Accepted Purchased Shares) on the Offer
Expiration Time and the Current Market Price of the Common Stock on the Trading
Day next succeeding the Offer Expiration Time, such reduction to become
effective immediately prior to the opening of business on the day following the
Offer Expiration Time. In the event that such person is obligated to purchase
shares pursuant to any such tender or exchange offer, but such person is
permanently prevented by applicable law from effecting any such purchases or all
such purchases are rescinded, the Conversion Price shall again be adjusted to be
the Conversion Price which would then be in effect if such tender or exchange
offer had not been made. Notwithstanding the foregoing, the adjustment described
in this Section 15.5(g) shall not be made if, as of the Offer Expiration Time,
the offering documents with respect to such offer disclose a plan or intention
to cause the Company to engage in any transaction described in Article XII;
provided, however, that if such transaction is not consummated within twelve
(12) months of the Offer Expiration time, the adjustment described in this
Section 15.5(g) shall be made.
(h) For purposes of this Section 15.5, the following terms shall
have the meaning indicated:
(1) "Closing Price" with respect to any securities on any day
shall mean the closing sale price regular way on such day or, in case no
such sale takes place on such day, the average of the reported closing bid
and asked prices, regular way, in each case on the New York Stock
Exchange, or, if such security is not listed or admitted to trading on
such Exchange, on the
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principal national security exchange or quotation system on which such
security is quoted or listed or admitted to trading, or, if not quoted or
listed or admitted to trading on any national securities exchange or
quotation system, the average of the closing bid and asked prices of such
security on the over-the-counter market on the day in question as reported
by the National Quotation Bureau Incorporated, or a similar generally
accepted reporting service, or if not so available, in such manner as
furnished by any New York Stock Exchange member firm selected from time to
time by the Board of Directors for that purpose, or a price determined in
good faith by the Board of Directors or, to the extent permitted by
applicable law, a duly authorized committee thereof, whose determination
shall be conclusive.
(2) "Current Market Price" shall mean the average of the daily
Closing Prices per share of Common Stock for the ten (10) consecutive
Trading Days immediately prior to the date in question; provided, however,
that (1) if the "ex" date (as hereinafter defined) for any event (other
than the issuance or distribution or Fundamental Change requiring such
computation) that requires an adjustment to the Conversion Price pursuant
to Section 15.5(a), (b), (c), (d), (e), (f) or (g) occurs during such ten
(10) consecutive Trading Days, the Closing Price for each Trading Day
prior to the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the same fraction by which the
Conversion Price is so required to be adjusted as a result of such other
event, (2) if the "ex" date for any event (other than the issuance,
distribution or Fundamental Change requiring such computation) that
requires an adjustment to the Conversion Price pursuant to Section
15.5(a), (b), (c), (d), (e), (f) or (g) occurs on or after the "ex" date
for the issuance or distribution requiring such computation and prior to
the day in question, the Closing Price for each Trading Day on and after
the "ex" date for such other event shall be adjusted by multiplying such
Closing Price by the reciprocal of the fraction by which the Conversion
Price is so required to be adjusted as a result of such other event, and
(3) if the "ex" date for the issuance, distribution or Fundamental Change
requiring such computation is prior to the day in question, after taking
into account any adjustment required pursuant to clause (1) or (2) of this
proviso, the Closing Price for each Trading Day on or after such "ex" date
shall be adjusted by adding thereto the amount of any cash and the fair
market value (as determined by the Board of Directors or, to the extent
permitted by applicable law, a duly authorized committee thereof in a
manner consistent with any determination of such value for purposes of
Section 15.5(d), (f) or (g), whose determination shall be conclusive and
described in a resolution of the Board of Directors or such duly
authorized committee thereof, as the case may be) of the evidences of
indebtedness, shares of capital stock or assets being distributed
applicable to one share of Common Stock as of the close of business on the
day before such "ex" date. For purposes of any computation under Section
15.5(f) or (g), the Current Market Price of the Common Stock on any date
shall be deemed to be the average of the daily Closing Prices per share of
Common Stock for such day and the next two succeeding Trading Days;
provided, however, that if the "ex" date for any event (other than the
tender or exchange offer requiring such computation) that requires an
adjustment to the Conversion Price pursuant to Section 15.5(a), (b), (c),
(d), (e), (f) or (g) occurs on or after the Expiration Time or Offer
Expiration Time, as the case may be, for the tender or exchange offer
requiring such
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computation and prior to the day in question, the Closing Price for. each
Trading Day on and after the "ex" date for such other event shall be
adjusted by multiplying such Closing Price by the reciprocal of the
fraction by which the Conversion Price is so required to be adjusted as a
result of such other event. For purposes of this paragraph, the term "ex"
date, (1) when used with respect to any issuance or distribution, means
the first date on which the Common Stock trades regular way on the
relevant exchange or in the relevant market from which the Closing Price
was obtained without the right to receive such issuance or distribution,
(2) when used with respect to any subdivision or combination of shares of
Common Stock, means the first date on which the Common Stock trades
regular way on such exchange or in such market after the time at which
such subdivision or combination becomes effective, and (3) when used with
respect to any tender or exchange offer means the first date on which the
Common Stock trades regular way on such exchange or in such market after
the Offer Expiration Time of such offer.
(3) "fair market value" shall mean the amount which a willing
buyer would pay a willing seller in an arm's length transaction.
(4) "Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of Common
Stock have the right to receive any cash, securities or other property or
in which the Common Stock (or other applicable security) is exchanged for
or converted into any combination of cash, securities or other property,
the date fixed for determination of stockholders entitled to receive such
cash, securities or other property (whether such date is fixed by the
Board of Directors or by statute, contract or otherwise).
(5) "Trading Day" shall mean (x) if the applicable security is
listed or admitted for trading on the New York Stock Exchange or another
national security exchange, a day on which the New York Stock Exchange or
another national security exchange is open for business or (y) if the
applicable security is quoted on the Nasdaq National Market, a day on
which trades may be made on thereon or (z) if the applicable security is
not so listed, admitted for trading or quoted, any day other than a
Saturday or Sunday or a day on which banking institutions in the State of
New York are authorized or obligated by law or executive order to close.
(i) The Company may make such reductions in the Conversion Price, in
addition to those required by Sections 15.5 (a), (b), (c), (d), (e), (f) or (g)
as the Board of Directors considers to be advisable to avoid or diminish any
income tax to holders of Common Stock or rights to purchase Common Stock
resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes.
To the extent permitted by applicable law, the Company from time to
time may reduce the Conversion Price by any amount for any period of time if the
period is at least twenty (20) days, the reduction is irrevocable during the
period and the Board of Directors shall have made a determination that such
reduction would be in the best interests of the Company, which determination
shall be conclusive.
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Whenever the Conversion Price is reduced pursuant to the preceding sentence, the
Company shall mail to holders of record of the Debentures a notice of the
reduction at least fifteen (15) days prior to the date the reduced Conversion
Price takes effect, and such notice shall state the reduced Conversion Price and
the period during which it will be in effect.
(j) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least one percent
(1%) in such price; provided, however, that any adjustments which by reason of
this Section 15.5(j) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Article XV shall be made by the Company and shall be made to the nearest cent or
to the nearest one-hundredth (1/100) of a share, as the case may be. No
adjustment need be made for rights to purchase Common Stock pursuant to a
Company plan for reinvestment of dividends or interest. To the extent the
Debentures become convertible into cash, assets, property or securities (other
than capital stock of the Company), no adjustment need be made thereafter as to
the cash, assets, property or such securities. Interest will not accrue on the
cash.
(k) Whenever the Conversion Price is adjusted as herein provided,
the Company shall promptly file with the Trustee and any conversion agent other
than the Trustee an Officers' Certificate setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment. Promptly after delivery of such certificate, the Company shall
prepare a notice of such adjustment of the Conversion Price setting forth the
adjusted Conversion Price and the date on which each adjustment becomes
effective and shall mail such notice of such adjustment of the Conversion Price
to the holder of each Debenture at his last address appearing on the Debenture
register provided for in Section 2.5 of this Indenture within twenty (20) days
after execution thereof. Failure to deliver such notice shall not affect the
legality or validity of any such adjustment.
(l) In any case in which this Section 15.5 provides that an
adjustment shall become effective immediately after a record date for an event,
the Company may defer until the occurrence of such event (i) issuing to the
holder of any Debenture converted after such record date and before the
occurrence of such event the additional shares of Common Stock issuable upon
such conversion by reason of the adjustment required by such event over and
above the Common Stock issuable upon such conversion before giving effect to
such adjustment and (ii) paying to such holder any amount in cash in lieu of any
fraction pursuant to Section 15.3.
(m) For purposes of this Section 15.5, the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The Company
will not pay any dividend or make any distribution on shares of Common Stock
held in the treasury of the Company.
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Section 15.6. Effect of Reclassification, Consolidation, Merger or Sale.
If any of the following events occur, namely (i) any reclassification or change
of the outstanding shares of Common Stock (other than a subdivision or
combination to which Section 15.5(c) applies), (ii) any consolidation, merger or
combination of the Company with another corporation as a result of which holders
of Common Stock shall be entitled to receive stock, securities or other property
or assets (including cash) with respect to or in exchange for such Common Stock,
or (iii) any sale or conveyance of the properties and assets of the Company as,
or substantially as, an entirety to any other corporation as a result of which
holders of Common Stock shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock, then the Company or the successor or purchasing corporation, as
the case may be, shall execute with the Trustee a supplemental indenture (which
shall comply with the Trust Indenture Act as in force at the date of execution
of such supplemental indenture) providing that such Debenture shall be
convertible into the kind and amount of shares of stock and other securities or
property or assets (including cash) receivable upon such reclassification,
change, consolidation, merger, combination, sale or conveyance by a holder of a
number of shares of Common Stock issuable upon conversion of such Debentures
(assuming, for such purposes, a sufficient number of authorized shares of Common
Stock available to convert all such Debentures) immediately prior to such
reclassification, change, consolidation, merger, combination, sale or conveyance
assuming such holder of Common Stock did not exercise his rights of election, if
any, as to the kind or amount of securities, cash or other property receivable
upon such consolidation, merger, statutory exchange, sale or conveyance
(provided that, if the kind or amount of securities, cash or other property
receivable upon such consolidation, merger, statutory exchange, sale or
conveyance is not the same for each share of Common Stock in respect of which
such rights of election shall not have been exercised ("nonelecting share")),
then for the purposes of this Section 15.6 the kind and amount of securities,
cash or other property receivable upon such consolidation, merger, statutory
exchange, sale or conveyance for each non-electing share shall be deemed to be
the kind and amount so receivable per share by a plurality of the non-electing
shares. Such supplemental indenture shall provide for adjustments which shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Article.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each holder of Debentures, at its address appearing on
the Debenture register provided for in Section 2.5 of this Indenture, within
twenty (20) days after execution thereof. Failure to deliver such notice shall
not affect the legality or validity of such supplemental indenture.
The above provisions of this Section shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.
If this Section 15.6 applies to any event or occurrence, Section
15.5 shall not apply.
Section 15.7. Taxes on Shares Issued. The issue of stock certificates on
conversions of Debentures shall be made without charge to the converting
Debentureholder for any tax in respect of the issue thereof. The Company shall
not, however, be required to pay any tax which may be payable in
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respect of any transfer involved in the issue and delivery of stock in any name
other than that of the holder of any Debenture converted, and the Company shall
not be required to issue or deliver any such stock certificate unless and until
the person or persons requesting the issue thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
Section 15.8. Reservation of Shares; Shares to Be Fully Paid; Compliance
with Governmental Requirements; Listing of Common Stock. The Company shall
provide, free from preemptive rights, out of its authorized but unissued shares
or shares held in treasury, sufficient shares of Common Stock to provide for the
conversion of the Debentures from time to time as such Debentures are presented
for conversion.
Before taking any action which would cause an adjustment reducing
the Conversion Price below the then par value, if any, of the shares of Common
Stock issuable upon conversion of the Debentures, the Company will take all
corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue shares of such Common Stock at
such adjusted Conversion Price.
The Company covenants that all shares of Common Stock which may be
issued upon conversion of Debentures will upon issue be fully paid and
non-assessable by the Company and free from all taxes, liens and charges with
respect to the issue thereof.
The Company covenants that if any shares of Common Stock to be
provided for the purpose of conversion of Debentures hereunder require
registration with or approval of any governmental authority under any federal or
state law before such shares may be validly issued upon conversion, the Company
will in good faith and as expeditiously as possible endeavor to secure such
registration or approval, as the case may be.
The Company further covenants that if at any time the Common Stock
shall be listed on the Nasdaq National Market or any other national securities
exchange or automated quotation system the Company will, if permitted by the
rules of such exchange or automated quotation system, list and keep listed, so
long as the Common Stock shall be so listed on such exchange or automated
quotation system, all Common Stock issuable upon conversion of the Debentures;
provided, however, that if rules of such exchange or automated quotation system
permit the Company to defer the listing of such Common Stock until the first
conversion of the Debentures into Common Stock in accordance with the provisions
of this Indenture, the Company covenants to list such Common Stock issuable upon
conversion of the Debentures in accordance with the requirements of such
exchange or automated quotation system at such time.
Section 15.9. Responsibility of Trustee. The Trustee and any other
conversion agent shall not at any time be under any duty or responsibility to
any holder of Debentures to determine the Conversion Price or whether any facts
exist which may require any adjustment of the Conversion Price, or with respect
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to the nature or extent or calculation of any such adjustment when made, or with
respect to the method employed, or herein or in any supplemental indenture
provided to be employed, in making the same. The Trustee and any other
conversion agent shall not be accountable with respect to the validity or value
(or the kind or amount) of any shares of Common Stock, or of any securities or
property, which may at any time be issued or delivered upon the conversion of
any Debenture; and the Trustee and any other conversion agent make no
representations with respect thereto. Neither the Trustee nor any conversion
agent shall be responsible for any failure of the Company to issue, transfer or
deliver any shares of Common Stock or stock certificates or other securities or
property or cash upon the surrender of any Debenture for the purpose of
conversion or to comply with any of the duties, responsibilities or covenants of
the Company contained in this Article. Without limiting the generality of the
foregoing, neither the Trustee nor any conversion agent shall be under any
responsibility to determine the correctness of any provisions contained in any
supplemental indenture entered into pursuant to Section 15.6 relating either to
the kind or amount of shares of stock or securities or property (including cash)
receivable by Debentureholders upon the conversion of their Debentures after any
event referred to in such Section 15.6 or to any adjustment to be made with
respect thereto, but, subject to the provisions of Section 8.1, may accept as
conclusive evidence of the correctness of any such provisions, and shall be
fully protected in relying upon, the Officers' Certificate (which the Company
shall be obligated to file with the Trustee prior to the execution of any such
supplemental indenture) with respect thereto.
Section 15.10. Notice to Holders Prior to Certain Actions. In case:
(a) the Company shall declare a dividend (or any other distribution)
on its Common Stock that would require an adjustment in the Conversion Price
pursuant to Section 15.5; or
(b) the Company shall authorize the granting to the holders of all
or substantially all of its Common Stock of rights or warrants to subscribe for
or purchase any share of any class of its capital stock or any other rights or
warrants; or
(c) of any reclassification or reorganization of the Common Stock of
the Company (other than a subdivision or combination of its outstanding Common
Stock, or a change in par value, or from par value to no par value, or from no
par value to par value), or of any consolidation or merger to which the Company
is a party and for which approval of any stockholders of the Company is
required, or of the sale or transfer of all or substantially all of the assets
of the Company or any Significant Subsidiary; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company or any Significant Subsidiary;
the Company shall cause to be filed with the Trustee and to be mailed to each
holder of Debentures at his address appearing on the Debenture register provided
for in Section 2.5 of this Indenture, as promptly as possible but in any event
at least fifteen (15) days prior to the applicable date hereinafter specified, a
notice
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stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution or rights or warrants, 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 or rights are to be determined, or (y) the date
on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective or occur,
and the date as of which it is expected that holders of Common Stock of record
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of such
dividend, distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up.
ARTICLE XVI
MISCELLANEOUS PROVISIONS
Section 16.1. Provisions Binding on Company's Successors. All the
covenants, stipulations, promises and agreements by the Company contained in
this Indenture shall bind its successors and assigns whether so expressed or
not.
Section 16.2. Official Acts by Successor Corporation. Any act or
proceeding by any provision of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any corporation that shall at the time be the lawful sole successor
of the Company.
Section 16.3. Addresses for Notices, Etc. Any notice or demand which by
any provision of this Indenture is required or permitted to be given or served
by the Trustee or by the holders of Debentures on the Company shall be deemed to
have been sufficiently given or made, for all purposes, if given or served by
being deposited postage prepaid by registered or certified mail in a post office
letter box addressed (until another address is filed by the Company with the
Trustee) to Sepracor Inc., 111 Locke Drive, Marlborough, MA 01752, Attention:
Chief Financial Officer. Any notice, direction, request or demand hereunder to
or upon the Trustee shall be deemed to have been sufficiently given or made, for
all purposes, if given or served by being deposited postage prepaid by
registered or certified mail in a post office letter box addressed to the
Corporate Trust Office, which office is, at the date as of which this Indenture
is dated, located at The Chase Manhattan Bank, 450 West 33rd Street, 15th Floor,
New York, New York 10001-2697, Attention: Global Trust Services.
The Trustee, by notice to the Company, may designate additional or
different addresses for subsequent notices or communications.
Any notice or communication mailed to a Debentureholder shall be
mailed to him by first class mail, postage prepaid, at his address as it appears
on the Debenture register and shall be sufficiently given to him if so mailed
within the time prescribed.
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Failure to mail a notice or communication to a Debentureholder or
any defect in it shall not affect its sufficiency with respect to other
Debentureholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
Section 16.4. Governing Law. This Indenture and each Debenture shall be
deemed to be a contract made under the laws of The Commonwealth of
Massachusetts, and for all purposes shall be construed in accordance with the
laws of The Commonwealth of Massachusetts.
Section 16.5. Evidence of Compliance with Conditions Precedent;
Certificates to Trustee. Upon any application or demand by the Company to the
Trustee to take any action under any of the provisions of this Indenture, the
Company shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, and an Opinion of Counsel stating that,
in the opinion of such counsel, all such conditions precedent have been complied
with.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture shall include (1) a statement that the person
making such certificate or opinion has read such covenant or condition; (2) a
brief statement as to the nature and scope of the examination or investigation
upon which the statement or opinion contained in such certificate or opinion is
based: (3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
Section 16.6. Legal Holidays. In any case where the date of maturity of
interest on or principal of the Debentures or the date fixed for redemption of
any Debenture will not be a Business Day, then payment of such interest on or
principal of the Debentures need not be made on such date, but may be made on
the next succeeding Business Day with the same force and effect as if made on
the date of maturity or the date fixed for redemption, and no interest shall
accrue for the period from and after such date.
Section 16.7. Trust Indenture Act. This Indenture is hereby made subject
to, and shall be governed by, the provisions of the Trust Indenture Act required
to be part of and to govern indentures qualified under the Trust Indenture Act;
provided, however, that, unless otherwise required by law, notwithstanding the
foregoing, this Indenture and the Debentures issued hereunder shall not be
subject to the provisions of subsections (a)(1), (a)(2), and (a)(3) of Section
314 of the Trust Indenture Act as now in effect or as hereafter amended or
modified; provided, further, that this Section 16.7 shall not require this
Indenture or the Trustee to be qualified under the Trust Indenture Act prior to
the time such qualification is in fact required under the terms of the Trust
Indenture Act, nor shall it constitute any admission or acknowledgment by any
party to such supplemental indenture that any such qualification is required
prior to the time such qualification is in fact required under the terms of the
Trust Indenture Act.
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If any provision hereof limits, qualifies or conflicts with another provision
hereof which is required to be included in an indenture qualified under the
Trust Indenture Act, such required provision shall control.
Section 16.8. No Security Interest Created. Nothing in this Indenture or
in the Debentures, expressed or implied, shall be construed to constitute a
security interest under the Uniform Commercial Code or similar legislation, as
now or hereafter enacted and in effect, in any jurisdiction where property of
the Company or its subsidiaries is located.
Section 16.9. Benefits of Indenture. Nothing in this Indenture or in the
Debentures, expressed or implied, shall give to any Person, other than the
parties hereto, any paying agent, any authenticating agent, any Debenture
registrar and their successors hereunder, the holders of Debentures and the
holders of Senior Obligations, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
Section 16.10. Table of Contents, Headings, Etc. The table of contents
and the titles and headings of the articles and sections of this Indenture have
been inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 16.11. Authenticating Agent. The Trustee may appoint an
authenticating agent which shall be authorized to act on its behalf and subject
to its direction in the authentication and delivery of Debentures in connection
with the original issuance thereof and transfers and exchanges of Debentures
hereunder, including under Sections 2.4, 2.5, 2.6, 2.7, 3.3 and 3.5, as fully to
all intents and purposes as though the authenticating agent had been expressly
authorized by this Indenture and those Sections to authenticate and deliver
Debentures. For all purposes of this Indenture, the authentication and delivery
of Debentures by the authenticating agent shall be deemed to be authentication
and delivery of such Debentures "by the Trustee" and a certificate of
authentication executed on behalf of the Trustee by an authenticating agent
shall be deemed to satisfy any requirement hereunder or in the Debentures for
the Trustee's certificate of authentication. Such authenticating agent shall at
all times be a person eligible to serve as trustee hereunder pursuant to Section
8.9.
Any corporation into which any authenticating agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any authenticating agent
shall be a party, or any corporation succeeding to the corporate trust business
of any authenticating agent, shall be the successor of the authenticating agent
hereunder, if such successor corporation is otherwise eligible under this
Section 16.11, without the execution or filing of any paper or any further act
on the part of the parties hereto or the authenticating agent or such successor
corporation.
Any authenticating agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any authenticating agent by giving written notice
of termination to such authenticating agent and to the Company. Upon
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<PAGE>
receiving such a notice of resignation or upon such a termination, or in case at
any time any authenticating agent shall cease to be eligible under this Section,
the Trustee shall either promptly appoint a successor authenticating agent or
itself assume the duties and obligations of the former authenticating agent
under this Indenture, and upon such appointment of a successor authenticating
agent, if made, shall give written notice of such appointment of a successor
authenticating agent to the Company and shall mail notice of such appointment of
a successor authenticating agent to all holders of Debentures as the names and
addresses of such holders appear on the Debenture register.
The Trustee agrees to pay to the authenticating agent from time to
time reasonable compensation for its services (to the extent pre-approved by the
Company in writing), and the Trustee shall be entitled to be reimbursed for such
pre-approved payments, subject to Section 8.6.
The provisions of Sections 8.2, 8.3, 8.4, 9.3 and this Section 16.11
shall be applicable to any authenticating agent.
Section 16.12. Execution in Counterparts. This Indenture may be executed
in any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this indenture to be duly
executed.
SEPRACOR INC.
By: /s/ Robert F. Scumaci
------------------------
Name: Robert F. Scumaci
Title: Senior Vice President Finance and
Administration
THE CHASE MANHATTAN BANK,
as Trustee
By: /s/ Kathleen Perry
----------------------
Name: Kathleen Perry
Title: Vice President
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<PAGE>
EXHIBIT A
[For Global Debenture only:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (THE
"DEPOSITARY," WHICH TERM INCLUDES ANY SUCCESSOR DEPOSITARY FOR THE CERTIFICATES)
TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DEPOSITARY AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO. (OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE, OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
THE DEBENTURE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR FOREIGN
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE BENEFIT OF,
U.S. PERSONS, EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT), OR (B) IT IS NOT A "UNITED STATES PERSON"
(AS DEFINED IN RULE 902 OF REGULATION S) AND IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S; (2) AGREES THAT IT WILL
NOT, PRIOR TO THE DATE THAT IS TWO YEARS AFTER THE LATER OF THE INITIAL ISSUANCE
OF THE DEBENTURE EVIDENCED HEREBY AND THE LAST DATE ON WHICH SEPRACOR (THE
"COMPANY") OR ANY "AFFILIATE" (AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT)
OF THE COMPANY WAS THE OWNER OF THE DEBENTURE (THE "RESTRICTION TERMINATION
DATE") RESELL OR OTHERWISE TRANSFER THE DEBENTURE EVIDENCED HEREBY OR THE COMMON
STOCK ISSUABLE UPON CONVERSION OF SUCH DEBENTURE EXCEPT (A) TO THE COMPANY OR
ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN AN OFFSHORE
TRANSACTION COMPLYING WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE
UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S, (D) PURSUANT TO ANY
OTHER AVAILABLE EXEMPTION FROM
<PAGE>
REGISTRATION PROVIDED BY THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER); AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE DEBENTURE EVIDENCED
HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THE DEBENTURE EVIDENCED HEREBY BEFORE THE
RESTRICTION TERMINATION DATE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET
FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT
THIS CERTIFICATE TO THE CHASE MANHATTAN BANK, AS TRUSTEE (OR A SUCCESSOR
TRUSTEE, AS APPLICABLE). THE HOLDER MUST, PRIOR TO SUCH TRANSFER (OTHER THAN A
TRANSFER PURSUANT TO CLAUSE 2(E) ABOVE), FURNISH TO THE CHASE MANHATTAN BANK AS
TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS SUCH TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
THIS LEGEND WILL BE REMOVED UPON ANY TRANSFER OF THE DEBENTURE EVIDENCED HEREBY
UPON OR AFTER THE RESTRICTION TERMINATION DATE.
A-2
<PAGE>
SEPRACOR INC.
5% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2007
No: _______ CUSIP: ________
SEPRACOR INC., a corporation duly organized and validly existing under the
laws of the State of Delaware (herein called the "Company"), which term includes
any successor corporation under the Indenture referred to on the reverse hereof,
for value received hereby promises to pay to ___________________________________
or registered assigns, the principal sum of ________________ ($____________) on
February 15, 2007, at the office or agency of the Company maintained for that
purpose in accordance with the terms of the Indenture, or, at the option of the
holder of this Debenture, at the Corporate Trust Office, in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts, and to pay interest,
semi-annually on February 15 and August 15, of each year, commencing August 15,
2000, on said principal sum at said office or agency, in like coin or currency,
at the rate per annum of 5% from February 14, 2000 and thereafter to maturity
from the February 15 or August 15, as the case may be, next preceding the date
of this Debenture to which interest has been paid or duly provided for, unless
the date hereof is a date to which interest has been paid or duly provided for,
in which case from the date of this Debenture, or unless no interest has been
paid or duly provided for on the Debentures, in which case from February 14,
2000, until payment of said principal sum has been made or duly provided for.
Notwithstanding the foregoing, if the date hereof is after any January 31 or
July 31, as the case may be, and before the following February 15 or August 15,
this Debenture shall bear interest from such February 15 or August 15; provided,
however, that if the Company shall default in the payment of interest due on
such February 15 or August 15, then this Debenture shall bear interest from the
next preceding February 15 or August 15, to which interest has been paid or duly
provided for or, if no interest has been paid or duly provided for on such
Debenture, from February 14, 2000. The interest payable on the Debenture
pursuant to the Indenture on any February 15 or August 15 will be paid to the
person entitled thereto as it appears in the Debenture register at the close of
business on the record date, which shall be the January 31 or July 31 (whether
or not a Business Day) next preceding such February 15 or August 15, as provided
in the Indenture; provided that any such interest not punctually paid or duly
provided for shall be payable as provided in the Indenture. Interest may, at the
option of the Company, be paid either (i) by check mailed to the registered
address of such person (provided that the holder of Debentures with an aggregate
principal amount in excess of $2,000,000 shall, at the written election of such
holder, be paid by wire transfer in immediately available funds) or (ii) by
transfer to an account maintained by such person located in the United States.
A-3
<PAGE>
Reference is made to the further provisions of this Debenture set
forth on the reverse hereof, including, without limitation, provisions
subordinating the payment of principal of and premium, if any, and interest on
the Debentures to the prior payment in full of all Senior Obligations, as
defined in the Indenture, and provisions giving the holder of this Debenture the
right to convert this Debenture into Common Stock of the Company on the terms
and subject to the limitations referred to on the reverse hereof and as more
fully specified in the Indenture. Such further provisions shall for all purposes
have the same effect as though fully set forth at this place.
This Debenture shall be deemed to be a contract made under the laws
of The Commonwealth of Massachusetts, and for all purposes shall be construed in
accordance with and governed by the laws of The Commonwealth of Massachusetts.
This Debenture shall not be valid or become obligatory for any
purpose until the certificate of authentication hereon shall have been manually
signed by the Trustee or a duly authorized authenticating agent under the
Indenture.
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed under its corporate seal to be affixed or imported hereon.
SEPRACOR INC.
BY:___________________________________
Name:
Title:
Attest:_______________________________
Name:
Title:
Dated:___________________
A-4
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Debentures described in the within-named Indenture.
THE CHASE MANHATTAN BANK, as Trustee
By:______________________________________
Authorized Signatory
By:______________________________________
As Authenticating Agent
(if different from Trustee)
A-5
<PAGE>
[FORM OF REVERSE OF DEBENTURE]
SEPRACOR INC.
5% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2007
This Debenture is one of a duly authorized issue of Debentures of
the Company, designated as its 5% Convertible Subordinated Debentures due 2007
(herein called the "Debentures"), limited to the aggregate principal amount of
$____________ all issued or to be issued under and pursuant to an Indenture
dated as of February 14, 2000 (herein called the "Indenture"), between the
Company and The Chase Manhattan Bank as trustee (herein called the "Trustee"),
to which Indenture and all indentures supplemental thereto reference is hereby
made for a description of the rights, limitations of rights, obligations, duties
and immunities thereunder of the Trustee, the Company and the holders of the
Debentures.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of, premium, if any, and accrued
interest (including Liquidated Damages, if any) on all Debentures may be
declared, and upon said declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture:
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Debentures at the time outstanding, evidenced
as in the Indenture provided, to execute supplemental indentures adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Indenture or of any supplemental indenture or modifying in any manner the
rights of the holders of the Debentures; provided, however, that no such
supplemental indenture shall (i) extend the fixed maturity of any Debenture, or
reduce the rate or extend the time of payment of interest thereon, or reduce the
principal amount thereof or premium, if any, thereon, or reduce any amount
payable on redemption thereof, or impair the right of any Debentureholder to
institute suit for the payment thereof, or make the principal thereof or
interest or premium, if any, thereon payable in any coin or currency other than
that provided in the Debenture, or modify the provisions of the Indenture with
respect to the subordination of the Debentures in a manner adverse to the
Debentureholders in any material respect, or change the obligation of the
Company to make redemption of any Debenture upon the happening of a Fundamental
Change in a manner adverse to the holder of the Debentures, or impair the right
to convert the Debentures into Common Stock subject to the terms set forth in
the Indenture, including Section 15.6 thereof, without the consent of the holder
of each Debenture so affected or (ii) reduce the aforesaid percentage of
Debentures, the holders of which are
A-6
<PAGE>
required to consent to any such supplemental indenture, without the consent of
the holders of all Debentures then outstanding. It is also provided in the
Indenture that, prior to any declaration accelerating the maturity of the
Debentures, the holders of a majority in aggregate principal amount of the
Debentures at the time outstanding may on behalf of the holders of all of the
Debentures waive any past default or Event of Default under the Indenture and
its consequences except a default in the payment of interest (including
Liquidated Damages, if any) or any premium on or the principal of any of the
Debentures, a default in the payment of redemption price pursuant to Article III
or a failure by the Company to convert any Debentures into Common Stock of the
Company. Any such consent or waiver by the holder of this Debenture (unless
revoked as provided in the Indenture) shall be conclusive and binding upon such
holder and upon all future holders and owners of this Debenture and any
Debentures which may be issued in exchange or substitute hereof, irrespective of
whether or not any notation thereof is made upon this Debenture or such other
Debentures.
The indebtedness evidenced by the Debentures is, to the extent and
in the manner provided in the Indenture, expressly subordinate and subject in
right of payment to the prior payment in full of all Senior Obligations of the
Company, as defined in the Indenture, whether outstanding at the date of the
Indenture or thereafter incurred, and this Debenture is issued subject to the
provisions of the Indenture with respect to such subordination. Each holder of
this Debenture, by accepting the same, agrees to and shall be bound by such
provisions and authorizes the Trustee on its behalf to take such action as may
be necessary or appropriate to effectuate the subordination so provided and
appoints the Trustee his attorney-in-fact for such purpose.
No reference herein to the Indenture and no provision of this
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and any
premium and interest (including Liquidated Damages, if any) on this Debenture at
the place, at the respective times, at the rate and in the coin or currency
herein prescribed.
Interest on the Debentures shall be computed on the basis of a year
of twelve 30-day months.
The Debentures are issuable in registered form without coupons in
denominations of $1,000 and any integral multiple of $1,000. At the office or
agency of the Company referred to on the face hereof, and in the manner and
subject to the limitations provided in the Indenture, without payment of any
service charge but with payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration or
exchange of Debentures, Debentures may be exchanged for a like aggregate
principal amount of Debentures of other authorized denominations.
A-7
<PAGE>
The Debentures may be provisionally redeemed by the Company, in
whole or in part, at any time prior to February 15, 2003, at a redemption price
equal to $1,000 per Debenture to be redeemed plus accrued and unpaid interest,
if any (including Liquidated Damages Amount, if any) to the date of redemption
if (i) the closing price of the Common Stock shall have exceeded 150% of the
conversion price then in effect for at least 20 trading days in any consecutive
30-trading day period ending on the trading day prior to the date of mailing of
the notice of provisional redemption, which date shall be not more than 60 nor
less than 30 days prior to the date of redemption and (ii) (A) the shelf
registration statement covering resales of the Debentures and the Common Stock
issuable upon conversion of the Debentures is effective and available for use
and is expected to remain effective and available for use for the 30 days
immediately following the date of redemption, or (B) the Company is no longer
required under the terms of the Registration Rights Agreement to maintain the
effectiveness of such registration statement.
Upon any such provisional redemption, the Company shall make an
additional Make-Whole Payment (as defined in the Indenture) with respect to the
Debentures called for redemption to holders on the date of mailing of the notice
of provisional redemption in an amount equal to $230.77 per $1,000 Debenture,
less the amount of any interest actually paid on such Debenture prior to or in
connection with such provisional redemption. The Company shall make the
Make-Whole Payment on all Debentures called for provisional redemption,
including any Debentures converted after the date of mailing of the notice of
provisional redemption and prior to the date of redemption.
At any time on or after February 15, 2003, and prior to maturity, if
(i) the closing price of the Common Stock shall have exceeded 120% of the
conversion price then in effect for at least 20 trading days in any consecutive
30-trading day period ending on the trading day prior to the date of mailing of
the notice of optional redemption, which date shall be not more than 60 nor less
than 30 days prior to the date of redemption and (ii) the shelf registration
statement covering resales of the Debentures and the Common Stock issuable upon
conversion of the Debentures is effective and available for use for the 30 days
immediately following the date of redemption, the Debentures may be redeemed at
the option of the Company as a whole, or from time to time in part, upon mailing
a notice of such redemption not less than thirty (30) days before the date fixed
for redemption to the holders of Debentures at their last registered addresses,
all as provided in the Indenture, at the following optional redemption prices
(expressed as percentages of the principal amount), together in each case with
accrued interest (including Liquidated Damages, if any) to, but excluding, the
date fixed for redemption:
If redeemed during the period beginning February 15, 2003 and ending
on February 14, 2004, at a redemption price of 102%; if redeemed during the
period beginning February 15, 2004 and ending on February 14, 2005, at a
redemption price of 101%; and if redeemed during the period beginning February
15, 2005 and ending on February 15, 2007, at a redemption price of 100%;
provided that if the
A-8
<PAGE>
date fixed for redemption is on February 15 or August 15, then the interest
payable on such date shall be paid to the holder of record on the next preceding
January 31 or July 31, respectively.
The Debentures are not subject to redemption through the operation
of any sinking fund.
If a Fundamental Change (as defined in the Indenture) occurs at any
time prior to February 15, 2007, the Debentures will be redeemable on the 30th
day after notice thereof at the option of the holder at a redemption price equal
to 100% of the principal amount of the Debenture (or portion thereof) redeemed,
together with accrued interest to the date of redemption; provided that if such
Repurchase Date is February 15 or August 15, then the interest payable on such
date shall be paid to the holder of record of the Debenture on the next
preceding January 31 or July 31, respectively. The Company shall mail to all
holders of record of the Debentures a notice of the occurrence of a Fundamental
Change and of the redemption right arising as a result thereof on or before the
10th day after the occurrence of such Fundamental Change. For a Debenture to be
so repaid at the option of the holder, the Company must receive at the office or
agency of the Company maintained for that purpose in accordance with the terms
of the Indenture, such Debenture with the form entitled "Option to Elect
Repayment Upon a Fundamental Change" on the reverse thereof duly completed,
together with such Debentures duly endorsed for transfer, on or before the 30th
day after the date of such notice (or if such 30th day is not a Business Day,
the next succeeding Business Day).
Subject to the provisions of the Indenture, the holder hereof has
the right, at its option, at any time after ninety (90) days following the
latest date of original issuance thereof through the close of business on
February 15, 2007, or, as to all or any portion hereof called for redemption,
prior to the close of business on the Business Day immediately preceding the
date fixed for redemption (unless the Company shall default in payment due upon
redemption thereof), to convert the principal hereof or any portion of such
principal which is $1,000 or an integral multiple thereof into that number of
shares of the Company's Common Stock, as said shares shall be constituted at the
date of conversion, obtained by dividing the principal amount of this Debenture
or portion thereof to be converted by the Conversion Price of $184.76 or such
Conversion Price as adjusted from time to time as provided in the Indenture,
upon surrender of this Debenture, together with a conversion notice as provided
in the Indenture, to the Company at the office or agency of the Company
maintained for that purpose in accordance with the terms of the Indenture, or at
the option of such holder, the Corporate Trust Office, and, unless the shares
issuable on conversion are to be issued in the same name as this Debenture, duly
endorsed by, or accompanied by instruments of transfer in form satisfactory to
the Company duly executed by, the holder or by his duly authorized attorney. No
adjustment in respect of interest or dividends will be made upon any conversion;
provided, however, that if this Debenture shall be surrendered for conversion
during the period from (but excluding) a record date for any interest payment
date to (but excluding) such interest payment date, this Debenture (unless it
A-9
<PAGE>
or the portion being converted shall have been called for redemption during such
period) must be accompanied by an amount, in New York Clearing House funds or
other funds acceptable to the Company, equal to the interest payable on such
interest payment date on the principal amount being converted. No fractional
shares will be issued upon any conversion, but an adjustment in cash will be
made, as provided in the Indenture, in respect of any fraction of a share which
would otherwise be issuable upon the surrender of any Debenture or Debentures
for conversion.
Any Debentures called for redemption, unless surrendered for
conversion on or before the close of business on the date fixed for redemption,
may be deemed to be purchased from the holder of such Debentures at an amount
equal to the applicable redemption price, together with accrued interest
(including Liquidated Damages, if any) to (but excluding) the date fixed for
redemption, by one or more investment bankers or other purchasers who may agree
with the Company to purchase such Debentures from the holders thereof and
convert them into Common Stock of the Company and to make payment for such
Debentures as aforesaid to the Trustee in trust for such holders.
Upon due presentment for registration of transfer of this Debenture
at the office or agency of the Company maintained for that purpose in accordance
with the terms of the Indenture, or at the option of the holder of this
Debenture, at the Corporate Trust Office, a new Debenture or Debentures of
authorized denominations for an equal aggregate principal amount will be issued
to the transferee in exchange thereof, subject to the limitations provided in
the Indenture, without charge except for any tax or other governmental charge
imposed in connection therewith.
The Company, the Trustee, any authenticating agent, any paying
agent, any conversion agent and any Debenture registrar may deem and treat the
registered holder hereof as the absolute owner of this Debenture (whether or not
this Debenture shall be overdue and notwithstanding any notation of ownership or
other writing hereon made by anyone other than the Company or any Debenture
registrar), for the purpose of receiving payment hereof, or on account hereof,
for the conversion hereof and for all other purposes, and neither the Company
nor the Trustee nor any other authenticating agent nor any paying agent nor any
other conversion agent nor any Debenture registrar shall be affected by any
notice to the contrary. All payments made to or upon the order of such
registered holder shall, to the extent of the sum or sums paid, satisfy and
discharge liability for monies payable on this Debenture.
No recourse for the payment of the principal of or any premium or
interest on this Debenture, or for any claim based hereon or otherwise in
respect hereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in the Indenture or any indenture supplemental thereto
or in any Debenture, or because of the creation of any indebtedness represented
thereby, shall be had against any incorporator, stockholder, employee, agent,
officer or director or subsidiary, as such, past,
A-10
<PAGE>
present or future, of the Company or of any successor corporation, either
directly or through the Company or any successor corporation, whether by virtue
of any constitution, statute or rule of law or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.
Terms used in this Debenture and defined in the Indenture are used
herein as therein defined.
A-11
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription of the face of this
Debenture, shall be construed as though they were written out in full according
to applicable laws or regulations:
- --------------------------------------------------------------------------------
TEN COM- as tenants in common UNIF GIFT MIN ACT --
____________________ Custodian
(Cust)
____________________
(Minor)
- --------------------------------------------------------------------------------
TEN ENT- as tenants by the
entireties
- --------------------------------------------------------------------------------
JT TEN- as joint tenants with under Uniform Gifts to Minors Act
right of survivorship
and not as tenants in ____________________
common (State)
- --------------------------------------------------------------------------------
ADDITIONAL ABBREVIATIONS MAY ALSO BE USED
THOUGH NOT IN THE ABOVE LIST.
A-12
<PAGE>
CONVERSION NOTICE
To: SEPRACOR INC.
The undersigned registered owner of this Debenture hereby
irrevocably exercises the option to convert this Debenture, or the portion
hereof (which is $1,000 or an integral multiple thereof) below designated, into
shares of Common Stock of Sepracor Inc. in accordance with the terms of the
Indenture referred to in this Debenture, and directs that the shares issuable
and deliverable upon such conversion, together with any check in payment for
fractional shares and any Debentures representing any unconverted principal
amount hereof, be issued and delivered to the registered holder hereof unless a
different name has been indicated below. If shares or any portion of this
Debenture not converted are to be issued in the name of a person other than the
undersigned, the undersigned will check the appropriate box below and pay all
transfer taxes payable with respect thereto. Any amount required to be paid to
the undersigned on account of interest accompanies this Debenture.
Dated:_____________________ __________________________________________
__________________________________________
Signature(s)
Signature(s) must be guaranteed by a
commercial bank or trust company or a member
firm of a major stock exchange if shares of
Common Stock are to be issued, or Debentures
to be delivered, other than to and in the
name of the registered holder.
__________________________________________
Signature Guarantee
A-13
<PAGE>
Fill in for registration of shares of Common Stock if to be issued,
and Debentures if to be delivered, other than to and in the name of the
registered holder:
__________________________________
(Name)
__________________________________
(Street Address)
__________________________________
(City, State and Zip Code)
Please print name and address
Principal amount to be Converted
(if less than all): $____________
Social Security or Other Taxpayer
Identification Number:
A-14
<PAGE>
OPTION TO ELECT REPAYMENT
UPON A FUNDAMENTAL CHANGE
TO: SEPRACOR INC.
The undersigned registered owner of this Debenture hereby irrevocably
acknowledges receipt of a notice from Sepracor Inc. (the "Company") as to the
occurrence of a Fundamental Change with respect to the Company and requests and
instructs the Company to repay the entire principal amount of this Debenture, or
the portion thereof (which is $1,000 or an integral multiple thereof) below
designated, in accordance with the terms of the Indenture referred to in this
Debenture at the redemption price, together with accrued interest to, but
excluding, such date, to the registered holder hereof.
Dated:_____________________ __________________________________________
__________________________________________
Signature(s)
NOTICE: The above signatures of the
holder(s) hereof must correspond with the
name as written upon the face of the
Debenture in every particular without
alteration or enlargement or any change
whatever.
Principal amount to be Converted (if less
than all):
$_____________
__________________________________________
Social Security or Other Taxpayer
Identification Number
<PAGE>
ASSIGNMENT
For value received ___________________________ hereby sell(s),
assign(s) and transfer(s) unto ___________________________ (Please insert social
security or other Taxpayer Identification Number of assignee) the within
Debenture, and hereby irrevocably constitutes and appoints
_________________________ attorney to transfer the said Debenture on the books
of the Company, with full power of substitution in the premises.
In connection with any transfer of the Debenture within the period
prior to the expiration of the holding period applicable to sales thereof under
Rule 144(k) under the Securities Act (or any successor provision) (other than
any transfer pursuant to a registration statement that has been declared
effective under the Securities Act), the undersigned confirms that such
Debenture is being transferred:
|_| To Sepracor Inc. or a subsidiary thereof, or
|_| Pursuant to and in compliance with Rule 144A under the Securities Act of
1933, as amended; or
|_| To an Institutional Accredited Investor pursuant to and in compliance with
the Securities Act of 1933, as amended; or
|_| Pursuant to and in compliance with Regulation S under the Securities Act
of 1933, as amended; or
|_| Pursuant to and in compliance with Rule 144 under the Securities Act of
1933, as amended;
and unless the box below is checked, the undersigned confirms that such
Debenture is not being transferred to an "affiliate" of the Company as defined
in Rule 144 under the Securities Act of 1933, as amended (an "Affiliate").
|_| The transferee is an Affiliate of the Company.
Dated:
A-16
<PAGE>
__________________________________________
Signature(s)
Signature(s) must be guaranteed by a commercial
bank or trust company or a member firm of a major
stock exchange if shares of Common Stock are to be
issued, or Debentures to be delivered, other than
to or in the name of the registered holder.
__________________________________________
Signature Guarantee
NOTICE: The signature on the conversion notice, the option to elect repayment
upon a Fundamental Change or the assignment must correspond with the name as
written upon the face of the Debenture in every particular without alteration or
enlargement or any change whatever.
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<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF DEBENTURES
Re: 5% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2007 OF SEPRACOR INC.
This Certificate relates to $________________ principal amount of
Debentures held in* [ ] book-entry or [ ] definitive form by _____________ (the
"Transferor").
1. The Transferor has requested the Trustee by written order to exchange
or register the transfer of a Debenture or Debentures.
2. In connection with any such request and with respect to each such
Debenture, the Transferor does hereby certify that Transferor is familiar with
the Indenture relating to the above-captioned Debentures and, as provided in
Section 2.5 of such Indenture, the transfer of this Debenture does not require
registration under the Securities Act because:*
[ ] (a) Such Debenture is being acquired for the Transferor's own account,
without transfer.
[ ] (b) Such Debenture is being transferred to a person who the Transferor
reasonably believes is a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) purchasing for its own account or for the account
of a qualified institutional buyer over which it exercises sole investment
discretion who is aware that the transfer is being made in reliance on Rule
144A.
[ ] (c) Such Debenture is being transferred to a person that is not a
U.S. Person in accordance with Regulation S under the Securities Act and a
certificate in the form attached hereto is being delivered to the Trustee.
[ ] (d) Such Debenture is being transferred in reliance on and in
compliance with another exemption from the registration requirements of the
Securities Act. An opinion of counsel, if so requested by the Company or the
Trustee, to the effect that such transfer is in compliance with the Securities
Act accompanies this Certificate.
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* Check applicable box
<PAGE>
___________________________________
[INSERT NAME OF TRANSFEROR]
By:_________________________________
Date:_______________________________
A-19
<PAGE>
3. Affiliation with the Company [check if applicable]
[ ] (a) The undersigned represents and warrants that it is, or at some
time during which it held this Debenture was, an Affiliate of the Company.
[ ] (b) If 3(a) above is checked and if the undersigned was not an
Affiliate of the Company at all times during which it held this Debenture,
indicate the periods during which the undersigned was an Affiliate of the
Company:
------------------
TO BE COMPLETED BY TRANSFEREE IF 2(b) ABOVE IS CHECKED AND THE TRANSFEROR IS NOT
A QUALIFIED INSTITUTIONAL BUYER:
The undersigned represents and warrants that it is a "qualified
institutional buyer" as defined in Rule 144A under the Securities Act of 1933,
as amended, and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information.
Dated:________________________ ____________________________________
NOTICE: To be executed by an
officer.
------------------
If none of the boxes under Section 2 of this certificate is checked or if
any of the above representations required to be made by the Transferee is not
made, the Registrar shall not be obligated to register this Debenture in the
name of any person other than the Holder hereof.
THE UNDERSIGNED HEREBY AGREES THAT, UNLESS THE BOX FOR ITEM 3(a) IS
CHECKED, THE UNDERSIGNED SHALL BE DEEMED TO HAVE REPRESENTED THAT IT IS NOT NOR
HAS IT BEEN AT ANY TIME DURING WHICH IT HELD THIS SECURITY AN AFFILIATE, AS
DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OF THE
COMPANY.
Dated:________________________
A-20
<PAGE>
_________________________________
NOTICE: The signature of the Holder to
this assignment must correspond with
the name as written upon the face of
this Debenture particular, without
alteration or any change whatsoever.
A-21
<PAGE>
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION
WITH REGULATION S TRANSFERS
The Chase Manhattan Bank Date:________________
450 West 33rd Street, 15th Floor
New York, New York 10001-2697
Attention: Corporate Trust and Agency Services
Ladies and Gentlemen:
In connection with our proposed sale of 5% Convertible Subordinated
Debentures due 2007 of Sepracor Inc. (the "Company"), we confirm that such sale
has been effected pursuant to and in accordance with Regulation S under the
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we
represent that:
(1) the offer of the Debentures was not made to a person in the
United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United States, or
(b) the transaction was executed in, on or through the facilities of a
designated off-shore securities market and neither we nor any person acting on
our behalf knows that the transaction has been pre-arranged with a buyer in the
United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation
S under the Securities Act, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act;
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes; and
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<PAGE>
(6) if the circumstances set forth in Rule 904(c) under the
Securities Act are applicable, we have complied with the additional conditions
therein, including (if applicable) sending a confirmation or other notice
stating that the Debentures may be offered and sold during the restricted period
specified in Rule 903(c)(2) or (3), as applicable, in accordance with the
provisions of Regulation S; pursuant to registration of the Debentures under the
Securities Act; or pursuant to an available exemption from the registration
requirements under the Act.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Defined terms used herein without
definition have the respective meanings provided in Regulation S under the
Securities Act.
Very truly yours,
___________________________
[Name of Transferor]
By:________________________
[Authorized Signature]
Upon transfer, the Debentures would be registered in the name of beneficial
owner as follows:
Name:______________________________
Address:___________________________
Taxpayer ID Number:________________
A-23
<PAGE>
Exhibit 10.28
Execution Copy
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of
February 14, 2000 by and among SEPRACOR INC., a Delaware corporation (the
"Company") and DEUTSCHE BANK SECURITIES INC. (the "Initial Purchaser") pursuant
to the Purchase Agreement, dated as of February 8, 2000 (the "Purchase
Agreement"), between the Company and the Initial Purchaser. In order to induce
the Initial Purchaser to enter into the Purchase Agreement, the Company has
agreed to provide the registration rights set forth in this Agreement. The
execution of this Agreement is a condition to the closing under the Purchase
Agreement.
The Company agrees with the Initial Purchaser, (i) for their benefit
as Initial Purchaser and (ii) for the benefit of the holders from time to time
of the Debentures (including the Initial Purchaser) and the holders from time to
time of the Common Stock issued upon conversion of the Debentures (each of the
foregoing a "Holder" and together the "Holders"), as follows:
1. Definitions. Capitalized terms used herein without definition shall
have their respective meanings set forth in the Purchase Agreement. As used in
this Agreement, the following terms have the following meanings:
Affiliate: "Affiliate" means, with respect to any specified person,
(i) any other person directly or indirectly controlling or controlled by, or
under direct or indirect common control with, such specified person or (ii) any
officer or director of such other person. For purposes of this definition, the
term "control" (including the terms "controlling," "controlled by" and "under
common control with") of a person means the possession, direct or indirect, of
the power (whether or not exercised) to direct or cause the direction of the
management and policies of a person, whether through the ownership of voting
securities, by contract, or otherwise.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in The City of New York are
authorized or obligated by law or executive order to close.
Common Stock: The shares of common stock, par value $.10 per share,
of the Company and any other shares of stock as may constitute "Common Stock"
for purposes of the Indenture, in each case, as issuable or issued upon
conversion of the Debentures.
Damages Accrual Period: See Section 2(f) hereof.
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Damages Payment Date: Each of the semi-annual interest payment dates
provided in the Indenture.
Debentures: 5% Convertible Subordinated Debentures due 2007 of the
Company being issued and sold pursuant to the Purchase Agreement and the
Indenture.
Deferral Period: See Section 2(e) hereof.
Effectiveness Period: The period commencing with the date hereof and
ending on the date that all Registrable Securities (other than Registerable
Securities held by Affiliates of the Company) have ceased to be Registrable
Securities.
Event: See Section 2(f) hereof.
Event Date: See Section 2(f) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Filing Date: See Section 2(a) hereof.
Holder: See the second paragraph of this Agreement.
Indenture: The Indenture, dated as of February 14, 2000, between the
Company and The Chase Manhattan Bank, as Trustee, pursuant to which the
Debentures are being issued, as amended or supplemented from time to time in
accordance with the terms thereof.
Initial Purchaser: Deutsche Bank Securities Inc.
Initial Shelf Registration: See Section 2(a) hereof.
Liquidated Damages: See Section 2(f) hereof.
Losses: See Section 6 hereof.
Managing Underwriters: The investment banking firm or firms that
shall manage or co-manage an Underwritten Offering.
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Notice and Questionnaire: A written notice delivered to the Company
containing substantially the information called for by the Notice and
Questionnaire attached as Appendix B to the Offering Memorandum of the Company
relating to the Debentures.
Notice Holder: See Section 2(d) hereof.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by an amendment or prospectus supplement, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such Prospectus.
Purchase Agreement: See the first paragraph of this Agreement.
Record Holder: (i) With respect to any Damages Payment Date relating
to any Debenture as to which any such Liquidated Damages have accrued, the
registered holder of such Debenture on the record date with respect to the
interest payment date under the Indenture on which such Damages Payment Date
shall occur and (ii) with respect to any Damages Payment Date relating to any
Common Stock as to which any such Liquidated Damages have accrued, the
registered holder of such Common Stock fifteen (15) days prior to the next
succeeding Damages Payment Date.
Registrable Securities: (A) The Common Stock of the Company into
which the Debentures are convertible or converted, whether or not such
Debentures have been converted, and any Common Stock issued with respect thereto
upon any stock dividend, split or similar event until, in the case of any such
Common Stock, (i) it is effectively registered under the Securities Act and
resold in accordance with the Registration Statement covering it, (ii) it is
saleable by the holder thereof pursuant to Rule 144(k) (or any successor
provision) or (iii) it is sold to the public pursuant to Rule 144, and, as a
result of the event or circumstance described in any of the foregoing clauses
(i) through (iii), the legends with respect to transfer restrictions required
under the Indenture (other than any such legends required solely as the
consequence of the fact that such Common Stock (or the Debentures, upon the
conversion of which, such Common Stock was issued or is issuable) is owned by,
or was previously owned by, the Company or an Affiliate of the Company) are
removed or removable in accordance with the terms of the Indenture; (B) the
Debentures, until, in the case of such Debenture, (i) it is converted into
shares of Common Stock in accordance with the terms of the Indenture, (ii) it is
effectively registered under the Securities Act and resold in accordance with
the Registration Statement covering it, (iii) it is saleable by the holder
thereof pursuant to Rule 144(k) or (iv) it is sold to the public pursuant to
Rule 144, and, as a result
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of the event or circumstance described in any of the foregoing clauses (ii)
through (iv), the legends with respect to transfer restrictions required under
the Indenture (other than any such legends required solely as the consequence of
the fact that such Debenture is owned by, or was previously owned by, the
Company or an Affiliate of the Company) are removed or removable in accordance
with the terms of the Indenture.
Registration Statement: Any registration statement of the Company
which covers any of the Registrable Securities pursuant to the provisions of
this Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Rule 144: Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
Rule 144A: Rule 144A under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.
Shelf Registration: See Section 2(a) hereof.
Special Counsel: Ropes & Gray, or such successor counsel as shall be
specified by the Holders of a majority of the Registrable Securities, the fees
and expenses of which will be paid by the Company pursuant to Section 5 hereof.
Subsequent Shelf Registration: See Section 2(b) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The Trustee under the Indenture.
Underwritten Registration or Underwritten Offering: A registration
in which securities of the Company are sold to an underwriter for reoffering to
the public.
2. Shelf Registration.
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(a) Shelf Registration. The Company shall prepare and file with the SEC,
as soon as practicable but in any event on or prior to the date ninety (90) days
following the Closing Date of the original issuance of the Debentures (the
"Filing Date"), a Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415 of the Securities Act (a "Shelf
Registration") registering the resale from time to time by Holders thereof of
all of the Registrable Securities (the "Initial Shelf Registration"). The
Initial Shelf Registration shall be on Form S-1, Form S-3 or another appropriate
form permitting registration of such Registrable Securities for resale by the
Holders in the manner or manners designated by them. If the Holders of
Registrable Securities so elect, an offering of Registrable Securities pursuant
to the Shelf Registration may be effected in the form of an Underwritten
Offering; provided, however, that the Company shall not be obligated to arrange
for more than one (1) such Underwritten Offering. In any Underwritten Offering,
the Holders of a majority of the Registrable Securities requested to be sold
shall select the Managing Underwriter (subject to the consent of the Company,
which consent shall not be unreasonably withheld) of such Underwritten Offering.
The Company shall use reasonable best efforts to cause the Initial Shelf
Registration to be declared effective under the Securities Act as promptly as
practicable and to keep the Initial Shelf Registration continuously effective
under the Securities Act until the earlier of the expiration of the
Effectiveness Period or the date a Subsequent Shelf Registration, as defined
below, covering all of the Registrable Securities has been declared effective
under the Securities Act.
(b) If the Initial Shelf Registration or any Subsequent Shelf
Registration, as defined below, ceases to be effective for any reason as a
result of the issuance of a stop order by the SEC at any time during the
Effectiveness Period, the Company shall use its reasonable best efforts to
obtain the prompt withdrawal of any order suspending the effectiveness thereof,
and in any event shall within thirty (30) days of such cessation of
effectiveness amend the Shelf Registration in a manner reasonably expected to
obtain the withdrawal of the order suspending the effectiveness thereof, or file
an additional Shelf Registration covering all of the Registrable Securities (a
"Subsequent Shelf Registration"). If a Subsequent Shelf Registration is filed,
the Company shall use its reasonable best efforts to cause the Subsequent Shelf
Registration to be declared effective as soon as practicable after such filing
and to keep such Registration Statement continuously effective until the end of
the Effectiveness Period.
(c) The Company shall supplement and amend the Shelf Registration if
required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration, if required
by the Securities Act, or if reasonably requested by the Initial Purchaser or by
the Trustee on behalf of a majority of the Holders of the Registrable Securities
covered by such Registration Statement or by any Managing Underwriter of such
Registrable Securities in the event of an Underwritten Offering of the
Registrable Securities.
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(d) Each Holder of Registrable Securities agrees that if such Holder
wishes to sell its Registrable Securities pursuant to a Shelf Registration and
related Prospectus, it will do so only in accordance with this Section 2(d).
Each Holder of Registrable Securities agrees to deliver a Notice and
Questionnaire to the Company at least three (3) Business Days prior to any
intended distribution of Registrable Securities under the Shelf Registration. As
soon as practicable after the date the Notice and Questionnaire is provided to
the Company, and in any event within ten (10) Business Days after such date (or,
if later, the filing of the Initial Shelf Registration), the Company shall (i)
if necessary, prepare and file with the SEC a post-effective amendment to the
Shelf Registration or a supplement to the related Prospectus or a supplement or
amendment to any document incorporated therein by reference or file any other
required document so that such Registration Statement will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
so that, as thereafter delivered to purchasers of the Registrable Securities
being sold thereunder, such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; (ii) provide each Holder who has delivered
a completed Notice and Questionnaire in accordance with this Section 2(d) (each,
a "Notice Holder") copies of any documents filed pursuant to Section 2(d)(i);
and (iii) inform each Notice Holder that the Company has complied with its
obligation in Section 2(d)(i) (or that, if the Company has filed a
post-effective amendment to the Shelf Registration which has not yet been
declared effective, the Company will notify the Notice Holder to that effect,
will use its reasonable best efforts to secure the effectiveness of such
post-effective amendment and will immediately notify the Notice Holder when the
amendment has become effective). Each Notice Holder shall furnish such other
information with respect to such Holder and the intended method of distribution
as required to amend the Shelf Registration or supplement the related
Prospectus.
(e) In the event, following the initial declaration of effectiveness of
the Initial Shelf Registration filed hereunder, (i) of the happening of any
event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or
3(c)(vi) hereof or (ii) that, in the judgment of the Company, it is advisable to
suspend use of the Prospectus for a discrete period of time due to pending
material corporate developments or similar material events that have not yet
been publicly disclosed and as to which the Company believes public disclosure
will be prejudicial to the Company, the Company shall deliver a certificate in
writing, signed by an authorized executive officer of the Company, to the Notice
Holders (including any Notice Holder providing a Notice and Questionnaire
subsequent to the delivery by the Company of the certificate referenced above),
the Special Counsel and the Managing Underwriters, if any, to the effect of the
foregoing and, upon receipt of such certificate, each such Notice Holder shall
not sell any Registrable Securities and shall not use the Prospectus until such
Notice Holder's receipt of copies of the supplemented or
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amended Prospectus provided for in Section 2(d)(i) hereof, or until it is
advised in writing by the Company that the Prospectus may be used and has
received copies of any additional or supplemental filings that are incorporated
or deemed incorporated by reference in such Prospectus. The Company will use its
reasonable best efforts to ensure that the use of the Prospectus may be resumed,
and sales of Registrable Securities can commence or resume, as soon as
practicable and, in the case of a pending development or event referred to in
Section 2(e)(ii) hereof, as soon as the earlier of (x) public disclosure of such
pending material corporate development or similar material event or (y) in the
judgment of the Company, public disclosure of such material corporate
development or similar material event would not be prejudicial to the Company.
Notwithstanding any other provision in this Agreement, the Company shall not
under any circumstances be entitled to exercise its rights under this Section
2(e) to defer sales of Registrable Securities except as follows: the Company may
defer sales of Registrable Securities in accordance with this Section 2(e) for a
period not to exceed an aggregate of sixty (60) days in any three hundred sixty
five (365) day period, and the period in which sales of Registrable Securities
are suspended shall not exceed fifteen (15) days unless the Company shall
deliver to such Notice Holders one or more subsequent notices to the effect set
forth above, each of which shall have the effect of extending the period during
which sales of Registrable Securities are deferred by up to an additional
fifteen (15) days, or such shorter period of time as is specified in such
subsequent notice (each such period of deferral, as may be extended, a "Deferral
Period").
(f) The parties hereto agree that the Holders of Registrable Securities
will suffer damages, and that it would not be feasible to ascertain the extent
of such damages with precision, if (i) the Initial Shelf Registration had not
been filed on or prior to the Filing Date, (ii) prior to the end of the
Effectiveness Period, the SEC shall have issued a stop order suspending the
effectiveness of the Shelf Registration or proceedings have been initiated with
respect to the Shelf Registration under Section 8(d) or 8(e) of the Securities
Act, or (iii) the aggregate number of days in the Deferral Periods in any three
hundred sixty five (365) day period exceeds the period permitted pursuant to
Section 2(e) hereof (each of the events of a type described in any of the
foregoing clauses (i) through (iii) are individually referred to herein as an
"Event," and the Filing Date in the case of clause (i), the date on which the
effectiveness of the Shelf Registration has been suspended or proceedings with
respect to the Shelf Registration under Section 8(d) or 8(e) of the Securities
Act have been commenced in the case of clause (ii), and the date on which the
duration of the Deferral Periods in any three hundred sixty five (365) day
period exceeds the period permitted by Section 2(e) hereof in the case of clause
(iii) being referred to herein as an "Event Date"). Events shall be deemed to
continue until the date of the termination of such Event, which shall be the
following dates with respect to the respective types of Events: the date the
Initial Registration Statement is filed in the case of an Event of the type
described in clause (i), the date that all stop orders suspending effectiveness
of the Shelf Registration have been removed and the
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proceedings initiated with respect to the Shelf Registration under Section 8(d)
or 8(e) of the Securities Act have terminated, as the case may be, in the case
of Events of the types described in clause (ii), and termination of the Deferral
Period which caused the aggregate number of days in the Deferral Periods in any
three hundred sixty five (365) day period to exceed the number permitted by
Section 2(e) to be exceeded in the case of Events of the type described in
clause (iii).
Accordingly, upon the occurrence of any Event and until such time as
there are no Events which have occurred and are continuing (a "Damages Accrual
Period"), commencing on the Event Date on which such Damages Accrual Period
began, the Company agrees to pay, as liquidated damages, and not as a penalty,
an additional amount (the "Liquidated Damages"): (A)(i) to each holder of a
Debenture that is a Notice Holder, accruing at an annual rate equal to
one-quarter of one percent per annum (25 basis points) on the aggregate
principal amount of Debentures held by such Notice Holder and (ii) to each
holder of Common Stock that is a Notice Holder, accruing at an annual rate equal
to one-quarter of one percent per annum (25 basis points) calculated on an
amount equal to the product of (x) the then-applicable Conversion Price (as
defined in the Indenture) or, in the event that each Debenture has been
converted to Common Stock, the Conversion Price applicable to the Debenture last
converted, multiplied by (y) the number of shares of Common Stock held by such
holder; and (B) if the Damages Accrual Period continues for a period in excess
of thirty (30) days from the Event Date, from and after the end of such thirty
(30) days until such time as there are no Events which have occurred and are
continuing, (i) to each holder of a Debenture (whether or not a Notice Holder),
accruing at an annual rate equal to one-half of one percent per annum (50 basis
points) on the aggregate principal amount of Debentures held by such holder and
(ii) to each holder of Common Stock into which Debentures have been converted
(whether or not a Notice Holder), accruing at an annual rate equal to one-half
of one percent per annum (50 basis points) calculated on an amount equal to the
product of (x) the then applicable Conversion Price (as defined in the
Indenture) or, in the event that each Debenture has been converted to Common
Stock, the Conversion Price applicable to the Debenture last converted,
multiplied by (y) the number of shares of Common Stock held by such holder.
Notwithstanding the foregoing, no Liquidated Damages shall accrue under clause
(A) for the preceding sentence during any period for which Liquidated Damages
accrue under clause (B) of the preceding sentence or as to any Registrable
Securities from and after the expiration of the Effectiveness Period. The rate
of accrual of the Liquidated Damages with respect to any period shall not exceed
the rate provided for in this paragraph notwithstanding the occurrence of
multiple concurrent Events.
The Company shall pay the Liquidated Damages due on any Debentures
or Common Stock by depositing with the Trustee under the Indenture, in trust,
for the benefit of the holders of Debentures or Common Stock or Notice Holders,
as the case may be, entitled thereto,
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at least one (1) Business Day prior to the applicable Damages Payment Date, sums
sufficient to pay the Liquidated Damages accrued or accruing since the last
preceding Damages Payment Date through such Damages Payment Date. The Liquidated
Damages shall be paid by the Trustee at the direction and on behalf of the
Company to the Record Holders on each Damages Payment Date by wire transfer of
immediately available funds to the accounts specified by them or by mailing
checks to their registered addresses as they appear in the Debenture register
(as defined in the Indenture), in the case of the Debentures, and in the
register of the Company for the Common Stock, in the case of the Common Stock,
if no such accounts have been specified on or before the Damages Payment Date;
provided, however, that any Liquidated Damages accrued with respect to any
Debenture or portion thereof called for redemption on a redemption date,
redeemed or repurchased in connection with a Fundamental Change (as defined in
the Indenture) on a repurchase date, or converted into Common Stock on a
conversion date prior to the Damages Payment Date, shall, in any such event, be
paid instead to the holder who submitted such Debenture or portion thereof for
redemption, repurchase or conversion on the applicable redemption date,
repurchase date or conversion date, as the case may be, on such date (or
promptly following the conversion date, in the case of conversion of a
Debenture). The Trustee shall be entitled, on behalf of the holders of
Debentures, holders of Common Stock and Notice Holders, to seek any available
remedy for the enforcement of this Agreement, including for the payment of such
Liquidated Damages. Notwithstanding the foregoing, the parties agree that the
sole damages payable for a violation of the terms of this Agreement with respect
to which Liquidated Damages are expressly provided shall be such Liquidated
Damages. Nothing shall preclude a Notice Holder or Holder of Registrable
Securities from pursuing or obtaining specific performance or other equitable
relief with respect to this Agreement, in addition to the payment of Liquidated
Damages.
All of the Company's obligations set forth in this Section 2(f)
which are outstanding with respect to any Registrable Securities at the time
such security ceases to be a Registrable Security shall survive until such time
as all such obligations with respect to such security have been satisfied in
full (notwithstanding termination of the Agreement pursuant to Section 8(o)).
The parties hereto agree that the Liquidated Damages provided for in
this Section 2(f) constitute a reasonable estimate of the damages that may be
incurred by Holders of Registrable Securities (other than the Initial Purchaser)
by reason of the failure of the Shelf Registration to be filed or declared
effective or unavailable (absolutely or as a practical matter) for effecting
resales of Registrable Securities, as the case may be, in accordance with the
provisions hereof.
3. Registration Procedures. In connection with the Company's registration
obligations under Section 2 hereof, the Company shall effect such registrations
to permit the sale of the
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Registrable Securities in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Company shall:
(a) Prepare and file with the SEC a Registration Statement or Registration
Statements on any appropriate form under the Securities Act available for the
sale of the Registrable Securities by the Holders thereof in accordance with the
intended method or methods of distribution thereof, and use its reasonable best
efforts to cause each such Registration Statement to become effective and remain
effective as provided herein; provided that, before filing any such Registration
Statement or Prospectus or any amendments or supplements thereto (other than
documents that would be incorporated or deemed to be incorporated therein by
reference and that the Company is required by applicable securities laws or
stock exchange requirements to file), the Company shall furnish to the Initial
Purchaser, the Special Counsel and the Managing Underwriters of such offering,
if any, copies of all such documents proposed to be filed, which documents will
be subject to the review of the Initial Purchaser, the Special Counsel and such
Managing Underwriters, and the Company shall not file any such Registration
Statement or amendment thereto or any Prospectus or any supplement thereto
(other than such documents which, upon filing, would be incorporated or deemed
to be incorporated by reference therein and that the Company is required by
applicable securities laws or stock exchange requirements to file) to which the
Holders of a majority of the Registrable Securities covered by such Registration
Statement, the Managing Underwriters, the Initial Purchaser or the Special
Counsel shall reasonably object in writing within five (5) full days after
receipt of such materials in the case of the Initial Shelf Registration
Statement and two (2) full Business Days in every other case.
(b) Subject to Section 2(e), prepare and file with the SEC such amendments
and post-effective amendments to each Registration Statement as may be necessary
to keep such Registration Statement continuously effective for the Effectiveness
Period; cause the related Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
(or any similar provisions then in force) under the Securities Act; and comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement and Prospectus during the
applicable period in accordance with the intended methods of disposition by the
sellers thereof set forth in such Registration Statement as so amended or such
Prospectus as so supplemented.
(c) Notify all Notice Holders, the Initial Purchaser, the Special Counsel
and the Managing Underwriters, if any, promptly, and (if requested by any such
person) confirm such notice in writing, (i) when a Prospectus, any Prospectus
supplement, a Registration Statement or a post-effective amendment to a
Registration Statement has been filed with the SEC, and, with respect to a
Registration Statement or any post-effective amendment, when the same has become
effective, (ii) of any request by the SEC or any other federal or state
governmental authority for
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amendments or supplements to a Registration Statement or related Prospectus or
for additional information, (iii) of the issuance by the SEC or any other
federal or state governmental authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation or threatening of
any proceedings for that purpose, (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, (v) of the existence of any fact or happening of any event which makes
any statement of a material fact in such Registration Statement or related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue or which would require the making of any changes in the
Registration Statement or Prospectus in order that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading and (vi) of the Company's determination that a
post-effective amendment to a Registration Statement or a supplement to a
Prospectus would be required. Notice of the filing and effectiveness of the
Initial Shelf Registration and any Subsequent Registration shall be made by the
Company by release made to Reuters Economic Services and Bloomberg Business
News.
(d) Use its reasonable best efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement, or the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the earliest possible
moment.
(e) If reasonably requested by the Initial Purchaser or the Managing
Underwriters, if any, or the Holders of a majority of the Registrable Securities
being sold, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to a Registration Statement such information as the
Initial Purchaser, the Special Counsel, the Managing Underwriters, if any, or
such Holders, in connection with any offering of Registrable Securities, agree
should be included therein as required by applicable law and (ii) make all
required filings of such Prospectus supplement or such post-effective amendment
as soon as reasonably practicable after the Company has received notification of
the matters to be incorporated in such Prospectus supplement or post-effective
amendment; provided, however, that the Company shall not be required to take any
actions under this Section 3(e) that are not, in the reasonable opinion of
counsel for the Company, in compliance with applicable law.
(f) Furnish to each Notice Holder, the Special Counsel, the Initial
Purchaser and each Managing Underwriter, if any, without charge, at least one
conformed copy of the Registration
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Statement or Statements and any amendment thereto, including financial
statements but excluding schedules, all documents incorporated or deemed to be
incorporated therein by reference and all exhibits (unless requested in writing
by any such Notice Holder, Special Counsel, the Initial Purchaser or Managing
Underwriter).
(g) Deliver to each Notice Holder, the Special Counsel, the Initial
Purchaser and each Managing Underwriter, if any, in connection with any offering
of Registrable Securities, without charge, as many copies of the Prospectus or
Prospectuses relating to such Registrable Securities (including each preliminary
prospectus) and any amendment or supplement thereto as such persons may
reasonably request; and the Company hereby consents to the use of such
Prospectus or each amendment or supplement thereto by each of the Notice Holders
of Registrable Securities and the underwriters, if any, in connection with any
offering and sale of the Registrable Securities covered by such Prospectus or
any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, to register or
qualify or cooperate with the Notice Holders, the Managing Underwriters, if any,
and the Special Counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Notice Holder or Managing
Underwriter reasonably requests in writing; keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the applicable
Registration Statement; provided, however, that the Company will not be required
to (i) qualify generally to do business in any jurisdiction where it is not then
so qualified or (ii) take any action that would subject it to general service of
process in suits or to taxation in any such jurisdiction where it is not then so
subject.
(i) If required, cause the Registrable Securities covered by the
applicable Registration Statement to be registered with or approved by such
other governmental agencies or authorities within the United States, except as
may be required solely as a consequence of the nature of such Notice Holder, in
which case the Company will cooperate in all reasonable respects with the filing
of such Registration Statement and the granting of such approvals, as may be
necessary to enable the Notice Holder or Holders thereof or the Managing
Underwriters, if any, to consummate the disposition of such Registrable
Securities.
(j) Other than during a Deferral Period, immediately upon the existence of
any fact or the occurrence of any event as a result of which a Registration
Statement shall contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, or a Prospectus shall contain any untrue
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statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, promptly prepare and
file (subject to the proviso in Section 3(a)) a post-effective amendment to each
Registration Statement or a supplement to the related Prospectus or any document
incorporated therein by reference or file any other required document (such as a
Current Report on Form 8-K) that would be incorporated by reference into the
Registration Statement so that the Registration Statement shall not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading,
and so that the Prospectus will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, as thereafter delivered to the
purchasers of the Registrable Securities being sold thereunder, and, in the case
of a post-effective amendment to a Registration Statement, use its reasonable
best efforts to cause it to become effective as soon as practicable.
(k) Enter into such agreements (including, in the event of an Underwritten
Offering, an underwriting agreement in form, scope and substance as is customary
in Underwritten Offerings) and take all such other actions in connection
therewith (including, in the event of an Underwritten Offering, those reasonably
requested by the Managing Underwriters, if any, or the Holders of a majority of
the Registrable Securities being sold) in order to expedite or facilitate the
disposition of such Registrable Securities and in such connection, whether or
not an underwriting agreement is entered into, and if the registration is an
underwritten registration, (i) make such representations and warranties, subject
to the Company's ability to do so, to the Holders of such Registrable Securities
and the underwriters with respect to the business of the Company and its
subsidiaries, the Registration Statement, Prospectus and documents incorporated
by reference or deemed incorporated by reference, if any, in each case, in form,
substance and scope as are customarily made by issuers to underwriters in
underwritten offerings (provided that the scope and substance shall not be
materially different than those contained in the Purchase Agreement) and confirm
the same if and when requested; (ii) use its reasonable best efforts to obtain
opinions of counsel to the Company and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably satisfactory to the
Managing Underwriters, if any, and Special Counsel) addressed to each of the
underwriters covering the matters customarily covered in opinions requested in
underwritten offerings; (iii) use its reasonable best efforts to obtain "cold
comfort" letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other certified public
accountants of any business acquired or to be acquired by the Company for which
financial statements and financial data are, or are required to be, included in
the Registration Statement), addressed to each of the Managing Underwriters, if
any, such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort"
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letters in connection with underwritten offerings; and (iv) deliver such
documents and certificates as may be reasonably requested by the Special Counsel
and the Managing Underwriters, if any, to evidence the continued validity of the
representations and warranties of the Company and its subsidiaries made pursuant
to clause (i) above and to evidence compliance with any customary conditions
contained in the underwriting agreement or other agreement entered into by the
Company. The above shall be done at each closing under such underwriting or
similar agreement as and to the extent required thereunder.
(l) If requested in connection with a disposition of Registrable
Securities pursuant to a Registration Statement, make available for inspection
by a representative of the Holders of Registrable Securities being sold, any
Managing Underwriter participating in any disposition of Registrable Securities,
if any, and any attorney or accountant retained by such Notice Holders or
underwriter, financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries, and cause the executive
officers, directors and employees of the Company and its subsidiaries, to supply
all information reasonably requested by any such representative, Managing
Underwriter, attorney or accountant in connection with such disposition, subject
to reasonable assurances by each such person that such information will only be
used in connection with matters relating to such Registration Statement;
provided, however, that such persons shall first agree in writing with the
Company that any information that is reasonably and in good faith designated by
the Company in writing as confidential at the time of delivery of such
information shall be kept confidential by such persons and shall be used solely
for the purposes of exercising rights under this Agreement, unless (i)
disclosure of such information is required by court or administrative order or
is necessary to respond to inquiries of regulatory authorities, (ii) disclosure
of such information is required by law, (iii) such information becomes generally
available to the public other than as a result of a disclosure or failure to
safeguard by any such person or (iv) such information becomes available to any
such person from a source other than the Company and such source is not bound by
a confidentiality agreement.
(m) Comply with all applicable rules and regulations of the SEC and make
generally available to its securityholders earning statements (which need not be
audited) satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder (or any similar rule promulgated under the Securities Act)
no later than forty-five (45) days after the end of any twelve (12) month period
(or ninety (90) days after the end of any twelve (12) month period if such
period is a fiscal year) (i) commencing at the end of any fiscal quarter in
which Registrable Securities are sold to underwriters in a firm commitment or
best efforts underwritten offering and (ii) if not sold to underwriters in such
an offering, commencing on the first day of the first fiscal quarter of the
Company commencing after the effective date of a Registration Statement, which
statements shall cover said twelve (12) month period.
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(n) Cooperate with the Notice Holders of Registrable Securities to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any restrictive legends; and
enable such Registrable Securities to be in such denominations and registered in
such names as such Holders may request.
(o) Provide the Trustee under the Indenture and the transfer agent for the
Common Stock with printed certificates for the Registrable Securities which are
in a form eligible for deposit with The Depositary Trust Company.
(p) Cause the Common Stock covered by the Registration Statement to be
listed on each securities exchange (or quoted on each automated quotation system
on which any of the Company's "Common Stock," as that term is defined in the
Indenture, is then listed or quoted) no later than the date the Registration
Statement is declared effective and, in connection therewith, to the extent
applicable, to make such filings under the Exchange Act (e.g., the filing of a
Registration Statement on Form 8-A) and to have such filings declared effective
thereunder.
(q) Cooperate and assist in any filings required to be made with the
National Association of Securities Dealers, Inc.
4. Holder's Obligations. Each Holder agrees, by acquisition of the
Debentures and Registrable Securities, that no Holder of Registrable Securities
shall be entitled to sell any of such Registrable Securities pursuant to a
Registration Statement or to receive a Prospectus relating thereto, unless such
Holder has furnished the Company with the Notice and Questionnaire required
pursuant to Section 2(d) hereof and such other information regarding such Holder
and the distribution of such Registrable Securities as may be required to be
included in the Registration Statement or the Prospectus or as the Company may
from time to time reasonably request. The Company may exclude from such
registration the Registrable Securities of any Holder who does not furnish such
information provided above for so long as such information is not so furnished.
Each Holder of Registrable Securities as to which any Registration Statement is
being effected agrees promptly to furnish to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such Holder not misleading. Any sale of any Registrable
Securities by any Holder shall constitute a representation and warranty by such
Holder that the information relating to such Holder and its plan of distribution
is as set forth in the Prospectus delivered by such Holder in connection with
such disposition, that such Prospectus does not as of the time of such sale
contain any untrue statement of a material fact relating to such Holder or its
plan of distribution and that such Prospectus does not as of the time of such
sale omit to state any material fact relating to such Holder or its plan of
distribution necessary to make the statements in such Prospectus, in light of
the circumstances under which they were made, not misleading.
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5. Registration Expenses. All fees and expenses incident to the Company's
performance of or compliance with this Agreement shall be borne by the Company
whether or not any of the Registration Statements become effective. Such fees
and expenses shall include, without limitation, (i) all registration and filing
fees (including, without limitation, fees and expenses (x) with respect to
filings required to be made with the SEC or the National Association of
Securities Dealers, Inc. and (y) relating to compliance with federal securities
or Blue Sky laws (including, without limitation, reasonable fees and
disbursements of Special Counsel in connection with Blue Sky qualifications of
the Registrable Securities under the laws of such jurisdictions as the Managing
Underwriters, if any, or Holders of a majority of the Registrable Securities
being sold may designate)), (ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable Securities in a
form eligible for deposit with The Depository Trust Company and of printing
prospectuses if the printing of prospectuses is requested by the Special Counsel
or the Holders of a majority of the Registrable Securities included in any
Registration Statement), (iii) the reasonable fees and disbursements of the
Trustee and its counsel and of the registrar and transfer agent for the Common
Stock, (iv) reasonable fees and disbursements of counsel for the Company and the
Special Counsel in connection with the Shelf Registration (provided that the
Company shall not be liable for the fees and expenses of more than one separate
firm, in addition to counsel for the Company, for all parties participating in
any transaction hereunder), (v) fees and disbursements of all independent
certified public accountants referred to in Section 3(k)(iii) hereof (including
the expenses of any special audit and "cold comfort" letters required by or
incident to such performance) and (vi) Securities Act liability insurance, to
the extent obtained by the Company in its sole discretion. In addition, the
Company shall pay its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the securities to be registered on
any securities exchange on which similar securities issued by the Company are
then listed and the fees and expenses of any person, including special experts,
retained by the Company. Notwithstanding the provisions of this Section 5, each
seller of Registrable Securities shall pay all underwriting discounts, selling
commissions and stock transfer taxes applicable to the Registrable Securities,
all selling expenses and all registration expenses to the extent that the
Company is prohibited by applicable Blue Sky laws from paying such expenses for
or on behalf of such seller of Registrable Securities.
6. Indemnification.
(a) Indemnification by the Company. The Company shall indemnify and hold
harmless the Initial Purchaser, each Holder and each person, if any, who
controls the Initial Purchaser or any Holder (within the meaning of either
Section 15 of the Securities Act or Section 20(a) of the Exchange Act) from and
against all losses, liabilities, damages and expenses (including,
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without limitation, any reasonable legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim)
(collectively, "Losses"), arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement or Prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
Losses arise out of or are based upon the information relating to the Initial
Purchaser or any Holder furnished to the Company in writing by the Initial
Purchaser or such Holder expressly for use therein (including, without
limitation, any information relating to the plan of distribution of Registrable
Securities furnished by such person); provided that the Company shall not be
liable to any Holder of Registrable Securities (or any person controlling such
Holder) to the extent that any such Losses arise out of or are based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in any preliminary prospectus if either (A)(i) such Holder failed to send
or deliver a copy of the Prospectus with or prior to the delivery of written
confirmation of the sale by such Holder to the person asserting the claims from
which such Losses arise and (ii) the Prospectus would have corrected such untrue
statement or alleged untrue statement or such omission or alleged omission, or
(B)(x) such untrue statement or alleged untrue statement, omission or alleged
omission is corrected in an amendment or supplement to the Prospectus and (y)
having previously been furnished by or on behalf of the Company with copies of
the Prospectus as so amended or supplemented, such Holder thereafter fails to
deliver such Prospectus as so amended or supplemented, with or prior to the
delivery of written confirmation of the sale of a Registrable Security to the
person asserting the claim from which Losses arise. The Company shall also
indemnify each underwriter and each person who controls such person (within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act) to the same extent and with the same limitations as provided above with
respect to the indemnification of the Initial Purchaser or the Holders of
Registrable Securities.
(b) Indemnification by Holder of Registrable Securities. Each Holder
agrees, and such agreement shall be evidenced by the Holder delivering the
Notice and Questionnaire described in Section 2(d) hereof, severally and not
jointly to indemnify and hold harmless the Initial Purchaser, the other Holders,
the Company, its directors, its officers who sign a Registration Statement, and
each person, if any, who controls the Company, the Initial Purchaser and any
other Holder (within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act), from and against all losses arising out of or
based upon any untrue statement of a material fact contained in any Registration
Statement, Prospectus or preliminary prospectus or arising out of or based upon
any omission of a material fact required to be stated therein or necessary to
make the statements therein not misleading, to the extent, but only to the
extent, that such untrue statement or omission is contained in any information
relating to such Holder so furnished in writing by such
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Holder to the Company expressly for use in such Registration Statement or
Prospectus. In no event shall the liability of any Holder of Registrable
Securities hereunder be greater in amount than the dollar amount of the proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to either of the two
preceding paragraphs, such person (the "indemnified party") shall promptly
notify the person against whom such indemnity may be sought (the "indemnifying
party") in writing and the indemnifying party, shall have the right to assume
the defense of such proceeding and to retain counsel reasonably satisfactory to
the indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate because there may be one or
more legal defenses available to the indemnified party that conflicts with those
available to the indemnifying party. It is understood that the indemnifying
party shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for (a) the fees and expenses of more than one separate firm (in
addition to any local counsel) for the Initial Purchaser and all persons, if
any, who control the Initial Purchaser within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act, (b) the fees and
expenses of more than one separate firm (in addition to any local counsel) for
all Holders and all persons, if any, who control any Holder within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act,
and (c) the fees and expenses of more than one separate firm (in addition to any
local counsel) for the Company, its directors, its officers who sign a
Registration Statement and each person, if any, who controls the Company within
the meaning of either such Section, and that all such fees and expenses shall be
reimbursed as they are incurred. In the case of any such separate firm for the
Company, and such directors, officers and the control persons of the Company,
such firm shall be designated in writing by the Company. In such case involving
the Initial Purchaser and persons who control the Initial Purchaser, such firm
shall be designated in writing by Deutsche Bank Securities Inc. In such case
involving the Holders and such persons who control Holders, such firm shall be
designated in writing by the Holders of the majority of Registrable Securities
sold pursuant to the Registration Statement. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled
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with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability or claims
that are the subject matter of such proceeding.
(d) Contribution. If the indemnification provided for in this Section 6 is
unavailable to an indemnified party under Section 6(a) or 6(b) hereof in respect
of any Losses or is insufficient to hold such indemnified party harmless, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such Losses, (i) in such proportion as is appropriate to reflect
the relative benefits received by the indemnifying party or parties on the one
hand and the indemnified party or parties on the other hand or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the indemnifying
party or parties on the one hand and of the indemnified party or parties on the
other hand in connection with the statements or omissions that resulted in such
Losses, as well as any other relevant equitable considerations. Benefits
received by the Company shall be deemed to be equal to the total net proceeds
from the initial placement (before deducting expenses) of the Debentures
pursuant to the Purchase Agreement. Benefits received by the Initial Purchaser
shall be deemed to be equal to the total purchase discounts and commissions
received by them pursuant to the Purchase Agreement and benefits received by any
other Holders shall be deemed to be equal to the value of receiving Debentures
registered under the Securities Act. Benefits received by any underwriter shall
be deemed to be equal to the total discounts and commissions, as set forth on
the cover page of the Prospectus forming a part of the Registration Statement
which resulted in such Losses. The relative fault of the Holders on the one hand
and the Company on the other hand shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Holders or by the Company and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Holders' respective obligations to contribute
pursuant to this paragraph are several in proportion to the respective number of
Registrable Securities they have sold pursuant to a Registration Statement, and
not joint.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method or allocation that does not take into account
the equitable considerations referred to in the immediately
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preceding paragraph. The amount paid or payable by an indemnified party as a
result of the Losses referred to in the immediately preceding paragraph shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding this
Section 6(d), an indemnifying party that is a Holder of Registrable Securities
shall not be required to contribute any amount in excess of the amount by which
the total price at which the Registrable Securities sold by such indemnifying
party and distributed to the public were offered to the public exceeds the
amount of any damages which such indemnifying party has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
The indemnity, contribution and expense reimbursement obligations of
the Company hereunder shall be in addition to any liability the Company may
otherwise have hereunder, under the Purchase Agreement or otherwise. The
provisions of this Section 6 shall survive so long as Registrable Securities
remain outstanding, notwithstanding any transfer of the Registrable Securities
by any Holder or any termination of this Agreement.
The indemnity and contribution provisions contained in this Section
6 shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf of
the Initial Purchaser, any Holder or any person controlling any Initial
Purchaser or any Holder and (iii) the sale of any Registrable Securities by any
Holder.
7. Information Requirements.
(a) The Company shall file the reports required to be filed by it under
the Securities Act and the Exchange Act, and if at any time the Company is not
required to file such reports, it will, upon the request of any Holder of
Registrable Securities, make publicly available other information so long as
necessary to permit sales pursuant to Rule 144 and Rule 144A under the
Securities Act. The Company further covenants that it will cooperate with any
Holder of Registrable Securities and take such further reasonable action as any
Holder of Registrable Securities may reasonably request (including, without
limitation, making such reasonable representations as any such Holder may
reasonably request), all to the extent required from time to time to enable such
Holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144 and Rule 144A
under the Securities Act. Upon the request of any Holder of Registrable
Securities, the Company shall deliver to such Holder a written statement as to
whether it has complied with such filing
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requirements. Notwithstanding the foregoing, nothing in this Section 7 shall be
deemed to require the Company to register any of its securities under any such
section of the Exchange Act.
(b) The Company shall file the reports required to be filed by it under
the Exchange Act and shall comply with all other requirements set forth in the
instructions to Form S-3 in order to allow the Company to be eligible to file
registration statements on Form S-3.
8. Miscellaneous.
(a) Remedies. In the event of a breach by the Company of its obligations
under this Agreement, each Holder of Registrable Securities, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement, provided that the sole damages payable for a violation of the terms
of this Agreement for which Liquidated Damages are expressly provided pursuant
to Section 2(e) hereof shall be such Liquidated Damages. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of any of the provisions of this Agreement and hereby
further agrees that, in the event of any action for specific performance in
respect of such breach, it shall waive the defense that a remedy at law would be
adequate.
(b) No Conflicting Agreements. The Company has not, as of the date hereof,
and shall not, on or after the date of this Agreement, enter into any agreement
with respect to its securities which conflicts with the rights granted to the
Holders of Registrable Securities in this Agreement. The Company represents and
warrants that the rights granted to the Holders or Registrable Securities
hereunder do not in any way conflict with the rights granted to the holders of
the Company's securities under any other agreements.
(c) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the Company has obtained the written consent of Holders of a
majority of the then outstanding Common Stock constituting Registrable
Securities (with Holders of Debentures deemed to be the Holders, for purposes of
this Section, of the number of outstanding shares of Common Stock into which
such Debentures are convertible as of such date of determination).
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders of Registrable Securities whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders of Registrable Securities may be given by Holders of at
least a majority of the Registrable Securities being sold by such Holders;
provided that the provisions of this statement may not be
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amended, modified or supplemented except in accordance with the provisions of
the immediately preceding sentence.
(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing and shall be deemed given (i) when
made, if made by hand delivery, (ii) upon confirmation, if made by telecopier or
(ii) one (1) business day after being deposited with a reputable next-day
courier, postage prepaid, to the parties as follows:
(i) if to a Holder of Registrable Securities, at the most current
address given by such Holder to the Company in accordance with the provisions of
Sections 8(e):
(ii) if to the Company, to:
Sepracor Inc.
111 Locke Drive
Marlborough, MA 01752
Attention: Chief Financial Officer
Telecopy No: (508) 481-6700
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attention: Mark G. Borden
Telecopy No: (617) 526-5000
and
(iii) if to the Initial Purchaser or Special Counsel to:
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Keith F. Higgins, Esq.
Telecopy No: (617) 951-7050
or to such other address as such person may have furnished to the other persons
identified in this Section 8(d) in writing in accordance herewith.
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(e) Owner of Registrable Securities. The Company will maintain, or will
cause its registrar and transfer agent to maintain, a register with respect to
the Registrable Securities in which all transfers of Registrable Securities of
which the Company has received notice will be recorded. The Company may deem and
treat the person in whose name Registrable Securities are registered in such
register of the Company as the owner thereof for all purposes, including without
limitation, the giving of notices under this Agreement.
(f) Approval of Holders. Whenever the consent or approval of Holders of a
specified percentage of Registrable Securities is required hereunder, (i)
Holders of Debentures shall be deemed to be Holders, for such purposes, of the
number of outstanding shares of Common Stock into which such Debentures are
convertible and (ii) Registrable Securities held by the Company or its
affiliates (as such term is defined in Rule 405 under the Securities Act) (other
than the Initial Purchaser or subsequent Holders of Registrable Securities if
such subsequent Holders are deemed to be such affiliates solely by reason of
their holdings of such Registrable Securities) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
(g) Successors and Assigns. Any person who purchases any Registrable
Securities from an Initial Purchaser shall be deemed, for purposes of this
Agreement, to be an assignee of such Initial Purchaser. This Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties and shall inure to the benefit of and be binding upon each Holder
of any Registrable Securities.
(h) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be original and all of which taken together
shall constitute one and the same agreement.
(i) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(j) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS.
(k) Severability. If any term, provision, covenant or restriction of this
Agreement is held to be invalid, illegal, void or unenforceable, the remainder
of the terms, provisions, covenants
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and restrictions set forth herein shall remain in full force and effect and
shall in no way be affected, impaired or invalidated thereby, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be in the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such which may be hereafter declared invalid, illegal, void or unenforceable.
(l) Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and is intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and the registration rights granted by the
Company with respect to the Registrable Securities. Except as provided in the
Purchase Agreement, there are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein, with respect to
the registration rights granted by the Company with respect to the Registrable
Securities. This Agreement supersedes all prior agreements and undertakings
among the parties with respect to such registration rights.
(m) Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the prevailing party, as determined by the court, shall be
entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
(n) Further Assurances. Each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things reasonably necessary, proper or advisable under
applicable law, and execute and deliver such documents and other papers, as may
be required to carry out the provisions of this Agreement and the other
documents contemplated hereby and consummate and make effective the transactions
contemplated hereby.
(o) Termination. This Agreement and the obligations of the parties
hereunder shall terminate upon the end of the Effectiveness Period, except for
any liabilities or obligations under Section 4, 5 or 6 hereof and the
obligations to make payments of and provide for Liquidated Damages under Section
2(e) hereof to the extent such damages accrue prior to the end of the
Effectiveness Period, each of which shall remain in effect in accordance with
their terms.
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Registration Rights Agreement
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
SEPRACOR INC.
By: /s/ Robert F. Scumaci
-----------------------
Name: Robert F. Scumaci
Title: Senior Vice President Finance and
Administration
Accepted as of the date first above written:
DEUTSCHE BANK SECURITIES INC.
By: /s/ Michael J. Ott
----------------------
Name: Michael J. Ott
Title: Managing Director
By: /s/ Brent B. Milner
----------------------
Name: Brent B. Milner
Title: Director
<PAGE>
Exhibit 10.29
================================================================================
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
AMONG
FLEET NATIONAL BANK,
SEPRACOR INC.
AND
BIOSPHERE MEDICAL, INC.
------------------------------------------------
Dated as of December 22, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1 DEFINITIONS...................................................1
1.1 Definitions......................................................1
1.2 Accounting Terms................................................10
1.3 Multiple Borrowers..............................................10
SECTION 2 DESCRIPTION OF CREDIT........................................10
2.1 The Revolving Loans.............................................10
2.2 Fees............................................................11
2.3 Reduction of Revolving Commitment Amount/Biosphere Sublimit.....12
2.4 The Notes.......................................................12
2.5 Letters of Credit...............................................12
2.6 Capital Requirements............................................12
2.7 Payments and Prepayments of the Revolving Loans.................13
2.8 Method of Payment...............................................13
2.9 Overdue Payments................................................13
2.10 Holidays........................................................14
2.11 Interest........................................................14
2.12 Certain LIBOR Provisions........................................14
2.13 Conditions for Basing Interest on the LIBOR Rate................16
2.14 Indemnification for Funding and Other Losses....................17
2.15 Change in Applicable Laws, Regulations, etc.....................17
2.16 Taxes...........................................................17
SECTION 3 CONDITIONS OF LOANS..........................................18
3.1 Conditions Precedent to Initial Revolving Loan..................18
3.2 Conditions Precedent to all Revolving Loans.....................20
SECTION 4 REPRESENTATIONS AND WARRANTIES...............................20
4.1 Organization and Qualification..................................20
4.2 Corporate Authority.............................................20
4.3 Valid Obligations...............................................21
4.4 Consents or Approvals...........................................21
4.5 Title to Properties; Absence of Encumbrances....................21
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TABLE OF CONTENTS
(continued)
Page
4.6 Financial Statements............................................21
4.7 Changes.........................................................21
4.8 Defaults........................................................22
4.9 Taxes...........................................................22
4.10 Material Agreements.............................................22
4.11 Material Licenses...............................................22
4.12 Litigation......................................................22
4.13 Use of Proceeds.................................................22
4.14 Existing Indebtedness...........................................22
4.15 Existing Investments............................................22
4.16 Subsidiaries....................................................23
4.17 Investment Company Act..........................................23
4.18 Compliance with ERISA...........................................23
4.19 FDA Compliance, Etc.............................................23
4.20 Environmental Matters...........................................23
SECTION 5 AFFIRMATIVE COVENANTS........................................24
5.1 Financial Statements and other Reporting Requirements...........25
5.2 Conduct of Business.............................................26
5.3 Maintenance and Insurance.......................................27
5.4 Taxes...........................................................27
5.5 Inspection by the Bank..........................................27
5.6 Maintenance of Books and Records................................27
5.7 Maintenance of Accounts.........................................27
5.9 Minimum Liquidity Ratio.........................................28
5.10 Minimum Tangible Capital Base...................................28
5.11 Minimum Cash or Equivalents/Fixed Charge Coverage Ratio.........28
5.12 Further Assurances..............................................28
SECTION 6 NEGATIVE COVENANTS...........................................28
6.1 Indebtedness....................................................28
6.2 Contingent Liabilities..........................................29
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TABLE OF CONTENTS
(continued)
Page
6.3 Sale and Leaseback..............................................29
6.4 Encumbrances....................................................29
6.5 Lines of Business...............................................30
6.6 Merger; Consolidation; Sale or Lease of Assets..................30
6.7 Additional Stock Issuance.......................................30
6.8 Restricted Payments.............................................30
6.9 Transactions with Affiliates....................................31
6.10 Investments.....................................................31
6.11 ERISA...........................................................31
6.12 Observance of Subordination Provisions, etc.....................31
6.13 Restrictive Agreements..........................................32
SECTION 7 DEFAULTS.....................................................32
7.1 Events of Default...............................................32
7.2 Remedies........................................................34
SECTION 8 MISCELLANEOUS................................................35
8.1 Notices.........................................................35
8.2 Expenses........................................................36
8.3 Set-Off.........................................................36
8.4 Term of Agreement...............................................36
8.5 No Waivers......................................................36
8.6 Governing Law; Jurisdiction.....................................36
8.7 Amendments......................................................37
8.8 Binding Effect of Agreement; Assignments; Participations........37
8.9 Currency Conversion.............................................38
8.10 Counterparts....................................................38
8.11 Partial Invalidity..............................................38
8.12 Captions........................................................38
8.13 WAIVER OF JURY TRIAL............................................38
8.14 Entire Agreement................................................38
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TABLE OF CONTENTS
Page
EXHIBITS AND SCHEDULES
Exhibit A-1 Sepracor Promissory Note
Exhibit A-2 Biosphere Promissory Note
Exhibit B Compliance Certificate
Exhibit C Guaranty Agreement
Schedule 4.10 Material Agreements
Schedule 4.11 Material Licenses
Schedule 4.12 Litigation
Schedule 4.15 Investments
Schedule 4.16 Subsidiaries
Schedule 6.1 Indebtedness
Schedule 6.2 Guaranties
Schedule 6.4 Encumbrances
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SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
Dated as of December 22, 1999
THIS SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT is made as of
December 22, 1999, by and among SEPRACOR INC., a Delaware corporation having its
chief executive office at 111 Locke Drive, Marlborough, Massachusetts 01752 (the
"Borrower"), BIOSPHERE MEDICAL, INC., a Delaware corporation having its chief
executive office at 111 Locke Drive, Marlborough, Massachusetts 01752
("Biosphere, collectively with the Borrower, the "Credit Parties") and FLEET
NATIONAL BANK (the "Bank"), having its office at One Federal Street, Boston,
Massachusetts 02110.
This Agreement amends, restates and supersedes the Amended and Restated
Revolving Credit Agreement dated as of December 31, 1996 as amended to date (the
"Prior Credit Agreement") by and among the Borrower, Sepracor Securities
Corporation and Fleet National Bank, pursuant to which the Bank agreed to
establish a Revolving Line of Credit and make Revolving Credit Loans (the "Prior
Loans") to the Borrower.
NOW, THEREFORE, the parties hereby agree as follows:
SECTION 1
DEFINITIONS
1.1 Definitions.
All capitalized terms used in this Agreement or in the Notes or in any
certificate, report or other document made or delivered pursuant to this
Agreement (unless otherwise defined therein) shall have the meanings assigned to
them below:
Account and Account Receivable. Include all rights to payment for goods
sold or leased or for services rendered, all sums of money or other proceeds due
or becoming due thereon, all instruments pertaining thereto, all guaranties and
security therefor, and all goods giving rise thereto and the rights pertaining
to such goods, including the right of stoppage in transit, and all related
insurance.
Affiliate. As applied to any Person, a spouse or relative of such Person,
any member, director or officer of such Person, any corporation, association,
firm or other entity of which such Person is a member, director or officer, and
any other Person directly or indirectly controlling, controlled by or under
direct or indirect common control with such Person.
Agreement. This Second Amended and Restated Revolving Credit Agreement, as
the same may be supplemented, amended or restated from time to time.
<PAGE>
Alternative Currency. The lawful currency of a foreign country which may
be established as an alternate currency by mutual agreement entered into between
the Bank and the Credit Parties hereafter as confirmed in writing, so long as
any such currency is freely transferable, convertible into Dollars and traded on
the inter-bank currency deposits market in which the Bank customarily funds
foreign currency loans.
Alternative Currency Commitment. A commitment, to the extent mutually
agreed by the Bank and the Credit Parties, for (i) the exchange, for future
delivery, of an Alternative Currency into Dollars or Dollars into an Alternative
Currency or (ii) the purchase, for future delivery, of an Alternative Currency
with Dollars or Dollars with an Alternative Currency, in accordance with the
Bank's prevailing customs and practices.
Alternative Currency Equivalent. The amount in Alternative Currency of
Dollars at the quoted spot rate at which the Bank's principal office in the
United States offers to exchange such Alternative Currency for Dollars at 11:00
a.m. (Boston time) two (2) Business Days prior to the date on which such
equivalent is determined.
Authorized Officer. The president, chief financial officer or senior vice
president finance and administration of the Borrower.
Available Aggregate Revolving Commitment. The excess, if any, of (1) the
Revolving Commitment Amount minus (2) the LC Exposure.
Bank. See Preamble.
Biosphere. See Preamble.
Biosphere Loan Sublimit A sublimit of the Revolving Commitment Amount
equal to $2,000,000, as such amount may be reduced from time to time pursuant to
Section 2.3.
Biosphere Loans. Revolving Loans made by the Bank to Biosphere.
Biosphere Note. The Promissory Note dated the date hereof made by
Biosphere payable to the order of the Bank in the original principal amount of
$2,000,000.
Borrower. See Preamble.
Business Day. Any day other than a Saturday, Sunday or legal holiday on
which banks in Boston, Massachusetts are open for the conduct of a substantial
part of their commercial banking business.
Canadian Indebtedness. The indebtedness of the Borrower's wholly-owned
Canadian subsidiary, Sepracor Canada Limited, to certain Canadian investors in
the maximum principal amount of 4,891,000 Canadian Dollars which is guaranteed
by the Borrower.
Capital Expenditure. Any payment made directly or indirectly for the
purpose of acquiring or constructing fixed assets, real property or equipment
which in accordance with GAAP would be added as a debit to the fixed asset
account of the Person making such
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expenditure, including, without limitation, amounts paid or payable under any
conditional sale or other title retention agreement or under any lease or other
periodic payment arrangement which is of a nature that payment obligations of
the lessee or obligor thereunder would be required by GAAP to be capitalized and
shown as liabilities on the balance sheet of such lessee or obligor.
Capital Lease. Any lease of property (real, personal or mixed) which, in
accordance with GAAP, should be capitalized on the lessee's balance sheet or for
which the amount of the asset and liability thereunder as if so capitalized
should be disclosed in a note to such balance sheet.
Cash Equivalent Amount. The sum of the following, without duplication,
none of which may be subject to any Encumbrances except for Encumbrances in
favor of the Bank or any of its Affiliates: (1) cash held by the Borrower in the
United States and at the Bank, plus (2) Qualified Investments of the Borrower
held in the United States and Canada, plus (3) Net Outstanding Amount of
Accounts of the Borrower.
Closing Date. December 22, 1999
Code. The Internal Revenue Code of 1986 and the rules and regulations
thereunder, collectively, as the same may from time to time be supplemented or
amended and remain in effect.
Controlled Group. All trades or businesses (whether or not incorporated)
under common control that, together with the Credit Parties, are treated as a
single employer under Section 414(b) or 414(c) of the Code or Section 4001 of
ERISA.
Corporate Affiliate. As applied to any Person, any corporation,
association, firm or other entity directly or indirectly controlling, controlled
by or under direct or indirect common control with such Person.
Corporate Services Agreement. The Corporate Services Agreement between the
Borrower and each of its Subsidiaries, each as originally executed and delivered
to the Bank.
Credit Parties. See Preamble.
Default. Any event or condition that, with the giving of notice or lapse
of time, or both, would constitute an Event of Default.
Dollars or $. The lawful currency of the United States of America.
Dollar Equivalent. The amount in Dollars of any Alternative Currency at
the quoted spot rate at which the Bank's principal office in the United States
offers to exchange Dollars for such Alternative Currency at 11:00 a.m. (Boston
time) two (2) Business Days prior to the date on which such equivalent is to be
determined.
EBITDA. For any period, operating income for the Borrower and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP) for such period (calculated before taxes, Interest
Expense, depreciation, amortization, other non-cash income (other than
receivables arising in the ordinary course of business) or charges accrued for
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<PAGE>
such period) and (except to the extent received or paid in cash by the Borrower)
income or loss attributable to equity in Affiliates for such period, excluding
(i) any extraordinary and unusual gains or losses during such period, and (ii)
the proceeds of insurance and asset sales received by the Borrower or any of its
Subsidiaries during such period.
Encumbrances. See Section 6.4.
Environmental Laws. Any and all applicable foreign, federal, state and
local environmental, health or safety statutes, laws, regulations, rules,
ordinances, policies and rules or common law (whether now existing or hereafter
enacted or promulgated), of all governmental agencies, bureaus or departments
which may now or hereafter have jurisdiction over the Borrower or any of its
Subsidiaries and all applicable judicial and administrative and regulatory
decrees, judgments and orders, including common law rulings and determinations,
relating to injury to, or the protection of, real or personal property or human
health or the environment, including, without limitation, all requirements
pertaining to reporting, licensing, permitting, investigation, remediation and
removal of emissions, discharges, releases or threatened releases of Hazardous
Materials, chemical substances, pollutants or contaminants whether solid, liquid
or gaseous in nature, into the environment or relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of such Hazardous Materials, chemical substances, pollutants or
contaminants.
ERISA. The Employee Retirement Income Security Act of 1974 and the rules
and regulations thereunder, collectively, as the same may from time to time be
supplemented or amended and remain in effect.
Event of Default. Any event described in Section 8.1.
FDA. See Section 4.19.
Fixed Charge Coverage Ratio. As at any date, the ratio of (a) EBITDA for
the period of four fiscal quarters ending on or most recently ended prior to
such date to (b) the sum, for the Borrower and its Subsidiaries (determined on a
consolidated basis without duplication in accordance with GAAP) of (i) all
regularly scheduled payments of principal of any Indebtedness (including the
principal component of any payments in respect of Capital Leases) for such
period plus, (ii) all Interest Expense for such period, plus (iii) the aggregate
amount of all Non-Financed Capital Expenditures made during such period
(excluding payment of Capital Leases to the extent included in principal
payments or Interest Expense for such period).
GAAP. Generally accepted accounting principles as defined by the United
States Financial Accounting Standards Board, as from time to time in effect.
Guaranties. As applied to the Credit Parties and their Subsidiaries, all
guarantees, endorsements or other contingent or surety obligations with respect
to obligations of others whether or not reflected on the consolidated balance
sheet of the Credit Parties and their Subsidiaries, including any obligation to
furnish funds, directly or indirectly (whether by virtue of partnership
arrangements, by agreement to keep-well or otherwise), through the purchase of
goods, supplies or services, or by way of stock purchase, capital contribution,
advance or loan, or
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to enter into a contract for any of the foregoing, for the purpose of payment of
obligations of any other Person or entity.
Guaranty Agreement. The Guaranty Agreement executed and delivered by the
Borrower on the date hereof in favor of the Bank guarantying the Biosphere
Loans.
Hazardous Material. Any substance (i) the presence of which requires or
may hereafter require notification, investigation or remediation under any
Environmental Law; (ii) which is or becomes defined as a "hazardous waste",
"hazardous material" or "hazardous substance" or "controlled industrial waste"
or "pollutant" or "contaminant" under any present or future Environmental Law or
amendments thereto including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601
et seq.) and any applicable local statutes and the regulations promulgated
thereunder; (iii) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes
regulated by any governmental authority, agency, department, commission, board,
agency or instrumentality of any foreign country, the United States, any state
of the United States, or any political subdivision thereof to the extent any of
the foregoing has or had jurisdiction over the Borrower; or (iv) without
limitation, which contains gasoline, diesel fuel or other petroleum products,
asbestos or polychlorinated biphenyls ("PCB's").
Indebtedness. As applied to the Credit Parties and their Subsidiaries, (i)
any and all obligations for borrowed money or other extensions of credit whether
or not secured or unsecured, absolute or contingent, including, without
limitation, Capital Leases, unmatured reimbursement obligations with respect to
letters of credit or guarantees issued for the account of or on behalf of the
Credit Parties and their Subsidiaries and all obligations representing the
deferred purchase price of property, other than accounts payable arising in the
ordinary course of business, (ii) all obligations evidenced by bonds, notes,
debentures or other similar instruments, (iii) all obligations secured by any
mortgage, pledge, security interest or other lien on property owned or acquired
by the Credit Parties or any Subsidiary of a Credit Party whether or not the
obligations secured thereby shall have been assumed, (iv) that portion of all
obligations arising under Capital Leases that is required to be capitalized on
the consolidated balance sheet of the Credit Parties and their Subsidiaries, (v)
all Guaranties, and (vi) all obligations that are immediately due and payable
out of the proceeds of or production from property now or hereafter owned or
acquired by the Credit Parties or any Subsidiary of a Credit Party.
Interest Expense. For any period, the sum for the Borrower and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) all interest paid or payable during
such period by the Borrower and its Subsidiaries in respect of Indebtedness for
borrowed money plus (b) all fees, including Letter of Credit fees and expenses,
incurred hereunder during such period.
Investment. As applied to the Borrower and its Subsidiaries, the purchase
or acquisition of any share of capital stock, partnership interest, evidence of
indebtedness or other equity security of any other Person or entity, any loan,
advance or extension of credit to, or contribution to the capital of, any other
Person or entity, any real estate held for sale or investment, any commodities
futures contracts held other than in connection with bona fide hedging
transactions,
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any other investment in any other Person or entity, and the making of any
commitment or acquisition of any option to make an Investment.
LC Exposure. At any time, the sum of (a) the aggregate undrawn amount of
all outstanding Letters of Credit at such time plus (b) the aggregate amount of
all payments made by the Bank pursuant to Letters of Credit which have not yet
been reimbursed by or on behalf of the Credit Parties.
Letters of Credit. Letters of credit previously and hereafter issued by
the Bank for the account of a Credit Party in accordance with the provisions of
Section 2.5 hereof, or drafts accepted under any agreement for banker's
acceptances entered into by a Credit Party with the Bank.
Loan Account. The account on the books of the Bank in which will be
recorded Revolving Loans made by the Bank to the Credit Parties pursuant to this
Agreement, payments made on such Revolving Loans and other appropriate debits
and credits as provided by this Agreement.
Loan Documents. See Section 7.2.
Material Licenses. See Section 4.11.
Money Markets. See Section 8.10.
Net Outstanding Amount of Accounts. As of any date, the net amount of
Accounts Receivable of the Borrower outstanding on such date after (a)
eliminating from the aggregate amount of outstanding Accounts (i) such Accounts
past due under the original terms of sale more than sixty (60) days, (ii) any
Account owed by any account debtor whose principal place of business or chief
executive office is not within the United States or the District of Columbia
("Foreign Account Debtors"), (iii) such Accounts due from Affiliates or
Subsidiaries of the Borrower, (iv) such Accounts for services not yet rendered
or goods not yet delivered, and (v) such Accounts representing obligations in
respect of any joint venture interest owned by the Borrower and in respect of
royalties and license fees payable to the Borrower by any such joint venture or
any joint venture therein, and (b) deducting from the aggregate face amount of
the remaining Accounts Receivable of the Borrower (i) net offsets from accounts
owing from account debtors, other than foreign account debtors, which maintain
both receivable and payable balances with the Borrower, (ii) the aggregate
amount of outstanding claims asserted by account debtors, other than foreign
account debtors, against the Borrower and (iii) all payments, adjustments, and
credits applicable thereto and all amounts due thereon considered by the Bank to
be difficult to collect or uncollectible by reason of return, rejection,
repossession, loss or damage of or to the merchandise giving rise thereto, a
merchandise or other dispute, insolvency of the account debtor or any other
reason, all as determined by the Bank in its sole and reasonable discretion,
which determination shall be final and binding upon the Borrower.
Non-Financed Capital Expenditures. For any period, all Capital
Expenditures made by the Borrower and its Subsidiaries during such period that
have not been funded, directly or indirectly, with the proceeds of purchase
money financing (including, without limitations, Capital Leases) other than the
proceeds of Revolving Loans.
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Notes. Collectively, the Sepracor Note and the Biosphere Note.
Notice of Borrowing. See Section 2.1(b).
Obligations. Any and all obligations of the Credit Parties to the Bank of
every kind and description (i) hereunder and under the Notes and (ii) under
Alternative Currency Commitments and under any and all documents pertaining
thereto whether direct or indirect, absolute or contingent, primary or
secondary, due or to become due, now existing or hereafter arising, regardless
of how they arise or by what agreement or instrument, if any, and including
obligations to perform acts and refrain from taking action as well as
obligations to pay money.
Original Currency. See Section 8.10.
PBGC. The Pension Benefit Guaranty Corporation or any entity succeeding to
any or all of its functions under ERISA.
Permitted Encumbrances. See Section 6.4.
Person. A corporation, an association, a partnership, a limited liability
company or partnership, a joint venture, an organization, a business, an
individual, a government or political subdivision thereof or a governmental
agency.
Plan. At any time, an employee pension or other benefit plan that is
subject to Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by the Credit Parties or
any member of the Controlled Group for employees of the Credit Parties or any
member of the Controlled Group or (ii) if such Plan is established, maintained
pursuant to a collective bargaining agreement or any other arrangement under
which more than one employer makes contributions and to which the Credit Parties
or any member of the Controlled Group is then making or accruing an obligation
to make contributions or has within the preceding five Plan years made
contributions.
Prime Rate. The rate of interest announced from time to time by the Bank
at its office in Boston, Massachusetts as its prime rate.
Prior Credit Agreement. See Preamble.
Prior Loans. See Preamble.
Qualified Investments. As applied to the Borrower, Investments in (i)
notes, bonds or other obligations of the United States of America or any agency
thereof that as to principal and interest constitute direct obligations of or
are guaranteed by the United States of America; (ii) certificates of deposit or
other deposit instruments or accounts of banks or trust companies organized
under the laws of the United States or any state thereof that have capital and
surplus of at least $100,000,000, (iii) commercial paper issued by companies
organized under the laws of the United States or any state thereof and that is
rated not less than prime-two or A-2 or their equivalents by Moody's Investors
Service, Inc. or Standard & Poor's Corporation, respectively, or their
successors, (iv) mutual or closed end funds that invest solely in Investments
described in
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clauses (i) through (iii) of this definition and (v) any repurchase agreement
secured by any one or more of the foregoing.
Restricted Payments. (a) Any dividend or other distribution, direct or
indirect, on or on account of any shares of any class of stock of any Credit
Party now or hereafter outstanding and (b) any redemption, purchase or other
acquisition, direct or indirect, of any shares of any class of stock of Credit
Party now or hereafter outstanding or of any warrants or rights to purchase any
such stock (including without limitation the repurchase of any such stock or
warrant or any refund of the purchase price thereof in connection with the
exercise by the holder thereof of any right of rescission or similar remedies
with respect thereto) and (c) any payment of principal of, premium, if any, or
interest on, or otherwise in respect of any Subordinated Indebtedness.
Revolving Commitment Amount. Twenty-five Million Dollars ($25,000,000) or
any lesser amount, including zero, resulting from a termination or reduction of
such amount in accordance with Section 2.3 or Section 7.2.
Revolving Credit Period. The period beginning on the date hereof and
extending through and including the Revolving Credit Termination Date.
Revolving Credit Termination Date. December 31, 2001 or such earlier date
on which the commitment to make Revolving Loans is terminated or the Revolving
Commitment Amount is reduced to zero in accordance with the terms of this
Agreement.
Revolving Loans. Loans made pursuant to Section 2.1(a) that utilize the
Revolving Commitment Amount including, without limitation, all Biosphere Loans.
Second Currency. See Section 8.10.
Sepracor Note. The Promissory Note dated the date hereof made by the
Borrower payable to the order of the Bank in the original principal amount of
$25,000,000.
Subordinated Indebtedness. (a) the existing Indebtedness of the Credit
Parties which is designated as "Subordinated Indebtedness" in Schedule 6.1
attached hereto, and (b) any other Indebtedness of the Credit Parties consented
to in writing by the Bank which matures in its entirety later than the Notes and
by its terms (or by the terms of the instrument under which it is outstanding
and to which appropriate reference is made in the instrument evidencing such
Subordinated Indebtedness) is made subordinate and junior in right of payment to
the Notes and to the Credit Parties' other obligations to the Bank hereunder by
provisions reasonably satisfactory in form and substance to the Bank and its
counsel.
Subordinated Notes. The Borrower's (i) $165,000,000 6 1/4% Convertible
Subordinated Debentures due 2005 issued by the Borrower pursuant to an Indenture
dated February 5, 1998 from the Borrower to Chase Manhattan Bank, and (ii)
$300,000,000 7.00% Convertible Subordinated Debentures due 2005 issued pursuant
to an Indenture dated December 15, 1998 by the Borrower to Chase Manhattan Bank.
Subsidiary. Any corporation, association, limited liability company, joint
stock company, business trust or other similar organization of which 50% or more
of the ordinary
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voting power for the election of a majority of the members of the board of
directors or other governing body of such entity is held or controlled by any
Credit Party or their Subsidiaries; or any other such organization the
management of which is directly or indirectly controlled by any Credit Party or
a Subsidiary of any Credit Party through the exercise of voting power or
otherwise; or any joint venture, whether incorporated or not, in which any
Credit Party has, at least, a 50% ownership interest.
Tangible Capital Base. At any date as of which the amount thereof shall be
determined, the stockholders' equity of the Borrower and its Subsidiaries
determined on a consolidated basis in accordance with GAAP plus the outstanding
principal amount of any Subordinated Indebtedness minus the sum of any amounts
attributable to (a) goodwill, (b) intangible items such as unamortized debt
discount and expense, patents, trade and service marks and names, copyrights and
research and development expenses except prepaid expenses, (c) all reserves not
already deducted from assets, (d) any write-up in the book value of assets
resulting from any revaluation thereof subsequent to the date of the financial
statements referred to in Section 4.6 and (e) any and all items included as
assets on the consolidated balance sheet of the Borrower and its Subsidiaries if
and to the extent such items consist of the equity in Subsidiaries or other
joint ventures holdings or similar Investments.
Technology Transfer Agreements. The Technology Transfer and License
Agreements dated as of January 1, 1994 between the Borrower and each of its
Subsidiaries each as originally executed and delivered to the Bank.
Total Liabilities. Any and all liabilities of the Credit Parties and their
Subsidiaries on a consolidated basis determined in accordance with GAAP.
U.S. Subsidiary. With respect to any Person, each of such Person's
Subsidiaries organized, and having a principal place of business located in the
United States.
Versicor. Versicor Inc., a Delaware corporation, a Subsidiary of the
Borrower and an Affiliate of Biosphere.
1.2 Accounting Terms. All terms of an accounting character shall have the
meanings assigned thereto by GAAP applied on a basis consistent with the
financial statements referred to in Section 4.6 of this Agreement, modified to
the extent, but only to the extent, that such meanings are specifically modified
herein.
1.3 Multiple Borrowers. All Obligations are several (and not joint)
between the Borrower and Biosphere except that the Borrower is guarantying the
Biosphere Loans. All representations and covenants shall apply and be applied to
the Borrower (and not Biosphere). The Credit Parties hereby designate the
Borrower to act on behalf of the Credit Parties for all purposes under this
Agreement, including, without limitation, reduction of the Revolving Commitment
Amount and the Biosphere Sublimit. Notice when given to the Borrower shall be
sufficient notice to the Credit Parties. Any document delivered to the Borrower
shall be considered delivered to each of the Borrower and Biosphere. Any Event
of Default by the Borrower shall be an Event of Default by the Credit Parties.
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SECTION 2
DESCRIPTION OF CREDIT
2.1 The Revolving Loans.
(a) Upon the terms and subject to the conditions of this Agreement,
and in reliance upon the representations, warranties and covenants of the Credit
Parties made herein, the Bank agrees to make Revolving Loans to the Borrower and
Biosphere Loans to Biosphere, in each case in Dollars, pursuant to Notices of
Borrowing as delivered by the Credit Parties to the Bank from time to time, from
and after the Closing Date and during the Revolving Credit Period; provided,
that (1) the aggregate principal amount of Revolving Loans outstanding at any
time shall not exceed the Available Aggregate Revolving Commitment at such time,
(2) the sum of the aggregate principal amount of Biosphere Loans outstanding at
such time plus Biosphere LC Exposure shall not exceed the Biosphere Sublimit at
such time and (3) at the time a Credit Party requests a Revolving Loan or a
Letter of Credit and after giving effect to the making thereof there has not
occurred and is not continuing any Default or Event of Default. The Credit
Parties agree that it shall be an Event of Default if at any time the debit
balance of the Loan Account shall exceed the Available Aggregate Revolving
Commitment or the aggregate principal amount of Biosphere Loans plus Biosphere
LC Exposure exceeds the Biosphere Sublimit unless, in each case, the Credit
Parties shall, upon demand by the Bank, pay, within two (2) Business Days, cash
to the Bank to be credited to the Loan Account in such amount as shall be
necessary to eliminate any such the excess.
(b) Prior to 12:00 noon (Boston time) on the Revolving Loan request
date, (1) with respect to all Revolving Loans (except for Biosphere Loans), an
Authorized Officer and (2) with respect to Biosphere Loans, the Chief Financial
Officer of Biosphere and the Senior Vice President, Finance and Administration
of the Borrower, shall, subject to the notice requirements for LIBOR Loans as
set forth in Section 2.3(a), notify the Bank in writing or by telephone
confirmed by (i) telex, (ii) telecopy or (iii) other facsimile transmission, on
the same day as the telephonic request (the "Notice of Borrowing"), of the
proposed date of borrowing and the principal amount requested. No Notice of
Borrowing shall be revocable by any Credit Party. No Notice of Borrowing for a
Biosphere Loan shall be effective unless the Bank shall have received, on or
prior to the date of such Notice of Borrowing, a certificate of the secretary of
Biosphere with respect to resolutions of the Board of Directors authorizing such
Biosphere Loan or granting authority to certain officers of Biosphere to request
Biosphere Loans pursuant to the terms hereof.
(c) The Bank shall enter the Revolving Loans as debits in the Loan
Account. The Bank shall also record in the Loan Account all payments made by the
Credit Parties on account of the Revolving Loans, and may also record therein,
in accordance with customary accounting practices, other debits and credits, and
all interest, fees, charges and expenses chargeable to the Credit Parties under
this Agreement. The debit balance of the Loan Account shall reflect the amount
of the Credit Parties' Obligations to the Bank from time to time by reason of
the Revolving Loans (including Biosphere Loans) and other appropriate charges
hereunder. Periodically, the Bank shall render a statement of account showing as
of its date the debit balance of the Loan Account which, unless within thirty
(30) days of such date notice to the
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contrary is received by the Bank from the Credit Parties, absent manifest error,
shall be considered correct and accepted by each of the Credit Parties and
conclusively binding upon both Credit Parties.
(d) Subject to the terms and conditions of this Agreement, the Bank
shall make each Revolving Loan on the effective date specified therefor by
crediting the amount of such Revolving Loan to the applicable Credit Party's
demand deposit account with the Bank.
2.2 Fees. The Borrower shall pay to the Bank during the Revolving Credit
Period a commitment fee computed at the rate of one quarter of one percent
(0.25%) per annum on the average daily amount of the unborrowed portion of the
Revolving Commitment Amount during each quarter or portion thereof; provided,
that LC Exposure shall be deemed borrowed. Commitment fees shall be payable
quarterly in arrears, on the first day of January, April, July and October of
each year beginning on April 1, 2000, and on the last day of the Revolving
Credit Period.
2.3 Reduction of Revolving Commitment Amount/Biosphere Sublimit. The
Borrower may from time to time by written notice delivered to the Bank by the
Borrower at least five Business Days prior to the date of the requested
reduction or termination, reduce by integral multiples of Five Hundred Thousand
Dollars ($500,000) any unborrowed portion of the Revolving Commitment Amount by
integral multiples of One Hundred Thousand Dollars ($100,000) any unborrowed
portion of the Biosphere Sublimit or, subject to the prior payment in full of
any Biosphere Loans, together with all interest and fees accrued thereon,
terminate the Biosphere Sublimit; provided that if the Borrower shall cease to
own directly at least 51% of the outstanding capital stock of Biosphere, then
the Biosphere Sublimit shall be terminated automatically, and all Biosphere
Loans, together with all interest and fees accrued thereon, shall be immediately
due and payable in full. No reduction of the Revolving Commitment Amount or the
Biosphere Sublimit shall be subject to reinstatement.
2.4 The Notes.
(a) The Revolving Loans (except the Biosphere Loans) shall be
evidenced by the Sepracor Note substantially in the form of Exhibit A-1 hereto
and the Biosphere Loans shall be evidenced by the Biosphere Note, substantially
in the form of Exhibit A-2 hereto, each of which is payable to the order of the
Bank and with a final maturity on the Revolving Credit Termination Date. The
Notes shall be dated on or before the date of the first Revolving Loan and shall
have the blanks therein appropriately completed.
(b) The Bank shall, and is hereby irrevocably authorized (but not
required) by the Credit Parties to, enter on the schedule forming a part of each
Note or otherwise in its records appropriate notations evidencing the date and
the amount of each Revolving Loan, the interest rate applicable thereto and the
date and amount of each payment of principal made by the applicable Credit Party
with respect thereto; and in the absence of manifest error, such notations shall
constitute conclusive evidence thereof. The Bank is hereby irrevocably
authorized by the Credit Parties to attach to and make a part of each Note a
continuation of any such schedule as and when required. No failure on the part
of the Bank to make any notation as provided in this
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subsection (b) shall in any way affect any Revolving Loan or Biosphere Loan or
the rights or obligations of the Bank or any Credit Party with respect thereto.
2.5 Letters of Credit. Upon the request of a Credit Party (and if
Biosphere, subject to the requirements of Section 2.1(b)(2)), the Bank shall
issue such Letters of Credit as such Credit Party may request, provided that
such Letters of Credit shall not be issued unless and until such Credit Party
has completed and executed such application as the Bank may require from time to
time and such other agreements evidencing Letters of Credit as the Bank shall
request from time to time (consistent with the Bank's usual practice), and
provided further that, each Letter of Credit shall be subject to customary fees
relating to issuance, negotiation, settlement, amendment and other similar fees
and charges as agreed by the Bank and such Credit Party. All Letters of Credit
shall expire no later than five (5) Business Days prior to the Revolving Credit
Termination Date. Letters of Credit issued hereunder shall constitute
utilization of the Revolving Commitment Amount and the Biosphere Sublimit, as
applicable.
2.6 Capital Requirements. If after the date hereof, the Bank shall have
determined that the adoption or implementation of any applicable law, rule or
regulation regarding capital requirements for banks or bank holding companies,
or any change therein (including, without limitation, any change according to a
prescribed schedule of increasing requirements, whether or not known on the date
hereof), or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Bank with any
request or directive of such entity regarding capital adequacy (whether or not
having the force of law) has the effect of reducing the return on the Bank's
capital to a level below that which the Bank could have achieved (taking into
consideration the Bank's policies with respect to capital adequacy immediately
before such adoption, implementation, change or compliance and assuming that the
Bank's capital was fully utilized prior to such adoption, implementation, change
or compliance) but for such adoption, implementation, change or compliance as a
consequence of its Commitment to make Revolving Loans hereunder by any amount
deemed by the Bank to be material, the Credit Parties shall pay to the Bank as
an additional fee from time to time on demand such amount as the Bank shall have
determined to be necessary to compensate it for such reduction. The
determination by the Bank of such amount, if done on the basis of any reasonable
averaging and attribution methods, shall in the absence of manifest error be
conclusive, and at the Borrower's request, the Bank shall demonstrate the basis
of such determination.
2.7 Payments and Prepayments of the Revolving Loans. On at least two (2)
Banking Days prior written notice to the Bank with respect to Revolving Loans
subject to an exercised LIBOR Option and on at least one (1) Banking Day prior
written notice to the Bank with respect to all other Revolving Loans, the Credit
Parties may, at their option, prepay the Notes in whole at any time or in part
from time to time without penalty or premium; provided, that any prepayment of
any LIBOR Portion shall be made together with the applicable LIBOR Premium. Any
interest accrued on the amounts so prepaid to the date of such payment must be
paid at the time of any such payment. No prepayment of the Revolving Loans shall
affect the Revolving Commitment Amount or the Biosphere Sublimit or impair any
Credit Party's right to borrow as set forth in Section 2.1. On the Revolving
Credit Termination Date, the Borrower shall repay all outstanding Revolving
Loans and the Sepracor Note, and Biosphere shall repay all outstanding
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Biosphere Loans and the Biosphere Note together with all unpaid interest thereon
and all fees and other amounts due hereunder with respect to the Revolving
Loans.
2.8 Method of Payment. All payments and prepayments of principal and all
payments of interest shall be made by the Credit Parties to the Bank at One
Federal Street, Boston, Massachusetts 02110 in immediately available funds, on
or before 11:00 a.m. on the due date thereof, free and clear of, and without any
deduction or withholding for, any taxes or other payments. The Bank may, and
each Credit Party hereby authorizes the Bank to, debit the amount of any payment
not made by such time to the demand deposit account of such Credit Party with
the Bank.
2.9 Overdue Payments.
(a) Upon the occurrence and during the continuance of an Event of
Default, interest on the outstanding principal amount of the Notes and (to the
extent permitted by law) on accrued but unpaid interest shall thereafter be
payable on demand at a rate per annum equal to two percent (2%) above the
interest rate otherwise in effect with respect to such Revolving Loans. Upon the
cure of an Event of Default and the payment of interest at the default rate
through the date of such cure, the interest rate shall revert to that provided
for in Section 2.10.
(b) If a payment of principal or interest hereunder is not made in
full within 10 days of date when due, the applicable Credit Party will pay to
the Bank a late fee equal to three percent (3%) of the amount of such payment.
Nothing in the preceding sentence shall affect the Bank's right to exercise any
of its rights or remedies, including those provided in Section 7.2, if an Event
of Default has occurred.
2.10 Holidays. If any payment required by this Agreement becomes due on a
day that is not a Business Day such payment may be made on the next succeeding
Business Day, and such extension shall be included in computing interest in
connection with such payment.
2.11 Interest. Each Note shall bear interest on the unpaid principal
amount thereof until paid in full at the rate or rates per annum determined (on
the basis of the actual number of days elapsed over a 360-day year) and payable
as follows:
(a) The rate of interest for any portion of the outstanding
principal amount of the Revolving Loans which is not then subject to an
exercised LIBOR Option under Section 2.12 of this Agreement shall be computed at
the Prime Rate.
(b) The rate for any LIBOR Portion of the Revolving Loans shall be
computed at a rate equal to three-quarters percent (0.75%) above the applicable
LIBOR Rate.
(c) Interest on each Note shall be payable monthly in arrears on the
first Business Day of each month, commencing on January 1, 2000 and, in
addition, interest on any LIBOR Portion of the Revolving Loans in respect of any
LIBOR Period shall also be payable on the last day of such LIBOR Period and on
the last day of the third month for each LIBOR Portion with a 180-day LIBOR
Period and at maturity (whether by acceleration or otherwise). The rate of
interest payable on any portion of the outstanding principal balance of any
Revolving
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Loan which is not then subject to a LIBOR Option shall take effect
simultaneously with the corresponding change in the Prime Rate.
2.12 Certain LIBOR Provisions.
(a) LIBOR Option. Subject to the provisions of this Section 2, each
Credit Party shall have the right to have the interest on all or any portion of
the principal amount of any Revolving Loan based on a LIBOR Rate.
(b) Certain Definitions. As used herein, the following terms have
the following respective meanings:
Banking Day. (i) When used with respect to the LIBOR Option, a day on
which transactions may be effected in deposits of U.S. dollars in the London
interbank foreign currency deposits market and on which banks may conduct
business in London, England and Boston, Massachusetts and (ii) when used with
respect to the other provisions of this Agreement, any day excluding Saturday
and Sunday and excluding any other day which shall be in Boston, Massachusetts,
a legal holiday or a day on which banking institutions are authorized by law to
close.
Board. The Board of Governors of the Federal Reserve System of the United
States.
Legal Requirement. Any requirement imposed upon the Bank by any law of the
United States of America or the United Kingdom or by any regulation, order,
interpretation, ruling or official directive (whether or not having the force of
law) of the Board, the Bank of England or any other board, central bank or
governmental or administrative agency, institution or authority of the United
States of America, the United Kingdom or any political subdivision of either
thereof.
LIBOR Option. The option granted pursuant to this Section 2 to have the
interest on all or a portion of the principal amount of the Revolving Loans
based on a LIBOR Rate.
LIBOR Period. Any period, as provided below in this Section 2.12, of 30,
60, 90 or 180 days, commencing on any Banking Day; provided, however, that no
LIBOR Period with respect to any LIBOR Portion of any Revolving Loan shall
extend beyond the maturity date of the Notes. If any LIBOR Period so selected
would otherwise end on a date which is not a Banking Day, such LIBOR Period
shall instead end on the next preceding or succeeding Banking Day as determined
by the Bank in accordance with the then current banking practice in London. Each
determination by the Bank of any LIBOR Period shall, in the absence of manifest
error, be conclusive, and at any Credit Party's request the Bank shall
demonstrate the basis for such determination.
LIBOR Portion. That portion of the Revolving Loans specified in a LIBOR
Request, (i) which is not less than Five Hundred Thousand Dollars ($500,000),
(ii) which is an integral multiple of Ten Thousand Dollars ($10,000), (iii)
which does not exceed the outstanding balance of the Revolving Loan not already
subject to an exercised LIBOR Option, (iv) which, as of the date of the LIBOR
Request specifying such LIBOR Portion, has met the conditions for basing
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interest on the LIBOR Rate in Section 2.13 of this Agreement and (v) the LIBOR
Period of which has commenced and not terminated.
LIBOR Premium. With respect to the prepayment of any LIBOR Portion of any
Revolving Loan, whether voluntary or as a result of acceleration, an amount
equal to the product of (i) the excess, if any, of the rate of interest on the
principal amount so prepaid over the rate of interest on debt securities issued
by the Treasury of the United States of America on a date approximating the date
of payment of such principal amount and having a maturity date approximating the
last Banking Day of the applicable LIBOR Period, multiplied by (ii) the
principal amount so prepaid, multiplied by (iii) a fraction, the numerator of
which is the number of days remaining in the related LIBOR Period and the
denominator of which is 360.
LIBOR Rate. With respect to any LIBOR Portion for the related LIBOR
Period, an interest rate per annum (rounded upwards, if necessary, to the next
higher 1/8 of 1%) equal to the product of (a) the Base LIBOR Rate (as
hereinafter defined) and (b) Statutory Reserves. For purposes of this
definition, the term "Base LIBOR Rate" shall mean the rate (rounded to the
nearest 1/8 of 1% or, if there is no nearest 1/8 of 1%, the next higher 1/8 of
1%) at which deposits of U.S. dollars approximately equal in principal amount to
the LIBOR Portion and for a maturity equal to the applicable LIBOR Period are
offered to the Bank in the London interbank foreign currency deposits market at
approximately 11:00 a.m., London time, two (2) Banking Days prior to the
commencement of such LIBOR Period, for delivery on the first day of such LIBOR
Period. Each determination by the Bank of any LIBOR Rate shall, in the absence
of manifest error, be conclusive, and at any Credit Party's request, the Bank
shall demonstrate the basis for such determination.
LIBOR Request. Notice in writing (or by telephonic communications
confirmed by telex, telecopy or other facsimile transmission on the same day as
the telephone request) from Biosphere with respect to Biosphere Loans or from
the Borrower with respect to all other Revolving Loans, to the Bank requesting
that interest on a LIBOR Portion be based on the LIBOR Rate, specifying: (i) the
first day of the LIBOR Period, (ii) the length of the LIBOR Period consistent
with the definition of that term and (iii) a dollar amount of the LIBOR Portion
consistent with the definition of that term.
Statutory Reserves. A fraction, the numerator of which is the number one
and the denominator of which is the number one minus the aggregate of the
maximum reserve percentages (including, without limitation, any marginal,
special, emergency or supplemental reserves), expressed as a decimal,
established by the Board and any other banking authority to which the Bank is
subject for Eurocurrency Liabilities (as defined in Regulation D of the Board).
Such reserve percentages shall include, without limitation, those imposed under
such Regulation D. LIBOR Portions of the Revolving Loans shall be deemed to
constitute Eurocurrency Liabilities and as such shall be deemed to be subject to
such reserve requirements without benefit of or credit for proration, exceptions
or offsets which may be available from time to time to the Bank under such
Regulation D. Statutory Reserves shall be adjusted automatically on and as of
the effective date of any change in any reserve percentage.
Tax. In relation to any LIBOR Portion and the applicable LIBOR Rate, any
tax, levy, impost, duty, deduction, withholding or other charges of whatever
nature required by any Legal
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Requirement (i) to be paid by the Bank and/or (ii) to be withheld or deducted
from any payment otherwise required hereby to be made by any Credit Party to the
Bank, provided that the term "Tax" shall not include any taxes imposed upon the
net income of the Bank by the United States of America or any political
subdivision thereof (including state and local governmental authorities).
2.13 Conditions for Basing Interest on the LIBOR Rate. Upon the condition
that:
(a) The Bank shall have received a LIBOR Request from the Borrower
or Biosphere, as applicable, prior to noon at least two (2) Banking Days prior
to the first day of the LIBOR Period requested;
(b) There shall have occurred no change in applicable law which
would make it unlawful for the Bank to obtain deposits of U.S. dollars in the
London interbank foreign currency deposits market;
(c) As of the date of the LIBOR Request and the first day of the
LIBOR Period, there shall exist no Event of Default, nor any Default, which has
not been waived by the Bank;
(d) The Bank shall not have determined in good faith that it is
unable to determine the LIBOR Rate in respect of the requested LIBOR Period or
that it is unable to obtain deposits of U.S. dollars in the London interbank
foreign currency deposits market in the applicable amounts and for the requested
LIBOR Period; and
(e) As of the first date of the LIBOR Period specified in such LIBOR
Request, and after having given effect thereto, there shall be no more than an
aggregate of four (4) LIBOR Portions outstanding;
then interest on the LIBOR Portion requested during the LIBOR Period requested
will be at the applicable LIBOR Rate.
2.14 Indemnification for Funding and Other Losses. Each LIBOR Request
shall be irrevocable and binding on the applicable Credit Party. Without
limiting the generality of Section 2.15, the Credit Parties shall indemnify the
Bank against any loss or expense incurred by the Bank as a result of any failure
on the part of any Credit Party to fulfill, on or before the date specified in
any LIBOR Request, the applicable conditions set forth in this Agreement,
including, without limitation, any loss (including loss of anticipated profits)
or expense incurred by reason of the liquidation or redeployment of deposits or
other funds acquired by the Bank to fund or maintain the requested LIBOR Portion
when interest on such LIBOR Portion, as a result of such failure on the part of
the Credit Parties, is not based on the applicable LIBOR for the requested LIBOR
Period. The Bank shall determine the amount of such loss or expense incurred by
it, and absent manifest error such determination shall be conclusive, and at any
Credit Party's request the Bank shall demonstrate the basis for such
determination.
2.15 Change in Applicable Laws, Regulations, etc. If any Legal Requirement
shall make it unlawful for the Bank to fund through the purchase of U.S. dollar
deposits any LIBOR Portion, or otherwise to give effect to its obligations as
contemplated hereby, or shall impose on
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the Bank any costs based on or measured by the excess above a specified level of
the amount of a category of deposits or other liabilities of the Bank, which
includes deposits by reference to which the LIBOR Rate is determined as provided
herein or a category of extensions of credit or other assets of the Bank which
includes any LIBOR Portion, or shall impose on the Bank any restrictions on the
amount of such a category of liabilities or assets which the Bank may hold, (a)
the Bank may by notice thereof to the Credit Parties terminate the LIBOR Option,
(b) any LIBOR Portion subject thereto shall immediately bear interest thereafter
at the rate provided for in Section 2.10.(a), and (c) the Credit Parties shall
indemnify the Bank against any loss, penalty or expense incurred by the Bank by
reason of the liquidation or redeployment of deposits or other funds acquired by
the Bank to fund or maintain such LIBOR Portion, as provided in Section 2.14.
2.16 Taxes. It is the understanding of the Credit Parties and the Bank
that the Bank shall receive payments of amounts of principal of and interest on
the Revolving Loans with respect to the LIBOR Portions from time to time subject
to a LIBOR Option free and clear of, and without deduction for, any Taxes. If
(a) the Bank shall be subject to any such Tax in respect of any such LIBOR
Portion or part thereof or (b) the Credit Parties shall be required to withhold
or deduct any such Tax from any such amount, and (c) such Tax shall not have
existed as of the date of the applicable LIBOR Request, the LIBOR applicable to
such LIBOR Portion shall be adjusted by the Bank to reflect all additional costs
incurred by the Bank in connection with the payment by the Bank or the
withholding by the Credit Parties of such Tax and the Credit Parties shall
provide the Bank with a statement detailing the amount of any such Tax actually
paid by the Credit Parties. Determination by the Bank of the amount of such
costs shall, in the absence of manifest error, be conclusive, and at any Credit
Party's request, the Bank shall demonstrate the basis of such determination. If
after any such adjustment, any part of any Tax paid by any Bank is subsequently
recovered by the Bank, the Bank shall reimburse the Credit Parties to the extent
of the amount so recovered. A certificate of an officer of the Bank setting
forth the amount of such recovery and the basis therefor shall, in the absence
of manifest error, be conclusive.
SECTION 3
CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Revolving Loan. The obligation of the
Bank to make its initial Revolving Loans, to issue Letters of Credit is subject
to the condition precedent that the Bank shall have received, in form and
substance satisfactory to the Bank and its counsel, the following:
(a) this Agreement, duly executed by the Credit Parties;
(b) the Sepracor Note, duly executed by the Borrower;
(c) the Biosphere Note, duly executed by Biosphere;
(d) the Guaranty Agreement duly executed by the Borrower;
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(e) a certificate of the Secretary or an Assistant Secretary of the
Borrower with respect to resolutions of its Board of Directors authorizing the
execution and delivery of this Agreement, the Notes, and identifying the
officer(s) authorized to execute, deliver and take all other actions required
under this Agreement, and providing specimen signatures of such officers;
(f) a certificate signed by an Authorized Officer, certifying that
the conditions of Section 3.2.(b) have been fulfilled;
(g) the certificate of incorporation of the Borrower and all
amendments and supplements thereto, filed in the office of the Secretary of
State of the State of Delaware, each certified by said Secretary of State as
being a true and correct copy thereof;
(h) the bylaws of the Borrower and all amendments and supplements
thereto, certified by the Secretary or an Assistant Secretary as being a true
and correct copy thereof;
(i) a certificate of the Secretary of State of the State of
Delaware, as to legal existence and good corporate standing of the Borrower in
such state and listing all documents on file in the office of said Secretary of
State;
(j) a certificate of the Secretary or an Assistant Secretary of
Biosphere with respect to resolutions of the Board of Directors authorizing the
execution and delivery of this Agreement, the Biosphere Note, and identifying
the officer(s) authorized to execute, deliver and take all other actions
required under this Agreement, and providing specimen signatures of such
officers;
(k) a certificate signed by a principal officer of Biosphere,
certifying that the conditions of Section 3.2.(b) have been fulfilled;
(l) the certificate of incorporation of Biosphere and all amendments
and supplements thereto, filed in the office of the Secretary of State of the
State of Delaware, each certified by said Secretary of State as being a true and
correct copy thereof;
(m) the bylaws of Biosphere and all amendments and supplements
thereto, certified by the Secretary or an Assistant Secretary as being a true
and correct copy thereof;
(n) a certificate of the Secretary of State of the State of
Delaware, as to legal existence and good corporate standing of Biosphere in such
state and listing all documents on file in the office of said Secretary of
State;
(o) Lien searches against each Credit Party in all appropriate state
filing offices and in the United States Patent and Trademark Office and the
United States Copyright Office;
(p) if necessary, UCC-3 Termination Statements and other appropriate
lien discharge documentation terminating all liens except those consisting of
Permitted Encumbrances.
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(q) a certificate signed by an Authorized Officer, certifying that
there has been no material adverse change in the condition (financial or
otherwise), operations, properties, assets, liabilities or earnings of the
Credit Parties since the date of its most recent financial statement;
(r) an opinion addressed to it from Hale and Dorr LLP, counsel to
the Credit Parties, in form and substance satisfactory to the Bank and its
counsel; and
(s) such other documents, and completion of such other matters, as
counsel for the Bank may deem reasonably necessary or appropriate.
Notwithstanding the foregoing, the obligations of the Bank to make
Revolving Loans or Biosphere Loans or issue Letters of Credit hereunder shall
not become effective unless each of the foregoing conditions is satisfied (or
waived) at or prior to 12:00 p.m. on January 7, 2000 (and in the event such
conditions are not so satisfied or waived, the Revolving Commitment Amount (and
the Biosphere Sublimit) shall terminate).
3.2 Conditions Precedent to all Revolving Loans. The obligation of the
Bank to make each Revolving Loan, including the initial Revolving Loan, or
continue or convert the Revolving Loans to loans of another type, is further
subject to the following conditions:
(a) timely receipt by the Bank of a Notice of Borrowing as provided
in Section 2.1;
(b) the representations and warranties contained in Section 4 shall
be true and accurate in all material respects on and as of the date of such
Notice of Borrowing and on the effective date of the making, continuation or
conversion of each Revolving Loan as though made at and as of each such date
(except to the extent that such representations and warranties expressly relate
to an earlier date), and no Default or Event of Default shall have occurred and
be continuing, or would result from such Revolving Loan;
(c) the resolutions referred to in Sections 3.1.(d) and 3.1(i) shall
remain in full force and effect; and
(d) no change shall have occurred in any law or regulation or
interpretation thereof that, in the opinion of counsel for the Bank, would make
it illegal or against the policy of any governmental agency or authority for the
Bank to make Revolving Loans hereunder.
The making of each Revolving Loan shall be deemed to be a representation
and warranty by the Credit Parties on the date of the making, continuation or
conversion of such Revolving Loan as to the accuracy of the facts referred to in
subsection (b) of this Section 3.2.
SECTION 4
REPRESENTATIONS AND WARRANTIES
In order to induce the Bank to enter into this Agreement and to make the
Revolving Loans hereunder, issue Letters of Credit, the Borrower represents and
warrants to the Bank that:
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4.1 Organization and Qualification. Each of the Credit Parties and their
Subsidiaries (a) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, (b) has all
requisite corporate power to own its property and conduct its business as now
conducted and as presently contemplated and (c) is duly qualified and in good
standing as a foreign corporation and is duly authorized to do business in each
jurisdiction where the nature of its properties or business requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the financial condition, operations, properties or
business.
4.2 Corporate Authority. The execution, delivery and performance of this
Agreement, the Notes, and the transactions contemplated hereby are within the
corporate power and authority of the Credit Parties, as applicable, and the
execution, delivery and performance of the Notes are within the corporate power
and authority of the Credit Parties, as applicable, and have been authorized by
all necessary corporate proceedings, and do not and will not (a) require any
consent or approval of the stockholders of the Credit Parties, (b) contravene
any provision of the charter documents or by-laws of the Credit Parties or any
law, rule or regulation applicable to any Credit Party, (c) contravene any
provision of, or constitute an event of default or event that, but for the
requirement that time elapse or notice be given, or both, would constitute an
event of default under, any other agreement, instrument, order or undertaking
binding on any Credit Party, or (d) result in or require the imposition of any
Encumbrance on any of the properties, assets or rights of any Credit Party.
4.3 Valid Obligations. This Agreement, the Notes, and all of their
respective terms and provisions are the legal, valid and binding obligations of
the Credit Parties, as applicable, each enforceable in accordance with their
respective terms except as limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting the enforcement of creditors' rights
generally, and except as the remedy of specific performance or of injunctive
relief is subject to the discretion of the court before which any proceeding
therefor may be brought.
4.4 Consents or Approvals. The execution, delivery and performance of this
Agreement, the Notes, and the transactions contemplated herein do not require
any approval or consent of, or filing or registration with, any governmental or
other agency or authority, or any other party.
4.5 Title to Properties; Absence of Encumbrances. Each of the Credit
Parties and their Subsidiaries has good and marketable title to all of the
properties, assets and rights of every name and nature now purported to be owned
by it, including, without limitation, such properties, assets and rights as are
reflected in the financial statements referred to in Section 4.6 (except such
properties, assets or rights as have been disposed of in the ordinary course of
business since the date thereof), free from all Encumbrances except Permitted
Encumbrances hereto, and, except as so disclosed, free from all defects of title
that might materially adversely affect such properties, assets or rights, taken
as a whole.
4.6 Financial Statements. The Borrower has furnished the Bank the
consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries as of December 31, 1998, and the related consolidated and
consolidating statements of income, changes in stockholders' equity and cash
flow for the fiscal year then ended, and related footnotes, audited and
certified by
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PriceWaterhouseCoopers. The Borrower has also furnished the foregoing unaudited
financial statements to the Bank for the nine-month period ending September 30,
1999 and financial projections for the 1999 fiscal year prepared by the
Borrower. All such financial statements, except for such projections, were
prepared in accordance with GAAP applied on a consistent basis throughout the
periods specified and present fairly the financial position of the Borrower and
its Subsidiaries as of such date and the results of the operations of the
Borrower and its Subsidiaries for such period. The projections were prepared in
good faith and based on assumptions which were reasonable when made. There are
no liabilities, contingent or otherwise, not disclosed in such financial
statements that involve a material amount.
4.7 Changes. Since the date of the financial statements for the
three-month period ending September 30, 1999 referred to in Section 4.6, there
have been no changes in the assets, liabilities, financial condition, business
or prospects of the Borrower or any of its Subsidiaries other than changes in
the ordinary course of business, the effect of which has not, in the aggregate,
been materially adverse.
4.8 Defaults. As of the date hereof, no Default or Event of Default
exists.
4.9 Taxes. The Borrower and each Subsidiary has filed all federal, state
and other tax returns required to be filed, and all taxes, assessments and other
governmental charges due from the Borrower and each Subsidiary have been fully
paid. The Borrower and each Subsidiary have established on their books reserves
adequate for the payment of all federal, state and other tax liabilities.
4.10 Material Agreements. As of the Closing Date, Schedule 4.10 hereto
accurately and completely lists all material leases, management, stockholder,
partnership, joint venture, stock redemption or retirement, employment
(including severance), non-competition and related agreements, if any, which are
presently in effect in connection with the conduct of business of the Borrower
and its Subsidiaries.
4.11 Material Licenses. As of the Closing Date, Schedule 4.11 hereto
accurately and completely lists all material licenses and related agreements, if
any, which are presently in effect in connection with the conduct of business of
the Borrower and its Subsidiaries (the "Material Licenses"), and all such
Material Licenses are in full force and effect.
4.12 Litigation. Except as set forth in Schedule 4.12 hereto, there is no
litigation, arbitration, proceeding or investigation pending, or, to the
knowledge of any Credit Party's or any Credit Party's Subsidiary's officers,
threatened, against any Credit Party or any such Subsidiary that, if adversely
determined, could result in a material judgment not fully covered by insurance,
could result in a forfeiture of all or any substantial part of the property of
the Credit Parties or their Subsidiaries, or could otherwise have a material
adverse effect on the assets, business or prospects of the Credit Parties or any
Subsidiary.
4.13 Use of Proceeds.
(a) The Credit Parties will not, directly or indirectly, use any
part of the proceeds of any of the Revolving Loans (i) for the purpose of making
any Restricted Payment which is prohibited by Section 6.8 hereof, (ii) for the
purpose of purchasing or carrying any
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margin stock within the meaning of Regulations U and X (12 C.F.R. Part 221 and
224) of the Board, or (iii) for any other purpose which would violate any
provision of any other applicable statute, regulation, order or restriction.
(b) The proceeds of the Revolving Loans shall be used exclusively
for the working capital purposes of the Credit Parties and for acquisitions
permitted hereunder.
4.14 Existing Indebtedness. Schedule 6.1 hereto accurately and completely
lists all existing Indebtedness of the Credit Parties and their Subsidiaries as
of the date hereof.
4.15 Existing Investments. Schedule 4.15 hereto accurately and completely
lists the record owner, location and any relevant account numbers of all
depository and operating accounts and marketable securities owned by the Credit
Parties and their Subsidiaries as of the date hereof.
4.16 Subsidiaries. As of the date hereof, all the Subsidiaries of the
Credit Parties are listed in Schedule 4.16 hereto. The Borrower or a Subsidiary
of the Borrower is the owner, free and clear of all liens and encumbrances,
except as expressly provided in such schedule, of all of the issued and
outstanding stock of each Subsidiary. All shares of such stock have been validly
issued and are fully paid and nonassessable, and no rights to subscribe to any
additional shares have been granted, and no options, warrants or similar rights
are outstanding.
4.17 Investment Company Act. Neither Credit Party nor any of its
Subsidiaries is subject to regulation under the Investment Company Act of 1940,
as amended.
4.18 Compliance with ERISA. The Credit Parties and each member of the
Controlled Group have fulfilled their obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan and are in compliance
in all material respects with the applicable provisions of ERISA and the Code,
and have not incurred any liability to the PBGC or a Plan under Title IV of
ERISA; and no "prohibited transaction" or "reportable event" (as such terms are
defined in ERISA) has occurred with respect to any Plan.
4.19 FDA Compliance, Etc. Without limiting the scope of Section 4.2, the
Credit Parties and their Subsidiaries are in compliance in all material respects
with all applicable foreign and federal and state laws and regulations,
including all material rules, regulations and administrative orders of the
United States Food and Drug Administration (the "FDA") and of foreign
authorities with jurisdiction over the Credit Parties and their Subsidiaries.
The Credit Parties and their Subsidiaries are in compliance in all material
respects with all of the applicable provisions of the Food, Drug and Cosmetic
Act, as amended.
4.20 Environmental Matters.
(a) The Credit Parties and their Subsidiaries have obtained all
permits, licenses and other authorizations which are required under all
Environmental Laws, except to the extent failure to have any such permit,
license or authorization would not have a material adverse effect on the
business, financial condition or operations of the Credit Parties and their
Subsidiaries. The Credit Parties and their Subsidiaries are in compliance with
the terms and conditions of all such permits, licenses and authorizations, and
are also in compliance with all
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other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any applicable
Environmental Law or in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, except to the extent failure to comply would not have a material
adverse effect on the business, financial condition or operations of the Credit
Parties and their Subsidiaries.
(b) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or
threatened by any governmental or other entity with respect to any alleged
failure by the Credit Parties or any of its Subsidiaries, which could materially
adversely affect the properties, business, prospects, operating results or
condition (financial or otherwise) of the Credit Parties, to have any permit,
license or authorization required in connection with the conduct of its business
or with respect to any Environmental Laws, including, without limitation,
Environmental Laws relating to the generation, treatment, storage, recycling,
transportation, disposal or release of any Hazardous Materials.
(c) To the best of each Credit Party's knowledge no oral or written
notification of a release of a Hazardous Material, which could materially
adversely affect the properties, business, prospects, operating results or
condition (financial or otherwise) of any Credit Party, has been filed by or on
behalf of any Credit Party or any Subsidiary of a Credit Party and no property
now or previously owned, leased or used by any Credit Party or any Subsidiary of
a Credit Party is listed or proposed for listing on the National Priorities List
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, or on any similar state list of sites requiring
investigation or clean-up.
(d) There are no liens or encumbrances arising under or pursuant to
any Environmental Laws on any of the real property or properties owned, leased
or used by any Credit Party or any Subsidiary of a Credit Party and no
governmental actions have been taken or are in process which could subject any
of such properties to such liens or encumbrances or, as a result of which any
Credit Party or any Subsidiary of a Credit Party would be required to place any
notice or restriction relating to the presence of Hazardous Materials at any
property owned by it in any deed to such property.
(e) Neither any Credit Party nor any Subsidiary of a Credit Party
nor, to the best knowledge of any Credit Party, any previous owner, tenant,
occupant or user of any property owned, leased or used by any Credit Party or
any Subsidiary of a Credit Party (i) engaged in or permitted any operations or
activities upon or any use or occupancy of such property, or any portion
thereof, for the purpose of or in any way involving the handling, manufacture,
treatment, storage, use, generation, release, discharge, refining, dumping or
disposal (whether legal or illegal, accidental or intentional) of any Hazardous
Materials on, under, in or about such property, except to the extent commonly
used in day-to-day operations of such property and in such case only in
compliance with all Environmental Laws, or (ii) transported any Hazardous
Materials to, from or across such property except to the extent commonly used in
day-to-day operations of such property and, in such case, in compliance with,
all Environmental Laws, except, in the case of both clause (i) and clause (ii)
above, where so doing would not have a material adverse affect on the business,
prospects, operating results or condition (financial or
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otherwise) of any Credit Party; nor to the best knowledge of any Credit Party
have any Hazardous Materials migrated from other properties upon, about or
beneath such property, nor, to the best knowledge of any Credit Party, are any
Hazardous Materials presently constructed, deposited, stored or otherwise
located on, under, in or about such property except to the extent commonly used
in day-to-day operations of such property and, in such case, in compliance with,
all Environmental Laws.
SECTION 5
AFFIRMATIVE COVENANTS
So long as the Bank has any commitment to lend hereunder, issue Letters of
Credit or any Revolving Loan or other Obligation hereunder remains outstanding,
the Borrower covenants as follows:
5.1 Financial Statements and other Reporting Requirements. The Credit
Parties shall furnish to the Bank:
(a) as soon as available to each Credit Party and its Subsidiaries,
but in any event within 90 days after the end of each of fiscal year, the
consolidated and consolidating balance sheet of each Credit Party and its
Subsidiaries as of the end of, and the related consolidated and consolidating
statement of income, changes in stockholders' equity and cash flow for, such
year, audited and certified by PriceWaterhouseCoopers (or other independent
nationally recognized certified public accountants reasonably acceptable to the
Bank) in the case of such consolidated statements, and certified by an
Authorized Officer in the case of such consolidating statements; and,
concurrently with such financial statements, a copy of said certified public
accountants' management report and a written statement by such accountants that,
in the making of the audit necessary for their report and opinion upon such
financial statements they have obtained no knowledge of any Default or Event of
Default or, if in the opinion of such accountants any such Default or Event of
Default exists, they shall disclose in such written statement the nature and
status thereof;
(b) as soon as available to the Borrower, but in any event within 45
days after the end of each fiscal quarter, the consolidated and consolidating
balance sheets of the Borrower and its Subsidiaries as of the end of, and the
related consolidated and consolidating statements of income for, the period then
ended, certified by an Authorized Officer but subject, however, to normal,
recurring year-end adjustments;
(c) as soon as available to the Borrower, but in any event
concurrently with the delivery of each financial statement of the Borrower
pursuant to subsection 5.1.(a), a copy of each so-called management letter
submitted to the Borrower or any of its Subsidiaries by independent certified
public accountants in connection with each annual audit of the books of the
Borrower and its Subsidiaries by such accountants or in connection with any
interim audit thereof pertaining to any phase of the business of the Borrower or
any such Subsidiary;
(d) concurrently with the delivery of each financial statement of
the Borrower pursuant to subsections 5.1.(a) and 5.1.(b) and at any time
reasonably requested by the Bank, a
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completed compliance certificate substantially in the form of Exhibit C hereto
signed on behalf of the Borrower by an Authorized Officer;
(e) as soon as available to the Borrower and its Subsidiaries, but
in any event within 90 days after the end of each fiscal year, projections for
the Borrower and its consolidated Subsidiaries on a consolidating and
consolidated basis for the current fiscal year, including projected balance
sheets, income statements, cash flow statements and such other statements as the
Bank may reasonably request and in form and substance satisfactory to the Bank,
all prepared in good faith and based on assumptions which were reasonable when
made;
(f) if and when the Borrower gives or is required to give notice to
the PBGC of any "Reportable Event" (as defined in Section 4043 of ERISA) with
respect to any Plan that might constitute grounds for a termination of such Plan
under Title IV of ERISA, or knows that any member of the Controlled Group or the
plan administrator of any Plan has given or is required to give notice of any
such Reportable Event, a copy of the notice of such Reportable Event given or
required to be given to the PBGC;
(g) immediately upon becoming aware of the existence of any
condition or event that constitutes a Default or Event of Default, written
notice thereof specifying the nature and duration thereof and the action being
or proposed to be taken with respect thereto;
(h) promptly upon becoming aware of any litigation or of any
investigative proceedings by a governmental agency or authority commenced or
threatened against the Borrower or any of its Subsidiaries of which it has
notice, the outcome of which would or might have a materially adverse effect on
the assets, business or prospects of the Borrower or the Borrower and its
Subsidiaries on a consolidated basis, written notice thereof and the action
being or proposed to be taken with respect thereto;
(i) promptly upon becoming aware of any investigative proceedings by
a governmental agency or authority commenced or threatened against the Borrower
or any of its Subsidiaries regarding any potential violation of Environmental
Laws or any spill, release, discharge or disposal of any Hazardous Material,
written notice thereof and the action being or proposed to be taken with respect
thereto; and
(j) promptly after the same become available, (i) copies of all
proxy statements and annual, quarterly and interim reports (excluding reports in
respect of the beneficial ownership of officers, directors and certain other
shareholders on Forms 3, 4 and 5 promulgated under the Securities Exchange Act
of 1934, as amended) as the Borrower shall send to shareholders or as the
Borrower may file with the Securities and Exchange Commission or any
governmental authority at any time having jurisdiction over the Borrower and
(ii) with respect to Biosphere, copies of all annual reports as Biosphere shall
send to shareholders; and
(k) from time to time, such other financial data and information
about the Borrower or its Subsidiaries including, without limitation, a current
aging of Accounts, as the Bank may reasonably request.
5.2 Conduct of Business. Each of the Borrower and its Subsidiaries shall:
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(a) duly observe and comply in all material respects with all
applicable laws and valid requirements of any governmental authorities relative
to its corporate existence, rights and franchises, to the conduct of its
business and to its property and assets (including, without limitation, the
Food, Drug and Cosmetic Act, and all regulations promulgated by the FDA, all
Environmental Laws and ERISA), and shall maintain and keep in full force and
effect all licenses and permits necessary in any material respect to the proper
conduct of its business;
(b) maintain its corporate existence; and
(c) with respect to the Borrower, maintain its business in
developing and commercializing improved chemical entities and related products
and services and transacting related business; and with respect to Biosphere,
maintain its business in developing and commercializing its business related to
intracorporeal and "on-line" extracorporeal therapies.
5.3 Maintenance and Insurance. Each of the Credit Parties and their
Subsidiaries shall maintain and keep its properties in good repair, working
order and condition, and from time to time make all needful improvements thereto
so that its business may be properly and advantageously conducted at all times.
The Credit Parties will maintain or cause to be maintained on all insurable
properties now or hereafter owned by the Credit Parties insurance against loss
or damage by fire or other casualty to the extent customary with respect to like
properties of companies conducting similar businesses and will maintain or cause
to be maintained, products liability, public liability and workmen's
compensation insurance insuring the Credit Parties to the extent customary with
respect to companies conducting similar businesses and, upon request, will
furnish to the Bank satisfactory evidence of the same.
5.4 Taxes. The Credit Parties shall pay or cause to be paid all taxes,
assessments or governmental charges on or against it or any Subsidiary of a
Credit Party or their properties on or prior to the time when they become due;
provided that this covenant shall not apply to any tax, assessment or charge
that is being contested in good faith by appropriate proceedings and with
respect to which adequate reserves have been established and are being
maintained in accordance with GAAP.
5.5 Inspection by the Bank. Each Credit Party shall permit the Bank or its
designees, at any reasonable time, and upon reasonable notice (or if a Default
or Event of Default shall have occurred and is continuing, at any time and
without prior notice), to (i) visit and inspect the properties of each Credit
Party and its Subsidiaries, (ii) examine and make copies of and take abstracts
from the books and records of each Credit Party and its Subsidiaries and (iii)
discuss the affairs, finances and accounts of each Credit Party and its
Subsidiaries with their appropriate officers, employees and accountants. In
handling such information the Bank shall exercise the same degree of care that
it exercises with respect to its own proprietary information of the same types
to maintain the confidentiality of any non-public information thereby received
or received pursuant to Section 5 except that disclosure of such information may
be made (i) to the subsidiaries or affiliates of the Bank in connection with
their present or prospective business relations with any Credit Party and its
Subsidiaries if such subsidiaries agree in advance to be bound by the same
confidentiality provisions of the Bank as set forth in this Section 5.5, (ii) to
prospective transferees or purchasers of an interest in the Revolving Loans if
they agree in advance to be bound by the same confidentiality obligations of the
Bank as set forth in this
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Section 5.5, (iii) as required by law, regulation, rule or order, subpoena,
judicial order or similar order and (iv) as may be required in connection with
the examination, audit or similar investigation of the Bank.
5.6 Maintenance of Books and Records. Each Credit Party and its
Subsidiaries shall keep adequate books and records of account, in which true and
complete entries will be made reflecting all of its business and financial
transactions, and such entries will be made in accordance with GAAP consistently
applied and applicable law.
5.7 Maintenance of Accounts. The Credit Parties and each of their U.S.
Subsidiaries will maintain its principal depository and operating accounts with
the Bank at all times (except for Versicor which may maintain its principal
depository and operating accounts in California so long as its principal place
of business is located in California) and shall maintain in such accounts
sufficient funds to make all principal and interest payments when due.
5.8 [Reserved].
5.9 Minimum Liquidity Ratio. At the end of each fiscal quarter, the Cash
Equivalent Amount of the Borrower shall be equal to or greater than 150% of its
Total Liabilities.
5.10 Minimum Tangible Capital Base. The Borrower shall maintain at all
times a Tangible Capital Base of not less than $50,000,000.
5.11 Minimum Cash or Equivalents/Fixed Charge Coverage Ratio. The Borrower
shall maintain at all times (a) a Cash Equivalent Amount of not less than
$50,000,000 or (b) a Fixed Charge Coverage Ratio of not less than 1.50 to 1.00.
5.12 Further Assurances. At any time and from time to time the Credit
Parties shall, and shall cause each of their Subsidiaries to, execute and
deliver such further instruments and take such further action as may reasonably
be requested by the Bank to effect the purposes of this Agreement and the Note.
SECTION 6
NEGATIVE COVENANTS
So long as the Bank has any commitment to lend hereunder, issue Letters of
Credit or any Revolving Loan or other Obligation hereunder remains outstanding,
the Borrower covenants as follows:
6.1 Indebtedness. Neither the Borrower nor any of its Subsidiaries shall
create, incur, assume, guarantee or be or remain liable with respect to any
Indebtedness other than the following:
(a) Indebtedness of the Borrower or any of its Subsidiaries
(including Biosphere) to the Bank or any of its Affiliates;
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(b) Indebtedness existing as of the date hereof and disclosed in
Schedule 6.1 hereto and Guaranties disclosed on Schedule 6.2 hereto and any
refinancing of such Indebtedness in amounts not exceeding the principal amount
thereof and on terms (including without limitation any subordination terms
applicable thereto) which are substantially the same as the terms of the
refinanced Indebtedness;
(c) Indebtedness of the Borrower to or from its Subsidiaries in the
aggregate principal amount outstanding at any time not in excess of $20,000,000;
provided that no Default shall exist and be continuing or caused thereby at the
time of incurrence of such Indebtedness;
(d) Indebtedness secured by Permitted Encumbrances under Section
6.2(c);
(e) Indebtedness not in excess of 4,891,000 Canadian Dollars in
respect of Sepracor Canada Limited's obligation with respect to the Canadian
Indebtedness and the Borrower's guaranty of the Canadian Indebtedness and any
refinancing of such Indebtedness in amounts not exceeding the principal amount
thereof and on terms which are substantially the same terms as the terms of the
refinanced indebtedness;
(f) Indebtedness in respect of Capital Leases and purchase money
financing for tangible property used in the Borrower's business in the aggregate
principal amount outstanding at any time not in excess of $15,000,000 less, with
respect to Biosphere, any indebtedness in respect of Capital Leases and purchase
money financing for tangible property used in their businesses; and
6.2 Contingent Liabilities. Neither the Borrower nor any of its
Subsidiaries shall create, incur, assume or remain liable with respect to any
Guaranties other than the following:
(a) Guaranties in favor of the Bank or any of its Affiliates; and
(b) Guaranties disclosed in Schedule 6.2 hereto or in the financial
statements referred to in Section 4.6.
6.3 Sale and Leaseback. Neither the Borrower nor any of its Subsidiaries
shall enter into any arrangement, directly or indirectly, whereby it shall sell
or transfer any property owned by it in order to lease such property or lease
other property that the Borrower or any such Subsidiary intends to use for
substantially the same purpose as the property being sold or transferred.
6.4 Encumbrances. Neither the Borrower nor any of its Subsidiaries shall
create, incur, assume or suffer to exist any mortgage, pledge, security
interest, lien or other charge or encumbrance, including the lien or retained
security title of a conditional vendor upon or with respect to any of its
property or assets ("Encumbrances"), or assign or otherwise convey any right to
receive income, including the sale or discount of accounts receivable with or
without recourse, except the following ("Permitted Encumbrances"):
(a) Encumbrances in favor of the Bank or any of its Affiliates;
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(b) Encumbrances existing as of the date hereof and disclosed in
Schedule 6.4 hereto and securing any refinancing of Indebtedness provided that
such refinancing is permitted pursuant to Section 6.1(b);
(c) Encumbrances for purchase money obligations or Capital Leases
permitted pursuant to Section 6.1(d); provided that such Encumbrances shall not
attach to property and assets of the Borrower or any Subsidiary not purchased
with the proceeds of such purchase money obligations;
(d) liens for taxes, fees, assessments and other governmental
charges to the extent that payment of the same may be postponed or is not
required in accordance with the provisions of Section 5.4; and
(e) landlords' and lessors' liens in respect of rent not in default
or liens in respect of pledges or deposits under workmen's compensation,
unemployment insurance, social security laws, or similar legislation (other than
ERISA) or in connection with appeal and similar bonds incidental to litigation;
mechanics', laborers' and materialmen's and similar liens, if the obligations
secured by such liens are not then delinquent; liens securing the performance of
bids, tenders, contracts (other than for the payment of money); and statutory
obligations incidental to the conduct of its business and that do not in the
aggregate materially detract from the value of its property or materially impair
the use thereof in the operation of its business.
6.5 Lines of Business. Neither the Borrower nor any Subsidiary will engage
in any line of business if as a result thereof the business of the Borrower and
its Subsidiaries taken as a whole would be materially different from what it was
on the date hereof.
6.6 Merger; Consolidation; Sale or Lease of Assets. Neither the Borrower
nor any of its Subsidiaries shall, without the prior written consent of the
Bank, sell, lease or otherwise dispose of assets or properties, other than sales
or leases of inventory in the ordinary course of business; or liquidate, merge
or consolidate into or with any other Person or entity, provided that any
Subsidiary of a Credit Party may merge or consolidate into or with (i) the
Borrower if no Default or Event of Default has occurred and is continuing or
would result from such merger and if the Borrower is the surviving company or
(ii) any other wholly-owned Subsidiary of the Borrower.
Notwithstanding the foregoing provisions of this section, the Borrower or
any Subsidiary may acquire (whether by way of purchase of assets or stock, by
merger or consolidation or otherwise) all or substantially all of the assets
located in or capital stock of any Person engaged primarily in the same line of
business as the Borrower or any Subsidiaries; provided that (a) no Default shall
exist at the time of such acquisition or shall be caused thereby in the
foreseeable future and (b) after giving effect to such acquisition the Borrower
shall be in compliance with all the provisions of Sections 5.9 through 5.11 and
the Borrower shall have delivered to the Bank a Compliance Certificate
demonstrating such compliance on a pro forma basis.
Notwithstanding any provision of this Agreement to the contrary, the
Credit Parties may license and exploit any rights to their intellectual
property, including, without limitation, all
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patents, patent applications, trademarks, service marks, and tradenames, in
arms-length transactions for fair market value, without the consent of the Bank.
6.7 Additional Stock Issuance. The Borrower shall not permit any of its
Subsidiaries to issue any additional shares of such Subsidiary's capital stock
or other equity securities, any options therefor or any securities convertible
thereto other than to the Borrower; provided, that such Subsidiaries may issue
additional shares of its capital stock if after any such issuance the Borrower
or such Subsidiary has 50% or more of the ordinary voting power for the election
of a majority of the members of the board of directors or other governing body
of such entity or the Borrower or such Subsidiary has, at least, a 50% ownership
interest.
6.8 Restricted Payments. Neither the Borrower nor its Subsidiaries will
directly or indirectly declare, order, pay or make any Restricted Payment or set
aside any sum or property therefore if at the time of such proposed action or
immediately after giving effect thereto, any condition or event shall exist
which constitutes a Default or an Event of Default and unless such Restricted
Payment is expressly permitted by this Section 6.8; provided that nothing herein
shall be deemed to prohibit the making of any dividend or distribution by any
Subsidiary to a Credit Party.
Subject to the foregoing, the Borrower may (a) make any scheduled payment
of principal or interest on Subordinated Notes issued and outstanding on the
date of this Agreement in accordance with the subordination provisions for such
subordinated notes, (b) make payments under any Corporate Services Agreement,
(c) make distributions of shares of its capital stock as stock splits or stock
dividends, and (d) make any other Restricted Payment in addition to those
referred to in the previous clause; provided, that in the last event the
Borrower shall have received the prior written consent of the Bank to such
proposed Restricted Payment.
The amount involved in any Restricted Payment declared, ordered, paid,
made or set apart in property shall be deemed to be the greater of the fair
market value thereof at the time of such distribution or payment (or the date of
such transaction, as the case may be), as determined in good faith by the
Borrower, or the net book value thereof on the books of the Borrower as at such
time.
6.9 Transactions with Affiliates. Except for the Borrower's Subsidiaries
on the date hereof so long as they remain Subsidiaries of the Borrower, the
Credit Parties will not, and will not permit any Corporate Affiliate to,
directly or indirectly, enter into any lease or other transaction with any
shareholder or with any Affiliate of the Borrower or such shareholder, on terms
that are less favorable to the Borrower or such Subsidiary than those which
might be obtained at the time from Persons who are not a shareholder or an
Affiliate. Notwithstanding the preceding sentence, the Borrower may (1) sublease
its facilities to Biosphere, Versicor and Hemasure; (2) enter into and perform
the Corporate Services Agreements, the Technology Transfer Agreements and the
Cross License Agreement, (3) enter into an amended and restated cross license
agreement replacing the Cross License Agreement if such amended and restated
agreement is in form and substance acceptable to the Bank and its counsel and
(4) engage in transactions expressly permitted by Sections 6.1, 6.6 and 6.7.
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6.10 Investments. Neither the Credit Parties nor any of their Subsidiaries
shall make or maintain any Investments other than (i) existing and additional
Investments in Subsidiaries on the date hereof so long as they remain
Subsidiaries of Sepracor, (ii) Qualified Investments and (iii) acquisitions
permitted under Section 6.6 and (iv) Investments consisting of foreign deposit
accounts used for ordinary course working capital purposes of the Credit Parties
or their Subsidiaries; provided, that the aggregate balance of foreign deposit
accounts of the Borrower and its Subsidiaries shall not at any time exceed
$10,000,000.
6.11 ERISA. Neither the Credit Parties nor any member of the Controlled
Group shall permit any Plan maintained by it to (i) engage in any "prohibited
transaction" (as defined in Section 4975 of the Code, (ii) incur any
"accumulated funding deficiency" (as defined in Section 302 of ERISA) whether or
not waived, or (iii) terminate any Plan in a manner that could result in the
imposition of a lien or encumbrance on the assets of the Credit Parties or any
of their Subsidiaries pursuant to Section 4068 of ERISA.
6.12 Observance of Subordination Provisions, etc. The Credit Parties will
not make, or cause or permit to be made, any payments in respect of any
Subordinated Indebtedness in contravention of the subordination and other
payment provisions contained in the evidence of such Subordinated Indebtedness
or in contravention of any written agreement pertaining thereto, nor will the
Credit Parties (a) amend, modify or change in any manner any of such
subordination or other payment provisions without the prior written consent of
the Bank or (b) amend, modify or change in any manner adverse to the interests
of the Bank any of the other provisions set forth in the agreements under which
such Subordinated Indebtedness is outstanding or contained in the evidence of
such Subordinated or other Indebtedness.
6.13 Restrictive Agreements. No Credit Party will directly or indirectly,
enter into, incur or permit to exist any agreement or other arrangement that
prohibits, restricts or imposes any condition upon the ability of any Credit
Party to create, incur or permit to exist any Lien upon any of its property or
assets; provided that (i) the foregoing shall not apply to restrictions and
conditions imposed by law or by this Agreement, (ii) the foregoing shall not
apply to restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement if such restrictions or conditions
apply only to the property or assets securing such Indebtedness and (iii) the
foregoing shall not apply to customary provisions in leases and other contracts
restricting the assignment thereof.
SECTION 7
DEFAULTS
7.1 Events of Default. There shall be an Event of Default hereunder if any
of the following events occurs:
(a) the Credit Parties shall fail to pay when due (i) any amount of
principal of any Revolving Loans, or (ii) any amount of interest thereon; or
(b) the Credit Parties shall fail to pay within three (3) days after
receipt of notice from the Bank any fees or expenses payable hereunder or under
any Note; or
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(c) the Credit Parties shall fail to perform any term, covenant or
agreement contained in Sections 5 (except Section 5.3) or 6; or
(d) the Credit Parties shall fail to perform any term, covenant or
agreement (other than those referred to above in this Section 7.1) contained in
this Agreement and such default shall continue for twenty (20) days; or
(e) any representation or warranty of any Credit Party made in this
Agreement or in the Notes, or any Credit Parties in any other documents or
agreements executed in connection with the transactions contemplated by this
Agreement or in any certificate delivered hereunder shall prove to have been
false in any material respect upon the date when made or deemed to have been
made; or
(f) the failure to pay at maturity, or within any applicable period
of grace, any obligations of the Borrower in excess of One Million Dollars
($1,000,000) in the aggregate for borrowed monies or advances, or for the use of
real or personal property, or fail to observe or perform any term, covenant or
agreement evidencing or securing such obligations, the result of which failure
is to permit the holder or holders of such indebtedness to cause such
indebtedness to become due prior to its stated maturity upon delivery of
required notice, if any; or
(g) the Borrower shall default in any payment due on any
Indebtedness in respect of borrowed money, any Capital Lease or the deferred
purchase price of property with an outstanding principal amount in excess of One
Million Dollars ($1,000,000) and such default shall continue for more than the
period of grace, if any, specified therein and shall not have been waived
pursuant thereto; or
(h) the Borrower or any Subsidiary of the Borrower shall (i) apply
for or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee, liquidator or similar official of itself or of all
or a substantial part of its property, (ii) be generally not paying its debts as
such debts become due, (iii) make a general assignment for the benefit of its
creditors, (iv) commence a voluntary case under the Federal Bankruptcy Code (as
now or hereafter in effect), (v) take any action or commence any case or
proceeding, as debtor, under any law relating to bankruptcy, insolvency,
reorganization, winding-up or composition or adjustment of debts, or any other
law providing for the relief of debtors, (vi) fail to contest in a timely or
appropriate manner, or acquiesce in writing to, any petition filed against it in
an involuntary case under the Federal Bankruptcy Code or other law, (vii) take
any action under the laws of its jurisdiction of incorporation or organization
similar to any of the foregoing, or (viii) take any corporate action for the
purpose of effecting any of the foregoing; or
(i) a proceeding or case shall be commenced, without the application
or consent of the Borrower or any Subsidiary of the Borrower in any court of
competent jurisdiction, seeking (i) the liquidation, reorganization,
dissolution, winding up, or composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of it or
of all or any substantial part of its assets, or (iii) similar relief in respect
of it, under any law relating to bankruptcy, insolvency, reorganization,
winding-up or composition or adjustment of debts or any other law providing for
the relief of debtors, and such proceeding or case shall continue undismissed,
or unstayed and in effect, for a period of 60 days; or an order
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for relief shall be entered in an involuntary case under the Federal Bankruptcy
Code, against the Borrower or any Subsidiary of the Borrower; or action under
the laws of the jurisdiction of incorporation or organization of the Borrower or
any Subsidiary of the Borrower similar to any of the foregoing shall be taken
with respect to the Borrower or any Subsidiary of the Borrower and shall
continue unstayed and in effect for any period of 60 days; or
(j) a judgment or order for the payment of money shall be entered
against the Borrower by any court, or a warrant of attachment or execution or
similar process shall be issued or levied against property of the Borrower, that
in the aggregate exceeds One Million Dollars ($1,000,000) in value and such
judgment, order, warrant or process shall continue undischarged or unstayed for
45 days; or
(k) the Borrower or any member of the Controlled Group shall fail to
pay when due an amount or amounts aggregating in excess of One Hundred Thousand
Dollars ($100,000) that it shall have become liable to pay to the PBGC or to a
Plan under Title IV of ERISA; or notice of intent to terminate a Plan or Plans
shall be filed under Title IV of ERISA by the Borrower, any member of the
Controlled Group, any plan administrator or any combination of the foregoing; or
the PBGC shall institute proceedings under Title IV of ERISA to terminate or to
cause a trustee to be appointed to administer any such Plan or Plans or a
proceeding shall be instituted by a fiduciary of any such Plan or Plans against
the Borrower and such proceedings shall not have been dismissed within 30 days
thereafter; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any such Plan or Plans must be
terminated; or
(l) any Person or "group" (within the meaning of Section 13(d) and
14(d)(2) of the Securities and Exchange Act of 1934, as amended) shall
beneficially own or control in excess of 50% of the issued and outstanding
shares of the capital stock of the Borrower having ordinary voting power to
elect a majority of the board of directors of the Borrower; or
(m) the termination, expiration or non-renewal of any license or
other Material Agreement which termination, expiration or non-renewal has a
material adverse effect on the existing business or prospects of the Borrower.
7.2 Remedies. Upon the occurrence of an Event of Default described in
Sections 7.1.(h) and 7.1.(i), immediately and automatically, and upon the
occurrence of any other Event of Default, at any time thereafter while such
Event of Default is continuing, at the Bank's option and upon the Bank's
declaration:
(a) the Bank's commitment to make any further Revolving Loans
hereunder or to issue Letters of Credit, generally, shall terminate;
(b) the unpaid principal amount of the Revolving Loans together with
accrued interest and all other Obligations hereunder shall become immediately
due and payable, including the unpaid principal amount of any Revolving Loan
subject to an exercised LIBOR Option together with accrued interest thereon and
the related LIBOR Premium in the same manner as though the Credit Parties had
exercised their right to prepayment pursuant to Section
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2.7 of this Agreement, without presentment, demand, protest or further notice of
any kind, all of which are hereby expressly waived; and
(c) the Bank may exercise any and all rights it has under this
Agreement, the Notes or any other documents or agreements executed in connection
herewith, or at law or in equity, and proceed to protect and enforce the Bank's
rights by any action at law, in equity or other appropriate proceeding.
(d) Upon the occurrence of any Event of Default and at any time
thereafter (unless such Event of Default shall theretofore have been remedied),
at the Bank's option: (i) the Bank shall thereupon be relieved of all of its
obligations to make any Revolving Loans hereunder; (ii) the unpaid principal
amount of the Notes together with accrued interest thereon and all other
Obligations shall become immediately due and payable without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived;
and (iii) the Bank may exercise any and all rights it has under this Agreement,
the Notes, or any other documents or agreements executed in connection with the
transactions contemplated by this Agreement (the "Loan Documents"), or by law or
equity, and proceed to protect and enforce the Bank's rights by any action at
law, suit in equity or other appropriate proceeding, whether for specific
performance or for an injunction against a violation of any covenant contained
herein or in any Loan Document or in aid of the exercise of any power granted
hereby or thereby or by law.
SECTION 8
MISCELLANEOUS
8.1 Notices. Unless otherwise specified herein, all notices hereunder to
any party hereto shall be in writing and shall be deemed to have been given when
delivered by hand, or three (3) days after being properly deposited in the mails
certified, return receipt requested, or when sent by electronic facsimile
transmission, or when delivered to the telegraph company or overnight courier,
the next business day following addressed to such party at its address indicated
below:
If to the Credit Parties, at
Sepracor Inc.
111 Locke Drive
Marlborough, Massachusetts 01752
Attention: Robert F. Scumaci
Senior Vice President Finance and Administration
Tel. No.: 508-481-6700
Fax No.: 508-357-7494
If to the Bank, at
Fleet National Bank
100 Federal Street
Boston, Massachusetts 02110
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Attention: Kimberly A. Martone
Senior Vice President
Tel. No.: 617-434-5316
Fax No.: 617-434-2473
or at any other address specified by such party in writing.
8.2 Expenses. The Credit Parties will pay on demand all expenses of the
Bank in connection with the preparation, waiver or amendment of this Agreement,
the Notes, or other documents executed in connection therewith, or the
administration, default or collection of the Revolving Loans or other
Obligations or in connection with the Bank's exercise, preservation or
enforcement of any of its rights, remedies or options thereunder, including,
without limitation, reasonable fees and disbursements of outside legal counsel
or accounting, consulting, brokerage or other similar professional fees or
expenses, and any fees or expenses associated with any travel or other costs
relating to any appraisals or examinations conducted in connection with the
Obligations and the amount of all such expenses shall, until paid, bear interest
at the rate applicable to principal hereunder for Revolving Loans not subject to
a LIBOR Option (including any default rate).
8.3 Set-Off. Regardless of other means of obtaining repayment of the
Obligations, any deposits, balances or other sums credited by or due from the
head office of the Bank or any of its branch offices to the Credit Parties may,
at any time and from time to time after the occurrence of an Event of Default
hereunder, without notice to the Credit Parties or compliance with any other
condition precedent now or hereafter imposed by statute, rule of law, or
otherwise (all of which are hereby expressly waived) be set off, appropriated,
and applied by the Bank against any and all Obligations of the Credit Parties to
the Bank or any of its affiliates in such manner as the head office of the Bank
or any of its branch offices in their sole discretion may determine, and the
Credit Parties each hereby grant the Bank a continuing security interest in such
deposits, balances or other sums for the payment and performance of all such
obligations.
8.4 Term of Agreement. This Agreement shall continue in force and effect
so long as the Bank has any commitment to make Revolving Loans hereunder or any
Revolving Loan or any Obligation hereunder shall be outstanding.
8.5 No Waivers. No failure or delay by the Bank in exercising any right,
power or privilege hereunder or under the Note or under any other documents or
agreements executed in connection herewith shall operate as a waiver thereof;
nor shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein and in the Notes provided are cumulative and not
exclusive of any rights or remedies otherwise provided by agreement or law.
8.6 Governing Law; Jurisdiction. This Agreement and the Notes shall be
deemed to be contracts made under seal and shall be construed in accordance with
and governed by the laws of Massachusetts (without giving effect to any
conflicts of laws provisions contained therein). The Credit Parties, to the
extent that they may lawfully do so, hereby consent to the jurisdiction of the
courts of the Commonwealth of Massachusetts and the United States District Court
for the District of Massachusetts, as well as to the jurisdiction of all courts
to which an appeal may be
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taken from such courts, for the purpose of any suit, action or other proceeding
arising out of any of its obligations hereunder or with respect to the
transactions contemplated hereby, and expressly waives any and all objections it
may have as to venue in any such courts. The Credit Parties further agree that a
summons and complaint commencing an action or proceeding in any of such courts
shall be properly served and shall confer personal jurisdiction if served
personally or by certified mail to it at its address provided in Section 8.1 of
this Agreement or as otherwise provided under the laws of the Commonwealth of
Massachusetts.
8.7 Amendments. Neither this Agreement nor the Notes nor any provision of
this Agreement or thereof may be amended, waived, discharged or terminated
except by a written instrument signed by the Bank and, in the case of
amendments, by the Credit Parties.
8.8 Binding Effect of Agreement; Assignments; Participations.
(a) This Agreement shall be binding upon and inure to the benefit of
the Credit Parties and the Bank and their respective successors and assigns;
provided that the Credit Parties may not assign or transfer their rights or
obligations hereunder.
(b) Assignments by the Bank. From and after the date hereof, the
Bank may at any time assign all, or a proportionate part of all, of its rights,
interests and duties with respect to the Revolving Commitment Amount and the
Notes (1) to any one or more of its Affiliates without the consent or approval
of the Credit Parties or (2) to one or more banks or other financial
institutions with the consent of the Credit Parties which consent shall not be
unreasonably withheld (each assignee under clauses (1) and (2), an "Assignee"),
in each case on such terms, as between the Bank and each of its Assignees, as
the Bank may think fit, and such Assignee shall assume such rights, interests
and duties pursuant to an instrument executed by such Assignee and the Bank, and
for this purpose the Bank may make available to each of its potential Assignees
such information relating to the Credit Parties, this Agreement and the
transactions contemplated hereby as the Bank may think necessary or desirable,
which information shall be held by each potential Assignee strictly in
confidence. Upon execution and delivery of such an instrument and payment by
such Assignee to the Bank of an amount equal to the purchase price agreed
between the Bank and such Assignee, such Assignee shall be a Bank party to this
Agreement and shall have all the rights, interests and duties of a Bank with a
Revolving Commitment Amount and Revolving Loan as set forth in such instrument
of assumption, and the Bank shall be released from its obligations hereunder to
a corresponding extent, and no further consent or action by any party shall be
required. Upon the consummation of any assignment pursuant to this paragraph
(b), the Bank and the Credit Parties shall make appropriate arrangements so
that, if required, a new Note or Notes are issued to the Assignee.
(c) Participations by the Bank. From and after the date hereof, the
Bank shall be at liberty to offer the participations in the Revolving Commitment
Amount and the Notes to one or more banks or other financial institutions on
such terms as the Bank may think fit, and for this purpose the Bank may make
available to each of its potential participants such information relating to the
Credit Parties, this Agreement and the transactions contemplated hereby as the
Bank may think necessary or desirable, which information shall be held by each
potential participant strictly in confidence; provided, that the Bank shall not
offer any participations to foreign banks or financial institutions without the
prior written consent of the Credit Parties;
36
<PAGE>
provided further, that the Bank shall retain the sole right to consent to
amendments to, or waivers of, the provisions of this Agreement and the Notes and
the sole right and responsibility to enforce the obligations of the Credit
Parties hereunder and under the Notes; provided further, that the Bank may agree
with each of its participants that the Bank will not agree, without the consent
of the participant, to any amendment or waiver of any provision of this
Agreement which would increase or otherwise change such Revolving Commitment
Amount or reduce the principal of or rate of interest on the Revolving Loans
subject to such participation, or postpone the date fixed for any payment of
principal or of interest on any Revolving Loans.
8.9 Currency Conversion. If, for the purpose of obtaining or enforcing
judgment in any court or for any other purpose hereunder it is necessary to
convert an amount due hereunder in the currency in which it is due (the
"Original Currency") into another currency (the "Second Currency") the rate of
exchange applied shall be that at which, in accordance with normal banking
procedures, the Bank could purchase, in the United States money market or the
United States foreign exchange market (the "Money Markets"), as the case may be,
the Original Currency with the Second Currency on the Business Day on which
judgment is given or the amount is due. The Borrower agrees that its obligations
in respect of any amounts due from it to the Bank, in the Original Currency
hereunder shall, notwithstanding any judgment expressed or payment made in the
Second Currency, be discharged only to the extent that on the Business Day
following receipt of any sums so paid or adjudged to be due hereunder in the
Second Currency, the Bank may, in accordance with normal banking procedure
purchase, in the appropriate Money Market, the Original Currency with the amount
of the Second Currency so paid or so adjudged to be due; and if the amount of
the Original Currency so purchased is less than the amount originally due in the
Original Currency, the Borrower agrees as a separate obligation, and
notwithstanding any such payment or judgment to indemnify the Bank.
8.10 Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures hereto and thereto were
upon the same instrument.
8.11 Partial Invalidity. The invalidity or unenforceability of any one or
more phrases, clauses or sections of this Agreement shall not affect the
validity or enforceability of the remaining portions of it.
8.12 Captions. The captions and headings of the various sections and
subsections of this Agreement are provided for convenience only and shall not be
construed to modify the meaning of such sections or subsections.
8.13 WAIVER OF JURY TRIAL. THE BANK AND THE CREDIT PARTIES AGREE THAT
NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN ANY
LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON, OR ARISING OUT
OF, THIS AGREEMENT, ANY RELATED INSTRUMENTS, OR THE DEALINGS OR THE RELATIONSHIP
BETWEEN OR AMONG ANY OF THEM, OR (B) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH
ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE
PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE BANK AND THE
CREDIT PARTIES, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER
THE BANK NOR THE CREDIT
37
<PAGE>
PARTIES HAVE AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS
PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
8.14 Entire Agreement. This Agreement, the Notes and the documents and
agreements executed in connection herewith constitute the final agreement of the
parties hereto and supersede any prior agreement or understanding, written or
oral, with respect to the matters contained herein and therein.
38
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the day and year first above written.
SEPRACOR INC.
By: /s/ Robert F. Scumaci
---------------------------------------
Name: Robert F. Scumaci
Title: Senior Vice President Finance and
Administration
BIOSPHERE MEDICAL, INC.
By: /s/ Robert M. Palladino
--------------------------------------
Name: Robert M. Palladino
Title: Vice President and Chief Financial
Officer
FLEET NATIONAL BANK
By: /s/ Kimberly A. Martone
---------------------------------------
Name: Kimberly A. Martone
Title: Senior Vice President
39
<PAGE>
EXHIBIT A-1
FORM OF
SEPRACOR INC.
PROMISSORY NOTE
December 22, 1999
$25,000,000 Boston, Massachusetts
For value received, the undersigned hereby promises to pay to FLEET
NATIONAL BANK (the "Bank"), or order, at the head office of the Bank at One
Federal Street, Boston, Massachusetts 02110, the principal amount of TWENTY-FIVE
MILLION DOLLARS ($25,000,000) or such lesser amount as shall equal the principal
amount outstanding hereunder on December 31, 2001 or such earlier date as
provided in the Agreement (as defined below) in lawful money of the United
States of America and in immediately available funds, and to pay interest on the
unpaid principal balance hereof from time to time outstanding, at said office
and in like money and funds, for the period commencing on the date hereof until
paid in full, at the rates per annum and on the dates provided in the Agreement.
Upon the occurrence and during the continuance of an Event of Default,
interest on the unpaid principal amount hereof and (to the extent permitted by
law) on unpaid interest shall thereafter be payable on demand at a rate per
annum equal to two percent (2%) above the interest rate otherwise in effect with
respect to such Revolving Loans. Upon the cure of an Event of Default and the
payment of interest at the default rate through the date of such cure, the
interest rate shall revert to that provided for in the Agreement.
If the entire amount of any required principal and/or interest is not paid
in full within ten (10) days after the same is due, the undersigned shall pay to
the Bank a late fee equal to three percent (3%) of the required payment. Nothing
in the preceding sentence shall affect the Bank's rights to exercise any of its
rights and remedies provided in the Agreement (as defined below) if an Event of
Default (as defined in the Agreement) has occurred.
This Note is issued pursuant to, and entitled to the benefits of, and is
subject to, the provisions of a certain Second Amended and Restated Revolving
Credit Agreement dated as of December 22, 1999, by and among the undersigned,
Biosphere Medical, Inc. and the Bank (herein, as the same may from time to time
be amended or extended, referred to as the "Agreement"), but neither this
reference to the Agreement nor any provision thereof shall affect or impair the
absolute and unconditional obligation of the undersigned makers of this Note to
pay the principal of and interest on this Note as herein provided.
In case an Event of Default (as defined in the Agreement) shall occur, the
aggregate unpaid principal of and accrued interest on this Note shall become or
may be declared to be due and payable in the manner and with the effect provided
in the Agreement.
<PAGE>
The undersigned may at its option prepay all or any part of the principal
of this Note before maturity upon the terms provided in the Agreement, and this
Note is subject to mandatory prepayment in certain circumstances, which
repayment shall in certain cases require the payment of a premium and in certain
cases not require the payment of a premium.
The undersigned makers hereby waive presentment, demand, notice of
dishonor, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note.
This instrument shall have the effect of an instrument executed under seal
and shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts (without giving effect to any conflicts of laws
provisions contained therein).
SEPRACOR INC.
By:_______________________________________
Name: Robert F. Scumaci
Title: Senior Vice President Finance and
Administration
2
<PAGE>
SCHEDULE I TO PROMISSORY NOTE
AMOUNT OF INTEREST AMOUNT NOTATION
DATE REVOLVING LOAN RATE PAID MADE BY
3
<PAGE>
EXHIBIT A-2
FORM OF
BIOSPHERE MEDICAL, INC.
PROMISSORY NOTE
December 22, 1999
$2,000,000 Boston, Massachusetts
For value received, the undersigned hereby promises to pay to FLEET
NATIONAL BANK (the "Bank"), or order, at the head office of the Bank at One
Federal Street, Boston, Massachusetts 02110, the principal amount of TWO MILLION
DOLLARS ($2,000,000) or such lesser amount as shall equal the principal amount
outstanding hereunder on December 31, 2001 or such earlier date as provided in
the Agreement (as defined below) in lawful money of the United States of America
and in immediately available funds, and to pay interest on the unpaid principal
balance hereof from time to time outstanding, at said office and in like money
and funds, for the period commencing on the date hereof until paid in full, at
the rates per annum and on the dates provided in the Agreement.
Upon the occurrence and during the continuance of an Event of Default,
interest on the unpaid principal amount hereof and (to the extent permitted by
law) on unpaid interest shall thereafter be payable on demand at a rate per
annum equal to two percent (2%) above the interest rate otherwise in effect with
respect to such Revolving Loans. Upon the cure of an Event of Default and the
payment of interest at the default rate through the date of such cure, the
interest rate shall revert to that provided for in the Agreement.
If the entire amount of any required principal and/or interest is not paid
in full within ten (10) days after the same is due, the undersigned shall pay to
the Bank a late fee equal to three percent (3%) of the required payment. Nothing
in the preceding sentence shall affect the Bank's rights to exercise any of its
rights and remedies provided in the Agreement (as defined below) if an Event of
Default (as defined in the Agreement) has occurred.
This Note is issued pursuant to, and entitled to the benefits of, and is
subject to, the provisions of a certain Second Amended and Restated Revolving
Credit Agreement dated as of December 22, 1999, by and among Sepracor, the
undersigned and the Bank (herein, as the same may from time to time be amended
or extended, referred to as the "Agreement"), but neither this reference to the
Agreement nor any provision thereof shall affect or impair the absolute and
unconditional obligation of the undersigned makers of this Note to pay the
principal of and interest on this Note as herein provided.
In case an Event of Default (as defined in the Agreement) shall occur, the
aggregate unpaid principal of and accrued interest on this Note shall become or
may be declared to be due and payable in the manner and with the effect provided
in the Agreement.
<PAGE>
The undersigned may at its option prepay all or any part of the principal
of this Note before maturity upon the terms provided in the Agreement, and this
Note is subject to mandatory prepayment in certain circumstances, which
repayment shall in certain cases require the payment of a premium and in certain
cases not require the payment of a premium.
The undersigned makers hereby waive presentment, demand, notice of
dishonor, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note.
This instrument shall have the effect of an instrument executed under seal
and shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts (without giving effect to any conflicts of laws
provisions contained therein).
BIOSPHERE MEDICAL, INC.
By:_______________________________________
Name: Robert M. Palladino
Title: Vice President and Chief Financial
Officer
2
<PAGE>
SCHEDULE I TO PROMISSORY NOTE
AMOUNT OF INTEREST AMOUNT NOTATION
DATE REVOLVING LOAN RATE PAID MADE BY
3
<PAGE>
EXHIBIT B
COMPLIANCE CERTIFICATE
Fleet National Bank
100 Federal Street
Boston, Massachusetts 02110
Attention: Kimberly A. Martone
Senior Vice President
Re: Sepracor Inc. Obligations under Second Amended and Restated Revolving
Credit Agreement dated as of December 22, 1999
Ladies and Gentlemen:
As required by Section 5.1(c) of the Second Amended and Restated Revolving
Credit Agreement dated as of December 22, 1999 (the "Credit Agreement") by and
among Sepracor Inc. and Biosphere Medical, Inc. (collectively, the "Credit
Parties") and Fleet National Bank (the "Bank"), a review of the activities of
the Borrower for the fiscal year and/or fiscal quarter ending ___________, _____
(the "Fiscal Period") has been made under my supervision to determine whether
the Credit Parties have performed and/or maintained all of their respective
obligations under the Credit Agreement. Based upon such review, I hereby certify
to you, as an Authorized Officer of the Borrower, that the Credit Parties have
performed and maintained all such obligations under the Credit Agreement, the
Notes and the Loan Documents for the Fiscal Period and, to the best of my
knowledge, no event has occurred that constitutes a Default or an Even of
Default as defined in the Credit Agreement. Other capitalized terms used herein
without definition have the same meanings as in the Credit Agreement.
As required by Section [5.1(a)][5.1(b)] of the Credit Agreement financial
statements of the Credit Parties (the "Financial Statements") for the Fiscal
Period and other information required by such sections accompany this
certificate. The Financial Statements present fairly the financial position of
the Credit Parties as of the date thereof and the statements of operation of the
Credit Parties for the Fiscal Period covered thereby.
I further certify to you, as an Authorized Officer of the Borrower, that
the figures set forth below accurately represent amounts required to be
calculated under the various provisions or covenants of the Credit Agreement
indicated, each as of the last day of the Fiscal Period unless otherwise
indicated.
Dated:________________________ __________________________________________
Title:
<PAGE>
- --------------------------------------------------------------------------------
I. Section 5.9 - Minimum Liquidity Ratio
- --------------------------------------------------------------------------------
A. Total Liabilities
- --------------------------------------------------------------------------------
(1) Total Liabilities $
- --------------------------------------------------------------------------------
B. Minimum Cash or Equivalents
- --------------------------------------------------------------------------------
Qualified Investments held in the U.S.
- --------------------------------------------------------------------------------
(2) Obligations of the United States of
America held in the U.S. $
- --------------------------------------------------------------------------------
(3) Certificates of deposit, other deposit
instruments, bank accounts held in
the U.S. $
- --------------------------------------------------------------------------------
(4) Commercial Paper held in the U.S.
(see definition of Qualified
Investments) $
- --------------------------------------------------------------------------------
(5) Mutual/closed end funds that invest
only in investments set forth in
clauses (2) through (4) $
- --------------------------------------------------------------------------------
(6) Repurchase agreements secured by
any one or more of the foregoing
held in the U.S. $
- --------------------------------------------------------------------------------
(7) Qualified Investments: (sum of 2
through 6) $
- --------------------------------------------------------------------------------
Net Outstanding Amount of Base Accounts
- --------------------------------------------------------------------------------
(8) Base Accounts $
- --------------------------------------------------------------------------------
(9) Ineligible as of ________________(1)
- --------------------------------------------------------------------------------
(i) over 60 days from invoice date $
- --------------------------------------------------------------------------------
(ii) Accounts outside of US $
- --------------------------------------------------------------------------------
- ----------
(1) Ineligible calculated monthly
2
<PAGE>
- --------------------------------------------------------------------------------
(iii) Accounts due from Affiliates $
- --------------------------------------------------------------------------------
(iv) Prepayments $
- --------------------------------------------------------------------------------
(v) Uninvoiced Accounts $
- --------------------------------------------------------------------------------
(vi) Joint venture accounts $
- --------------------------------------------------------------------------------
(10) Ineligible Accounts (sum of 16(i)
through (v)) $
- --------------------------------------------------------------------------------
(11) Contra Account offsets $
- --------------------------------------------------------------------------------
(12) Net Outstanding Amount of Base
Accounts (8 - 10 - 11) $
- --------------------------------------------------------------------------------
(13) Cash Equivalent Amount
- --------------------------------------------------------------------------------
(14) Unencumbered Cash held in the
United States $
- --------------------------------------------------------------------------------
(15) Qualified Investments (from (14)) $
- --------------------------------------------------------------------------------
(16) Net Outstanding Amount of Base
Accounts (from (19)) $
- --------------------------------------------------------------------------------
(17) Actual Cash Equivalent Amount (13
+ 14 + 15) $
- --------------------------------------------------------------------------------
C. Liquidity Ratio
- --------------------------------------------------------------------------------
(14) Actual Liability Ratio (13/1) %
- --------------------------------------------------------------------------------
Required Minimum Liquidity Ratio: 150%
- --------------------------------------------------------------------------------
II. Section 5.10 - Minimum Tangible Capital Base
- --------------------------------------------------------------------------------
(1) Stockholders' equity $
- --------------------------------------------------------------------------------
(2) Subordinated Indebtedness $
- --------------------------------------------------------------------------------
(3) Goodwill $
- --------------------------------------------------------------------------------
(4) Intangible items $
- --------------------------------------------------------------------------------
(5) Reserves not already deducted from
assets $
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
(6) Write-ups from revaluations $
- --------------------------------------------------------------------------------
(7) Equity in Subsidiaries or joint
ventures $
- --------------------------------------------------------------------------------
(8) Actual Tangible Capital Base
(1 + 2) - (sum of 3 through 7) $
- --------------------------------------------------------------------------------
Required Minimum Tangible Capital Base: $ 50,000,000
- --------------------------------------------------------------------------------
III. A. Minimum Cash or Equivalent (from I.B) $
- --------------------------------------------------------------------------------
Required Minimum Cash Equivalent $ 50,000,000
- --------------------------------------------------------------------------------
B. Fixed Change Coverage Ratio
- --------------------------------------------------------------------------------
EBITDA
- --------------------------------------------------------------------------------
(1) Operating Income $
- --------------------------------------------------------------------------------
(2) Add Backs
- --------------------------------------------------------------------------------
(i) Taxes $
- --------------------------------------------------------------------------------
(ii) Interest Expense $
- --------------------------------------------------------------------------------
(iii) Depreciation/Amortization $
- --------------------------------------------------------------------------------
(iv) Non-Cash Income $
- --------------------------------------------------------------------------------
(v) Losses from Equity in
Affiliates $
- --------------------------------------------------------------------------------
(vi) Extraordinary and Unusual
Losses $
- --------------------------------------------------------------------------------
(vii) Total $
- --------------------------------------------------------------------------------
(3) Exclusions $
- --------------------------------------------------------------------------------
(i) Income from Equity in
Affiliates $
- --------------------------------------------------------------------------------
(ii) Extraordinary and Unusual
Gains $
- --------------------------------------------------------------------------------
(iii) Proceeds of Insurance and
asset sales $
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
(iv) Total
- --------------------------------------------------------------------------------
(4) EBITDA ((1) + (2) - (3)) $
- --------------------------------------------------------------------------------
Fixed Charges
- --------------------------------------------------------------------------------
(i) Interest Expense $
- --------------------------------------------------------------------------------
(ii) Non-Financed Capital
Expenditures $
- --------------------------------------------------------------------------------
(5) Total Fixed Charges ((i) + (ii)) $
- --------------------------------------------------------------------------------
(6) Actual Fixed Charge Coverage
Ratio (4 /5) ____:1
- --------------------------------------------------------------------------------
Required Fixed Charge Coverage Ratio 1.5 to 1
- --------------------------------------------------------------------------------
Dated:_________________, _____ __________________________________________
Title:
5
<PAGE>
EXHIBIT C
GUARANTY AGREEMENT
THIS AGREEMENT, dated as of December __, 1999, by SEPRACOR, INC., a
Delaware corporation (the "Guarantor"), to FLEET NATIONAL BANK (the "Secured
Party").
W I T N E S S E T H
WHEREAS, Biosphere Medical, Inc., a Delaware corporation (the "Company"),
the Guarantor and the Secured Party have entered into a Second Amended and
Restated Revolving Credit Agreement dated as of the date hereof (as amended from
time to time, the "Credit Agreement") pursuant to which the Secured Party has
agreed, subject to the terms and conditions set forth therein, to make certain
revolving loans to the Company (collectively, the "Biosphere Loans"), such
Biosphere Loans to be evidenced by the Company's Promissory note in the original
principal amount of $2,000,000 payable to the order of the Secured Party (as
amended or supplemented from time to time, the "Note"); and
WHERES, the Guarantor owns a majority of the outstanding capital stock of
the Company and the making of the Biosphere Loans will therefore be beneficial
to the Guarantor; and
WHEREAS, the obligation of the Secured Party to make the Biosphere Loans
is subject to the condition, among others, that the Guarantor shall execute and
deliver this Guaranty Agreement;
NOW, THEREFORE, in consideration of the willingness of the Secured Party
to make the Biosphere Loans to the Company, and for other good and valuable
consideration, receipt of which is hereby acknowledged by the Guarantor, the
Guarantor hereby agrees as follows:
<PAGE>
1. Guaranteed Obligations. The Guarantor does hereby irrevocably and
unconditionally guarantee the due and punctual payment and performance by the
Company of the following obligations to the Secured Party (individually, a
"Guaranteed Obligation" and collectively the "Guaranteed Obligations"):
(a) Principal of and premium, if any, and interest on the Note; and
(b) Any and all other obligations of the Company to the Secured
Party under the Credit Agreement or under any agreement or instrument relating
thereto, all as amended from time to time.
2. Demand by Secured Party. Upon failure by the Company punctually to pay
or perform any Guaranteed Obligation when due, after the expiration of any
applicable grace period, the Secured Period may make demand upon the Guarantor
for the payment or performance of such Guaranteed Obligation and the Guarantor
binds and obliges itself to make such payment or performance forthwith upon such
demand.
3. Waiver of Demands, Notices, Diligence, etc. The Guarantor hereby
assents to all of the terms and conditions of the Guaranteed Obligations and
waives: (a) demand for the payment of the principal of any Guaranteed Obligation
or of any claim for interest or any part of any thereof (other than the demand
provided for in Section 2 hereof); (b) notice of the occurrence of a default or
an event of default under any Guaranteed Obligation; (c) protest of the
nonpayment of the principal of any Guaranteed Obligation or of any claim for
interest or any part thereof: (d) notice of presentment, demand and protest; (e)
notice of acceptance of any guaranty herein provided for or of the terms and
provisions thereof or hereof by the Secured Party; (f) notice of any indulgences
or extensions granted to the Company or any successor to the Company or any
person or party which shall have assumed the obligations of the Company; (g) any
requirement of diligence or promptness on the part of the Secured Party in the
enforcement of any of its rights under the provisions of any Guaranteed
Obligation or this Guaranty Agreement; (h) any enforcement of any Guaranteed
Obligation; (i) any right which the Guarantor might have to require the Secured
Party to proceed against any other guarantor of the Guaranteed Obligations or to
realize on any collateral security therefor; and (j) any and all notices of
every kind and description which may be required to be given by an statute or
rule of law in any jurisdiction. The waivers set forth in this Section 3 shall
be effective notwithstanding the fact that the Company ceases to exist by reason
of its liquidation, merger, consolidation or otherwise.
4. Obligations of Guarantor Unconditional. The obligations of the
Guarantor under this Guaranty Agreement shall be unconditional, irrespective of
the validity, regularity or enforceability of any Guaranteed Obligation, and
shall not be affected by any action taken under any Guaranteed Obligation in the
exercise of any right or remedy therein conferred, or by any failure or omission
on the part of the Secured Party to enforce any right given thereunder or
hereunder or any remedy conferred thereby or hereby, or by any waiver of any
term, covenant, agreement or condition of any Guaranteed Obligation or this
Guaranty Agreement, or by any release of any security or any other guaranty at
any time existing for the benefit of any Guaranteed Obligation, or by the merger
or consolidation of the Company, or by sale, lease or
2
<PAGE>
transfer by the Company to any person of any or all of its properties, or by any
action of the Secured Party granting indulgence or extension to, or waiving or
acquiescing in any default, the Company or any successor to the Company or any
person or party which shall have assumed its obligations, or by reason of any
disability or other defense of the Company or any successor to the Company, or
by any modification, alteration, or by any circumstance whatsoever (with or
without notice to or knowledge of the Guarantor) which may or might in any
manner or to any extent vary the risk of the Guarantor hereunder, it being the
purpose and intent of the Guarantor that the obligations of the Guarantor
hereunder shall be absolute and unconditional under any and all circumstances
and shall not be discharged except by payment or performance as herein provided,
and then only to the extent of such payment or performance.
5. Subordination of Claims of Guarantor. Any claims against the Company to
which the Guarantor may be or become entitled (including, without limitation,
claims by subrogation or otherwise by reason of any payment or performance by
the Guarantor in satisfaction and discharge, in whole or in part, of its
obligations under this Guaranty Agreement) shall be and hereby are made subject
and subordinate to the prior payment or performance in full of the Guaranteed
Obligations.
6. Reinstatement. This Agreement shall continue to be effective, or be
reinstated, as the case may be, if at any time any amount received by the
Secured Party in respect of the Guaranteed Obligations is rescinded or must
otherwise be restored by the Secured Party upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Company or the Guarantor or
upon the appointment of an intervenor or conservator of, or trustee or similar
official for, the Company or the Guarantor or any substantial part of any of
their respective properties, or otherwise, all as though said payments had not
been made.
7. Notices. Except as otherwise provided herein, all notices to the
Guarantor or the Secured Party shall be in writing and shall be deemed to have
been sufficiently given or served for all purposes hereof if personally
delivered or mailed by certified mail, return receipt requested, as follows:
(a) if to the Guarantor:
Sepracor Inc.
111 Locke Drive
Marlborough, Massachusetts 01752
Attention: Robert F. Scumaci
Senior Vice President
with a copy to:
John D. Sigel, Esquire
Hale & Dorr
60 State Street
Boston, Massachusetts 02109
3
<PAGE>
(b) if to the Secured Party:
Fleet National Bank
100 Federal Street
Mail Stop: MA BOS 01-08-06
Boston, Massachusetts 02110
Attention: Kimberly A. Martone
Senior Vice President
with a copy to:
George Ticknor, Esquire
Palmer & Dodge LLP
One Beacon Street
Boston, Massachusetts 02108
or at such other address as the party to whom such notice or demand is directed
may have designated in writing to the other party hereto. A notice shall be
deemed to have been given upon the earlier to occur of (i) three (3) days after
the date on which it is deposited in the U.S. mails or (ii) receipt by the party
to whom such notice is directed.
8. Miscellaneous. This Guaranty Agreement shall inure to the benefit of
and be binding upon the Secured Party and the Guarantor and their respective
successors and assigns, and the term "Secured Party" shall be deemed to include
any other holder or holders of any of the Guaranteed Obligations. In case any
provision in this Guaranty Agreement shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby. This Guaranty Agreement may be
executed in any number of counterparts and by the different parties hereto on
separate counterparts, each of which shall be an original, but all of which
together shall constitute one instrument. The Guarantor agrees, as principal
obligor and not as guarantor, to pay to the Secured Party, all reasonable costs
and expenses (including court costs and reasonable attorneys' fees and
disbursements) incurred or expended by the Secured Party in connection with the
enforcement of this Guaranty Agreement.
9. Governing Law; Jurisdiction; Waiver of Jury Trial. This Guaranty
Agreement, including the validity hereof and the rights and obligations of the
parties hereunder, shall be construed in accordance with and governed by the
laws of the Commonwealth of Massachusetts. The Guarantor, to the extent that it
may lawfully do so, hereby consents to the jurisdiction of the courts of the
Commonwealth of Massachusetts and the United States District Court for the
District of Massachusetts, as well as to the jurisdiction of all courts to which
an appeal may be taken from such courts, for the purpose of any suit, action or
other proceeding arising out of any of its obligations hereunder or with respect
to the transactions contemplated hereby, and expressly waives any and all
objections it may have as to venue in any such courts. The Guarantor further
agrees that a summons and complaint commencing an action or proceeding in any of
such courts shall be properly served and shall confer personal jurisdiction if
served
4
<PAGE>
personally or by certified mail to it at its address provided in Section 7 of
this Guaranty Agreement or as otherwise provided under the law of the
Commonwealth of Massachusetts. The Guarantor irrevocably waives all right to a
trial by jury in any suit, action or other proceeding instituted by or against
it in respect of its obligations hereunder or the transactions contemplated
hereby.
IN WITNESS WHEREOF, the parties have executed this Guaranty Agreement as a
sealed instrument as of the date first above written.
SEPRACOR INC.
By ___________________________________
Name: Robert F. Scumaci
Title: Senior Vice President
The foregoing Guaranty Agreement is hereby
accepted:
FLEET NATIONAL BANK
By ___________________________________
Name: Kimberly A. Martone
Title: Senior Vice President
5
<PAGE>
February 14, 2000
Sepracor Inc. (the "Company")
111 Locke Drive
Marlborough, Massachusetts 01752
Re: $400,000,000 5.00% Convertible Subordinated Debentures due 2007
(including up to an additional $60,000,000 of 5.00% Convertible
Subordinated Debentures due 2007 which may be issued at the option
of the initial purchaser thereof, the "Debentures") issued pursuant
to a certain Indenture dated as of February 11, 2000 (the
"Indenture") by and between the Company and The Chase Manhattan
bank, as trustee (the "Trustee")
AMENDMENT NO. 1 AND CONSENT
Ladies and Gentlemen:
Reference is made to that certain Second Amended and Restated Revolving
Credit and Security Agreement dated as of December 22, 1999 (the "Credit
Agreement") among Fleet National Bank (the "Bank"), Sepracor Inc. (the
"Company") and BioSphere Medical, Inc. ("BioSphere").
The Company plans to issue the Debentures on or after February 14, 2000,
which Debentures shall be subordinated in right of payment to the amounts
payable pursuant to the Credit Agreement and the promissory note issued
thereunder and any other Obligations and to the obligations of the Company to
the Bank under (a) the Guaranty Agreement dated as of September 15, 1998 with
respect to certain loans to Hemasure Inc., (b) the Guaranty Agreement dated as
of December 22, 1999 with respect to certain loans to BioSphere (collectively
with the Guaranty Agreement described in clause (a), the "Guaranty Agreements"),
and (c) the Put Agreement dated as of December 30, 1997 (the "Put Agreement") by
and between the Company and the Bank. Without the Bank's waiver pursuant to this
Consent and Amendment, Section 6.1 of the Credit Agreement would prohibit the
issuance by the Company of the Debentures and Section 6.8 would prohibit the
payment of principal or interest on the Debentures.
The Company hereby covenants to the Bank that true and correct copies of
(i) the Confidential Offering Memorandum describing the issuance of the
Debentures and delivered to the purchasers thereof and (ii) the Indenture will
be promptly delivered to the Bank in the final and effective form.
In reliance upon such representations and warranties and the subordination
provisions contained in the Indenture, and contingent thereon and upon receipt
by the Bank of a copy of this letter executed by the Company:
<PAGE>
(i) the Bank, notwithstanding the provisions of Section 6.1 of the Credit
Agreement, the other Loan Documents, the Guaranty Agreements and the Put
Agreement, hereby consents to the issuance of the Debentures by the Company; and
(ii) the Bank and the Company agree that the Credit Agreement is amended
as follows:
(a) the definition of "Subordinated Notes" set forth in Section 1.1
the Credit Agreement is hereby deleted and replaced by the following:
Subordinated Notes. The Borrower's (i) $93,048,000 6 1/4%
Convertible Subordinated Debentures due 2005 issued by the Borrower
pursuant to an Indenture dated February 5, 1998 from the Borrower to
The Chase Manhattan Bank, (ii) $300,000,000 7.00% Convertible
Subordinated Debentures due 2005 issued pursuant to an Indenture
dated December 15, 1998 by the Borrower to The Chase Manhattan Bank
and (iii) $400,000,000 5.00% Convertible Subordinated Debentures due
2007 issued pursuant to an Indenture dated February 11, 2000 by the
Borrower to The Chase Manhattan Bank (plus up to an additional
$60,000,000 of such 5.00% Convertible Subordinated Debentures which
may be issued at the option of the initial purchaser thereof).
(b) The second paragraph of Section 6.8 of the Credit Agreement is
amended by deleting the following phrase on the second line, "issued and
outstanding on the date of this Agreement".
The Company hereby confirms that: (a) the representations and warranties
of the Company contained in Section 4 of the Credit Agreement are true on and as
of the date hereof as if made on such date (except to the extent that such
representations and warranties expressly relate to an earlier date); (b) the
Company is in compliance in all material respects with all of the terms and
provisions set forth in the Credit Agreement on its part to be observed or
performed thereunder; and (c) after giving effect to this Consent and Amendment,
no Event of Default specified in Section 8 of the Credit Agreement, nor any
event which with the giving of notice or expiration of any applicable grace
period or both would constitute such an Event of Default, shall have occurred
and be continuing.
Except as expressly stated herein, this letter (i) does not amend or
modify either of the Credit Agreement, any Loan Documents, the Guaranty
Agreements or the Put Agreement and (ii) does not constitute a consent to any
other actions or the issuance of any Indebtedness except for the Debentures. All
provisions of the Credit Agreement (as amended hereby), the Loan Documents, the
Guaranty Agreements and the Put Agreement shall remain in full force and effect
and, except as expressly stated herein, nothing herein shall constitute a waiver
of any such provision.
2
<PAGE>
Capitalized terms used herein which are defined in the Credit Agreement
have the same meanings herein as therein.
Sincerely,
FLEET NATIONAL BANK
By: /s/ Thomas W. Davies
--------------------
Name: Thomas W. Davies
Title: Senior Vice President
The foregoing is hereby
agreed to an accepted
SEPRACOR, INC.
By: /s/ Robert F. Scumaci
------------------------
Name:
Title:
3
<PAGE>
Exhibit 10.30
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
LICENSE AGREEMENT
by and between
SEPRACOR INC.
and
HOECHST MARION ROUSSEL, INC.
August 31, 1999
This document is the confidential information of both parties hereto.
It should be distributed on a need-to-know basis and kept in secure area.
<PAGE>
ARTICLE 1 - DEFINITIONS................................................2
ARTICLE 2 - ASSIGNMENT AND LICENSE GRANT...............................6
ARTICLE 3 - ROYALTIES AND OTHER CONSIDERATION..........................7
ARTICLE 4 - ROYALTY PAYMENTS, REPORTS AND RECORDS......................7
ARTICLE 5 - RIGHTS IN TECHNOLOGY, INVENTIONS AND PATENTS..............10
ARTICLE 6 - INFRINGEMENT INVOLVING PRODUCT............................10
ARTICLE 7 - CONFIDENTIALITY...........................................12
ARTICLE 8 - TERM......................................................13
ARTICLE 9 - BREACH AND TERMINATION....................................13
ARTICLE 10 - RIGHTS AND OBLIGATIONS UPON TERMINATION..................14
ARTICLE 11 - REPRESENTATIONS AND WARRANTIES...........................14
ARTICLE 12 - INDEMNIFICATION..........................................16
ARTICLE 13 - CHOICE OF LAW............................................16
ARTICLE 14 - FORCE MAJEURE............................................17
ARTICLE 15 - NOTICES..................................................17
ARTICLE 16 - WAIVER...................................................18
ARTICLE 17 - ENTIRE AGREEMENT.........................................18
ARTICLE 18 - ASSIGNMENT...............................................18
ARTICLE 19 - TITLES...................................................19
ARTICLE 20 - PUBLICITY................................................19
ARTICLE 21 - UNENFORCEABLE PROVISIONS.................................21
ARTICLE 22 - CONSTRUCTION.............................................21
ARTICLE 23 - HMR OWNERSHIP............................................21
-
<PAGE>
ARTICLE 24 - EXECUTION................................................22
ARTICLE 25 - CLOSING..................................................22
SCHEDULE 1.21 SEPRACOR PATENTS
SCHEDULE 2.1 FORM OF ASSIGNMENT
SCHEDULE 20.1 JOINT PRESS RELEASE
SCHEDULE 20.2.2 LISTING OF ALLEGRA(R)
ii
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
This License Agreement is made as of this 31st day of August, 1999 by and
between Sepracor Inc. ("Sepracor"), a Delaware corporation having a place of
business at 111 Locke Drive, Marlborough, Massachusetts 01752, and Hoechst
Marion Roussel, Inc. ("HMR"), a Delaware corporation having a place of business
at Route 202-206, P.O. Box 6800, Bridgewater, New Jersey 08867.
BACKGROUND
WHEREAS, Sepracor is the assignee of U.S. Patent No. 5,375,693, entitled
"Methods and Compositions for Treating Allergic Disorders and Other Disorders
using Metabolic Derivatives of Terfenadine" (the "693 Patent") and U.S. Patent
Application Serial No. 08/191,149, entitled "Methods and Compositions for
Treating Allergic Disorders and Other Disorders using Optically Pure Isomers of
Metabolic Derivatives of Terfenadine" (the "149 Application");
WHEREAS, Sepracor also owns a portfolio of patents and patent applications
generally directed to Terfenadine Carboxylate Technology and certain know-how
relating to the use of Terfenadine Carboxylate Technology;
WHEREAS, the parties entered into a license agreement on June 1, 1993 (the "1993
License Agreement"), whereby Sepracor granted HMR an exclusive license under
U.S. Patent Application Serial No. 07/924,156 entitled "Methods and Compositions
for Treating Allergic Disorders and Other Disorder using Metabolic Derivatives
of Terfenadine" (the "156 Application") and any patents issuing therefrom, and
the 693 Patent subsequently issued from a continuation of the 156 Application;
WHEREAS, HMR made two milestone payments to Sepracor under the 1993 License
Agreement, such payments were made under protest and totaled [**];
WHEREAS, an interference was declared by the U.S. Patent and Trademark Office
("PTO") relating to the 693 Patent, the 149 Application, and HMR's U.S. Patent
Application Serial No. 08/397,542, entitled "A Method of Providing an
Antihistaminic Effect in a Hepatically Impaired Patient" (the "542
Application");
WHEREAS, on the terms and conditions set forth herein, Sepracor is willing to
assign the Assigned Patents (as defined below) to HMR and license to HMR the
exclusive right to use additional Sepracor Patents and Sepracor Know-How to
develop and sell Products; and
WHEREAS, HMR wishes to accept such assignment and license.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereinafter set forth, the sufficiency of which is hereby
acknowledged, the parties to this
1
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Agreement mutually agree as follows:
ARTICLE 1 - DEFINITIONS
For purposes of this Agreement, the following initially capitalized terms in
this Agreement, whether used in the singular or plural, shall have the following
meanings, unless the context clearly requires otherwise:
1.1 Affiliate. "Affiliate" shall mean, with respect to either party hereto,
any corporation, company, partnership, joint venture or any other entity
which directly or indirectly controls, is controlled by, or is under
common control with such party. For purposes of this definition, "control"
shall mean direct or indirect ownership of at least fifty percent (50%) of
the outstanding voting securities of the entity.
1.2 Agreement. "Agreement" shall mean this License Agreement, including all
Schedules hereto.
1.3 Assigned Patents. "Assigned Patents" shall mean U.S. Patent No. 5,375,693,
U.S. Patent Application Serial No. 08/191,149, and any and all related
United States patent applications, including any additions, divisions,
continuations, continuations-in-part, reissues, reexaminations,
substitutions, extensions, patent term extensions and renewals thereof,
and patents issued therefrom.
1.4 Business Day. "Business Day" shall mean a day on which banks are open for
business in both Marlborough, Massachusetts and Bridgewater, New Jersey.
1.5 Closing Date. "Closing Date" shall mean the latest of (a) the date on
which Sepracor executes this Agreement; (b) the date on which HMR executes
this Agreement; and (c) if applicable, not later than the fifth Business
Day following the expiration or earlier termination of any notice and
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended ("HSR Act").
1.6 Combination Patent. "Combination Patent" shall mean United States Patent
Application Serial No. [**], and any and all related United States patent
applications, including any additions, divisions, continuations,
continuations-in-part, reissues, reexaminations, substitutions,
extensions, patent term extensions and renewals thereof, and patents
issued therefrom.
2
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
1.7 Combination Product. "Combination Product" shall mean a Product which is
comprised in part of Compound, and in part of one or more other active
ingredients; provided, however, that Combination Product shall not include
any Product encompassed by a Live Claim of an issued Combination Patent.
Notwithstanding the foregoing, Products containing Compound and
pseudoephedrine as the only active ingredients, including but not limited
to the Product currently identified by the trademark Allegra-D(R), shall
not be considered a Combination Product for the purposes of this
Agreement.
1.8 Compound. "Compound" shall mean the terfenadine metabolite known as
terfenadine carboxylate and fexofenadine, also identified by the chemical
name 4-[1-hydroxy-4-[4-(hydroxydiphenylmethyl)-1-piperidinyl]butyl]-
(alpha),(alpha)-dimethyl benzeneacetic acid, and any stereoisomer,
solvate, clathrate, salt, or non-covalent derivative thereof.
1.9 Confidential Information. "Confidential Information" shall mean all
Sepracor Know-How, and all technical and scientific know-how and
information, pre-clinical and clinical trial results, computer programs,
knowledge, technology, means, methods, processes, practices, formulas,
techniques, procedures, designs, drawings, apparatus, written and oral
representations of data, specifications, and all other scientific,
clinical, regulatory, marketing, financial and commercial information or
data, whether communicated in writing, verbally or electronically, which
is provided by one party to the other party in connection with this
Agreement. When Confidential Information is disclosed in a manner other
than in writing, it shall be reduced to written form, marked
"Confidential" and transmitted to the receiving party within [**] Business
Days of disclosure to the receiving party.
1.10 Control or Controlled. "Control" or "Controlled", when used in connection
with intellectual property rights, shall mean the legal authority or right
of a party hereto to grant a license or sublicense of intellectual
property rights to another party hereto, or to otherwise disclose
proprietary or trade secret information to such other party, without
breaching the terms of any agreement with a Third Party, or
misappropriating the proprietary or trade secret information of a Third
Party. Information that is generally known or available to the public as
of the Closing Date, or which becomes known or available to the public
through no fault of the party, shall not be deemed Controlled by a party
hereto.
1.11 Dollar. "Dollar" shall mean lawful money of the United States of America.
3
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
1.12 Generic Equivalent. "Generic Equivalent" shall mean any pharmaceutical
product that is sold by a Third Party without the consent or approval of
HMR or any Affiliate or Licensee thereof, and which includes the same
Compound as an active ingredient as that used in a particular Product for
the same indication and by the same route of administration as the
particular Product. For the purposes of this Section 1.12, an Optically
Pure stereoisomer of a Compound shall be considered a separate and
distinct Compound, and solvates, clathrates, salts or noncovalent
derivatives of a Compound shall be considered one and the same Compound.
1.13 Improvement. "Improvement" shall mean any enhancement of or improvement to
Terfenadine Carboxylate Technology developed, invented or acquired by, or
coming under the Control of, Sepracor during the term of this Agreement.
1.14 Licensee. "Licensee" shall mean any person, corporation, unincorporated
body, or other entity that is not an Affiliate of HMR and to whom HMR
grants a license or sublicense of the rights assigned or granted to HMR
pursuant to this Agreement.
1.15 Live Claim. "Live Claim" shall mean a claim of any issued, unexpired
patent which has not been withdrawn, canceled or surrendered, or held
invalid or unenforceable by a court of competent jurisdiction in a final,
unappealable decision.
1.16 Net Sales. "Net Sales" shall mean the gross amount invoiced by HMR and its
Affiliates and Licensees on account of sales of Product to Third Parties
in the Territory, less the total of (a) [**] and/or [**] and other [**] to
the extent [**] in the [**] and other [**] to the extent [**] in the [**]
by reason of [**] or the equivalents thereof.
Actual Net Sales for any Combination Product (except Product encompassed
by a Live Claim of an issued Combination Patent) shall be multiplied by
the Combination Allocation Portion (as defined below) attributable to such
Combination Product. The "Combination Allocation Portion", as used herein,
shall mean [**] only the [**] of the [**] only the [**] and the [**] of
the [**] that are [**] in Section 1.16(a)-(f) above. [**] for the [**] in
the [**] that are [**] on the [**]
4
<PAGE>
1.17 Optically Pure. "Optically Pure" shall mean Compound comprising at least
ninety percent (90%) by weight of one stereoisomer and ten percent (10%)
by weight or less of the other stereoisomer.
1.18 Payment Period. "Payment Period" shall mean a calendar quarter ending on
March 31st, June 30th, September 30th, or December 31st .
1.19 Product. "Product" shall mean any composition which contains Compound as
an active ingredient. Product shall include any Product encompassed by a
Live Claim of an issued Combination Patent. Product containing an
Optically Pure stereoisomer of a Compound shall be considered a separate
and distinct Product. Product containing solvates, clathrates, salts or
noncovalent derivatives of a Compound shall be considered one and the same
Product. If encompassed by a Live Claim of a Combination Patent, Product
containing one or more leukotriene inhibitors and fexofenadine shall be
considered a separate and distinct Product, and not a Combination Product.
Line extensions of a Product shall be considered one and the same Product;
for example, the composition currently identified by the trademark
Allegra-D(R) shall be considered the same Product as the composition
currently identified by the trademark Allegra(R).
1.20 Sepracor Know-How. "Sepracor Know-How" shall mean all proprietary,
non-public Terfenadine Carboxylate Technology, including, without
limitation, processes, techniques, formulas, data, methods, equipment
designs, know-how, show-how and trade secrets, discoveries, practices,
inventions, technology, manufacturing procedures, test procedures,
purification and isolation techniques, instructions, test data and other
intellectual property, patentable or otherwise, tangible or intangible,
that are owned or Controlled by Sepracor as of the Closing Date or which
were developed by or at the request of Sepracor prior to or during the
term of this Agreement and which are not generally known; provided,
however, that "Sepracor Know-How" shall not include any HMR information or
materials.
1.21 Sepracor Patents. "Sepracor Patents" shall mean all United States patents
and patent applications owned or Controlled by Sepracor and relating to
Terfenadine Carboxylate Technology, including those set forth in Schedule
1.21 hereto as it may be updated from time to time, and all additions,
divisions, continuations, continuations-in-part, substitutions,
extensions, patent term extensions and renewals thereof, and patents
issued thereon. The term "Sepracor Patents" includes Combination Patents,
but does not include the Assigned Patents.
1.22 Sepracor Technology. "Sepracor Technology" shall mean the Sepracor
Patents, Sepracor Know-How and Improvements.
5
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
1.23 Terfenadine Carboxylate Technology. "Terfenadine Carboxylate Technology"
shall mean technology related to Compound, including, but not limited to,
methods of use, processes, compositions, or formulations thereof.
1.24 Territory. "Territory" shall mean the United States of America and its
territories and possessions as of the Closing Date.
1.25 Third Party. "Third Party" shall mean any person, corporation,
unincorporated body, or other entity other than Sepracor and HMR and their
respective Affiliates and HMR's Licensees.
ARTICLE 2 - ASSIGNMENT AND LICENSE GRANT
2.1 On the Closing Date, Sepracor shall assign all right, title and interest
to the Assigned Patents to HMR pursuant to an assignment substantially in
the form attached hereto as Schedule 2.1. HMR may, at its sole discretion,
attend to filing and recordation thereof with the U.S. Patent and
Trademark Office (PTO).
2.2 Sepracor grants to HMR an exclusive license (exclusive even as to
Sepracor) to develop, have developed, make, have made, use, market, sell,
have sold and distribute Product in the Territory under the Sepracor
Technology, subject to the terms and conditions set forth in this
Agreement.
2.3 The rights and licenses granted hereunder to the Sepracor Patents shall be
sublicensable by HMR subject to the terms and conditions set forth in this
Agreement, provided that HMR remains responsible to Sepracor under this
Agreement and each Licensee confirms in writing to HMR that it agrees to
be bound by all of the terms and conditions contained in this Agreement.
2.4 To the extent necessary, each of Sepracor and HMR shall file within
fifteen (15) days after the date of this Agreement with the Federal Trade
Commission and the Antitrust Division of the U.S. Department of Justice,
any notification and report form required of it in the reasonable opinion
of both Parties under the HSR Act with respect to the transactions
contemplated hereby. The parties shall cooperate with one another to the
extent necessary in the preparation of any notification and report form
required to be filed under the HSR Act. Each Party shall be responsible
for its own costs, expenses, and filing fees associated with any filing
under the HSR Act.
6
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
ARTICLE 3 - ROYALTIES AND OTHER CONSIDERATION
3.1 In consideration of the assignment of the Assigned Patents and the rights
and licenses granted under the Sepracor Technology:
3.1.1 HMR shall pay to Sepracor a royalty of [**] on the Net Sales of
Product in the Territory ("Royalties");
3.1.2 Royalties shall be payable on Net Sales of Product in the Territory
for sales made on or after February 17, 2001, and shall continue on
a Product by Product basis until the first to occur of the following
events: (1) with respect to a particular Product line, the
introduction in the Territory of a Generic Equivalent of a Product
in such Product line by a Third Party without approval or consent of
HMR or any Affiliate or Licensee thereof; or (2)(a) with respect to
all Products (except as provided in clause (2)(b) below), the
anniversary of the Closing Date in the year 2012, or (b) with
respect to a Product encompassed by a Live Claim of an issued
Combination Patent, the expiration date of such Combination Patent.
Royalties payable for the month of February 2001 shall be calculated
on a pro rata basis, i.e., twelve twenty-eighths (12/28) of the
total Net Sales for February 2001 will be used to calculate the
Royalties due for February 2001. In addition, Royalties payable for
the month during which Royalties on a Product cease to be payable
shall also be calculated on a pro rata basis ; and
3.1.3 Sepracor shall retain the payment of [**] made by HMR to Sepracor on
April 30, 1997, and the payment of [**] made by HMR to Sepracor on
May 4, 1998, both payments having been made by HMR to Sepracor in
connection with Section 4.1 of the 1993 License Agreement and under
protest, and such payments shall be non-refundable and
non-creditable.
ARTICLE 4 - ROYALTY PAYMENTS, REPORTS AND RECORDS
4.1 HMR shall deliver to Sepracor within [**] days following the end of each
Payment Period, beginning with the first Payment Period, a written report
(the "Royalty Statement") describing, for the applicable Payment Period:
(a) the gross sales during the Payment Period for all Products;
(b) the Net Sales during the Payment Period for all Products; and
7
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
(c) the calculation used to determine the total Royalties due for the
Payment Period.
4.2 Each Royalty Statement for a Payment Period required by Section 4.1 above
shall be accompanied by full payment to Sepracor, made in accordance with
Section 4.3, of Royalties and any interest that may have accrued in
accordance with Articles 3 and 4.
4.3 With regard to any payments due to Sepracor, the following shall apply:
(a) All payments to Sepracor pursuant to this Agreement shall be made by
wire transfer, to Fleet Bank of Massachusetts, 75 State Street,
Boston, Massachusetts 02109 (ABA #011000138) to Account No. [**] or
such other bank or account as Sepracor may from time to time
designate in writing. All such payments shall be made in Dollars.
(b) Whenever any payment hereunder shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the
immediately succeeding Business Day.
(c) Payments hereunder shall be considered to be made as of the day on
which they are received in Sepracor's designated bank account.
(d) All payments due to Sepracor hereunder but not paid by HMR on the
due date thereof shall bear interest at the rate which is the lesser
of: (i) LIBOR plus two percent (2%) per annum; and (ii) the maximum
lawful interest rate permitted under applicable law. Such interest
shall accrue on the balance of unpaid amounts from time to time
outstanding from the date on which portions of such amounts become
due and owing until payment thereof in full.
4.4 Any income or other taxes which HMR is required by law to pay or withhold
on behalf of Sepracor with respect to Royalties, and any interest thereon,
payable to Sepracor under this Agreement, shall be deducted from the
amount of such Royalties and interest due, and paid or withheld, as
appropriate, by HMR on behalf of Sepracor. Any such tax required to be
paid or withheld shall be an expense of, and borne solely by, Sepracor.
The previous two sentences notwithstanding, the parties hereto will
reasonably cooperate in completing and filing documents required under the
provisions of any applicable tax laws or under any other applicable law,
in order to enable HMR to make such payments to Sepracor without any
deduction or withholding.
8
<PAGE>
4.5 HMR shall keep and maintain, and shall cause its Affiliates and its
Licensees to keep and maintain, complete and accurate records and books of
account in sufficient detail and form so as to enable Royalties and any
interest payable to be determined, including, but not limited to, true and
accurate records of sales of Products and calculations of Net Sales and
Royalties. Sepracor shall have the right to audit the records of HMR at
its own expense (except as otherwise provided in Section 4.6) using HMR's
independent certified accountants unless good cause can be shown as to why
such accountants should not be used, in which case Sepracor may elect to
use any nationally recognized firm of independent certified accountants to
whom HMR has shown no good cause objection. Such accountants will have
access on reasonable notice to HMR and its Affiliates' and Licensees'
records during reasonable business hours for the purpose of verifying the
Royalties and any interest payable as provided in this Agreement for the
two preceding years. Notwithstanding the foregoing, this right may not be
exercised more than once in any calendar year, and once a calendar year is
audited it may not be reaudited, and said accountant shall disclose to
Sepracor only information relating solely to the accuracy of the Royalty
Statements provided to Sepracor and the payments made to Sepracor under
this Agreement.
4.6 Any adjustment required as a result of an audit conducted under this
Article shall be made within twenty-five (25) days after the date on
which the accountant conducting the audit issues a written report to
Sepracor and HMR containing the results of the audit. If any
underpayment by HMR is greater than ten percent (10%) of the amount
previously paid to Sepracor for the relevant Payment Period, the costs
and expenses of the audit shall be paid for by HMR. In the case of
overpayment, HMR may elect, at its option, to either offset any
Royalties and any interest payable to Sepracor by the amount of the
overpayment or request reimbursement and HMR shall, within [**] Business
Days of issuance of the auditor's written report, provide written
notice to Sepracor of its election regarding any overpayment. If HMR
elects reimbursement of an overpayment, Sepracor shall have the longer
of a) ten (10) Business Days from its receipt of HMR's written notice, or
b) ten (10) days after the date on which the accountant conducting the
audit issues a written report to Sepracor and HMR containing the results
of the audit, to send HMR the requested overpayment reimbursement.
4.7 No part of any amount payable to Sepracor under this Agreement may be
reduced due to any counterclaim, set-off, adjustment or other right which
HMR might have against Sepracor, any other party or otherwise, except as
expressly stated to the contrary in this Agreement.
9
<PAGE>
ARTICLE 5 - RIGHTS IN TECHNOLOGY, INVENTIONS AND PATENTS
5.1 Sepracor agrees to use reasonable efforts to continue, at its sole cost
and expense, the prosecution of the Sepracor Patents and maintenance of
the Sepracor Patents and Sepracor Know-How. Prosecution of pending patent
applications shall mean through final patent office appeal and any
interference proceedings or the like, including, but not limited to,
re-issue applications and re-examination proceedings.
5.2 After the Closing Date, Sepracor and HMR shall consult with each other in
connection with the prosecution and maintenance of the Sepracor Patents.
Sepracor agrees to provide HMR with a reasonable opportunity to comment on
all material written correspondence with the PTO in connection with
Sepracor Patents, and Sepracor shall notify HMR of the allowance, grant or
acceptance of any Sepracor Patent. Should Sepracor decide not to pursue or
maintain any of the Sepracor Patents, it shall first offer to assign such
Sepracor Patents to HMR before letting such Sepracor Patents lapse.
5.3 Sepracor shall consult and cooperate with HMR in good faith with respect
to the filing and prosecution of any patent applications for Improvements
and the maintenance of patents issued thereon including, without
limitation, by executing and obtaining from employees and other persons
all assignments and other documents reasonably required in connection
therewith.
5.4 The parties agree to cooperate in order to avoid loss of any rights which
may otherwise be available to the parties under the U.S. Drug Price
Competition and Patent Term Restoration Act of 1984 and other similar
measures. Without limiting the foregoing, each of HMR and Sepracor agrees
to provide the other with reasonable information and assistance in order
to permit the timely filing of an application for patent term extension
within the sixty (60) day period following NDA approval to market Product
in the United States.
ARTICLE 6 - INFRINGEMENT INVOLVING PRODUCT
6.1 In the event that either HMR or Sepracor becomes aware of Third Party
infringement of any issued Sepracor Patent in the Territory, which
infringement involves Product, it will notify the other party in writing
to that effect. Any such notice shall include evidence to support an
allegation of infringement by such Third Party.
6.1.1 Except as provided in Section 6.1.3, HMR shall have the right, but
not the obligation, to enforce (with Sepracor's cooperation and at
HMR's expense) any Sepracor Patents licensed hereunder against
infringement by Third Parties. Any recovery or damages derived from
enforcement of any Sepracor Patent shall be used to first reimburse
HMR for its documented out-of-pocket legal expenses and costs
relating to such enforcement, then
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to reimburse Sepracor for its documented out of pocket legal
expenses and costs relating to such enforcement. Any remaining
compensatory damages, such as lost profit damages and reasonable
royalty damages, shall be treated as Net Sales hereunder for which
Sepracor shall be entitled to receive a royalty as provided in
Articles 3 and 4 of this Agreement. Any punitive damages, exemplary
damages, or other enhanced damages shall be shared equally by the
parties.
6.1.2 Except as provided in Section 6.1.3, in the event of infringement of
Sepracor Patents, if HMR does not file suit or enter into
negotiations with the Third Party infringer of such Sepracor Patents
within three (3) months of receiving evidence of such infringement
that provides a reasonable basis for jurisdiction of a court, then
Sepracor shall have the right, but not the obligation, to enforce
the Sepracor Patents against such infringement (on its own behalf
and at its own expense). Any recovery or damages derived from
enforcement of any Sepracor Patent shall first be used to reimburse
Sepracor for its documented out of pocket legal expenses and costs
relating to such enforcement, then to reimburse HMR for its
documented out of pocket legal expenses and costs relating to such
enforcement. Any remaining damages shall be divided by allocating
three quarters of such damages to Sepracor and one quarter of such
damages to HMR.
6.1.3 Notwithstanding any other provisions herein, if HMR, or its
Affiliates or Licensees is not selling any Product recited in a Live
Claim of an issued Combination Patent in the Territory, and
infringement by a Third Party involves Product recited in a Live
Claim of an issued Combination Patent, Sepracor shall have the
right, but not the obligation, to enforce the Combination Patents
against such infringement (on its own behalf and at its own
expense), and Sepracor shall retain all recoveries from such
enforcement.
6.2 In any suit or dispute involving infringement of Sepracor Patents or
Assigned Patents by a Third Party, the parties shall cooperate fully. Upon
the request and at the expense of the party bringing suit, the other party
shall make available to the party bringing suit (at reasonable times and
under appropriate conditions) all relevant assistance. In particular, the
parties agree to furnish technical and other necessary assistance to each
other in conducting any litigation necessary to enforce or defend the
Sepracor Patents and Assigned Patents against Third Parties.
ARTICLE 7 - CONFIDENTIALITY
7.1 During the term of this Agreement, and for a period of five (5) years
thereafter, each party hereto will maintain in confidence all Confidential
Information disclosed by the other party hereto. Neither party shall use,
disclose or grant use of such
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<PAGE>
Confidential Information except as required under this Agreement. To the
extent that disclosure is authorized by this Agreement, the disclosing
party shall obtain prior agreement from its employees, agents,
consultants, Affiliates, Licensees or clinical investigators to whom
disclosure is to be made to hold in confidence and not make use of such
information for any purpose other than those permitted by this Agreement.
Each party shall use at least the same standard of care as it uses to
protect its own Confidential Information to ensure that such employees,
agents, consultants, Affiliates, Licensees, and clinical investigators do
not disclose or make any unauthorized use of such Confidential
Information. Each party shall promptly notify the other upon discovery of
any unauthorized use or disclosure of Confidential Information.
Confidential Information shall not include any information which:
7.1.1 was already known to the receiving party, other than under an
obligation of confidentiality, at the time of disclosure by the
other party;
7.1.2 was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the other party;
7.1.3 becomes generally available to the public or otherwise part of the
public domain after its disclosure and other than through any act or
omission of the receiving party in breach of this Agreement;
7.1.4 was disclosed to the receiving party, other than under an obligation
of confidentiality, by a Third Party who had no obligation to the
other party not to disclose such information; or
7.1.5 was independently developed by the receiving party without reference
to the disclosure by the other party.
7.2 The parties agree that the material financial terms of the Agreement shall
be considered the Confidential Information of both parties.
7.3 Each party may disclose the Confidential Information to the extent such
disclosure is reasonably necessary in filing or prosecuting patent
applications, prosecuting or defending litigation, or complying with any
applicable statute or governmental regulation. In addition, either party
may disclose Confidential Information to its Affiliates, and HMR may
disclose Confidential Information to Licensees; provided, however, in
connection with any such disclosure the disclosing party shall use
diligent efforts to secure confidential treatment of such information.
7.4 The parties shall undertake to ensure that all their employees who have
access to Confidential Information of the other party are under
obligations of confidentiality fully consistent with those provided in
this Article 7.
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7.5 To the extent legally required, the parties agree to comply with the
requirements of 35 U.S.C.ss.135(c) relating to submission of agreements
between the parties to the U.S. Patent and Trademark Office.
ARTICLE 8 - TERM
8.1 This Agreement will commence as of the Closing Date and, unless sooner
terminated as provided hereunder, shall continue in full force and effect
until the expiration of the last to expire of the Combination Patents,
after which time HMR will have a fully paid-up, royalty-free and
irrevocable non-exclusive license under the Sepracor Technology in the
Territory.
ARTICLE 9 - BREACH AND TERMINATION
9.1 In the event HMR or Sepracor are in material breach of any of the
respective obligations and conditions contained in this Agreement, the
other party shall be entitled to give the breaching party written notice
requiring it to cure such material breach. If such material breach is not
cured within ninety (90) days after receipt of such written notice, the
notifying party may seek a determination of damages for the uncured breach
from the breaching party. If the uncured breach is an uncured material
breach under Section 20.6 of this Agreement, Sepracor agrees that such
uncured breach may result in irreparable harm to HMR and HMR may seek
temporary or permanent injunctive relief or other equitable relief.
9.2 If HMR fails to pay Sepracor Royalties, or any interest thereon, due and
payable in accordance with the terms of this Agreement, and such Royalties
or interest are not paid to Sepracor within ninety (90) days after receipt
of written notice as set forth in Section 9.1 above, Sepracor shall have
the right to terminate this Agreement by giving written notice thereof to
HMR, which notice shall take effect immediately upon issuance. In
addition, immediately upon receipt of such termination notice, HMR shall
assign to Sepracor the entire right, title, and interest in and to the
Assigned Patents.
9.3 In the event that one of the parties hereto becomes bankrupt or insolvent,
a receiver or a trustee is appointed for the property or estate of such
party and said receiver or trustee is not removed within sixty (60) days,
or the party makes an assignment for the benefit of its creditors, and
whether any of the aforesaid events be the outcome of the voluntary act of
that party, or otherwise, the other party shall be entitled to terminate
this Agreement forthwith by giving a written notice to the first party.
9.4 Nothing herein shall prevent either party hereto from exercising such
party's right to obtain temporary or permanent injunctive relief or other
equitable relief.
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ARTICLE 10 - RIGHTS AND OBLIGATIONS UPON TERMINATION
10.1 Termination of this Agreement by either party shall not prejudice the
rights of such party under this Agreement, at law or in equity or
otherwise, to seek damages or injunctive relief for any breach of this
Agreement by the other party hereto.
10.2 The termination of this Agreement for any reason shall be without
prejudice to (i) Sepracor's right to receive all payments accrued and
unpaid as of the effective date of such termination, (ii) the provisions
of Sections 4.5 and 4.6 hereof as to Payment Periods, or any portion
thereof, prior to the effective date of such termination, and (iii) the
remedy of either party hereto in respect of any previous breach of any of
the covenants herein contained.
10.3 Articles 7, 10, 12, 20 and 23 shall survive termination of this Agreement.
ARTICLE 11 - REPRESENTATIONS AND WARRANTIES
11.1 Sepracor represents and warrants to HMR that:
11.1.1 The execution, delivery and performance of this Agreement by
Sepracor does not conflict with any agreement, instrument or
understanding, oral or written, to which it is a party or by which
it may be bound, and, to the best of its knowledge, does not
violate any material law or regulation of any court, governmental
body or administrative or other agency having authority over it;
11.1.2 Sepracor is not currently a party to, and during the term of this
Agreement will not enter into, any agreements, oral or written,
that are inconsistent with its obligations under this Agreement;
11.1.3 Sepracor is duly organized and validly existing under the laws of
the state of its incorporation and has full legal power and
authority to enter into this Agreement;
11.1.4 Sepracor is not subject to any order, decree or injunction by a
court of competent jurisdiction which prevents or materially delays
the consummation of the transactions contemplated by this
Agreement;
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<PAGE>
11.1.5 Sepracor is the sole and exclusive owner or licensee of the
Assigned Patents, Sepracor Patents and the Sepracor Know-How, all
of which, to the best of Sepracor's knowledge, are free and clear
of any liens, charges and encumbrances, and, except for Sepracor's
Affiliates, no other person, corporate or other private entity, or
governmental entity or subdivision thereof has, or shall have, any
claim of control with respect to the Assigned Patents, Sepracor
Patents and the Sepracor Know-How as they relate to Terfenadine
Carboxylate Technology or Product; and
11.1.6 In the Territory, there are no Third Party claims, judgments or
settlements against or owed by Sepracor pending or, to the
knowledge of Sepracor, threatened, with respect to the Assigned
Patents, the Sepracor Patents and the Sepracor Know-How as they
relate to Terfenadine Carboxylate Technology or Product.
11.2 HMR represents and warrants to Sepracor that:
11.2.1 The execution, delivery and performance of this Agreement by HMR
does not conflict with any agreement, instrument or understanding,
oral or written, to which it is a party or by which it may be
bound, and, to the best of its knowledge, does not violate any
material law or regulation of any court, governmental body or
administrative or other agency having authority over it;
11.2.2 HMR is not currently a party to, and during the term of this
Agreement will not enter into, any agreements, oral or written,
that are inconsistent with its obligations under this Agreement;
11.2.3 HMR is duly organized and validly existing under the laws of the
state of its incorporation and has full legal power and authority
to enter into this Agreement; and
11.2.4 HMR is not subject to any order, decree or injunction by a court of
competent jurisdiction which prevents or materially delays the
consummation of the transactions contemplated by this Agreement.
11.3 THE LIMITED WARRANTIES CONTAINED IN THIS ARTICLE ARE THE SOLE WARRANTIES
GIVEN BY THE PARTIES AND ARE MADE EXPRESSLY IN LIEU OF AND EXCLUDE ANY
IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
TITLE, INFRINGEMENT OR OTHERWISE, AND ALL OTHER EXPRESS OR IMPLIED
REPRESENTATIONS AND WARRANTIES PROVIDED BY COMMON LAW, STATUTE OR
OTHERWISE ARE HEREBY DISCLAIMED BY BOTH PARTIES.
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ARTICLE 12 - INDEMNIFICATION
12.1 HMR agrees to defend, indemnify and hold harmless, Sepracor, its
successors and assigns, and its officers, directors, employees, agents,
Affiliates and any person who controls any of such persons (an
"Indemnified Sepracor Party") from and against any and all liabilities,
claims, demands, judgments, losses, costs, damages, fees or expenses
(including reasonable attorneys', consultants' and other professional fees
and disbursements of every kind, nature and description incurred by such
Indemnified Sepracor Party in connection therewith) (collectively,
"Damages") that such Indemnified Sepracor Party may sustain, suffer or
incur (a) arising out of or in connection with any product liability
action brought by a Third Party purchaser or user (or any heir or assign
thereof) of a Product, including, but not limited to, any actual or
alleged injury, damage, death or other consequence occurring to any person
as a result, directly or indirectly, of the possession, use or consumption
of any Product, whether claimed by reason of breach of warranty,
negligence, product defect or otherwise, or (b) arising out of or in
connection with acts or omissions by or on behalf of HMR or any Affiliate
or Licensee thereof with respect to the manufacture, commercialization,
marketing, sale or use of any Product.
12.2 Sepracor shall defend, indemnify and hold harmless HMR, its successors and
assigns, and its officers, directors, employees, agents, Affiliates and
any person who controls any of such persons (an "Indemnified HMR Party")
from and against any liabilities, claims, demands, judgments, losses,
costs, damages or expenses whatsoever (including reasonable attorneys',
consultants' and other professional fees and disbursements of every kind,
nature and description incurred by such Indemnified HMR Party in
connection therewith) (collectively, "Damages") that such Indemnified HMR
Party may incur to the extent that such Damages are attributed to any
breach of any representation, warranty, covenant or agreement of Sepracor
contained in this Agreement.
ARTICLE 13 - CHOICE OF LAW
13.1 The construction, validity and performance of this Agreement shall be
governed in all respects by the laws of the State of Delaware without
giving effect to principles of conflict of laws.
ARTICLE 14 - FORCE MAJEURE
14.1 No failure or omission by the parties hereto in the performance of any
obligation of this Agreement shall be deemed a breach of this Agreement
nor create any liability if the same shall arise from any cause or causes
beyond the control of the parties, including, but not limited to, the
following which, for the purposes of this
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<PAGE>
Agreement, shall be regarded as beyond the control of the party in
question: act of God; acts or omissions of any government or any rules,
regulations or orders of any governmental authority or any officer,
department, agency or instrument thereof; fire; storm; flood; earthquake;
accident; acts of the public enemy; war; rebellion; insurrection; riot;
invasion; or strikes or lockouts.
ARTICLE 15 - NOTICES
15.1 Any notice required or permitted to be given under this Agreement shall be
mailed by registered or certified air mail, postage prepaid, addressed to
the party to be notified at its address stated below, or at such other
address as may hereafter be furnished in writing to the notifying party,
or by telefax to the numbers set forth below, or to such changed telefax
numbers as may thereafter be furnished.
If to SEPRACOR: Sepracor Inc.
111 Locke Drive
Marlborough, MA 01752
Attn: Chief Executive Officer
Telefax: 508-357-7495
If to HMR:
Hoechst Marion Roussel, Inc.
Route 202-206
P.O. Box 6800
Bridgewater, New Jersey 08807-0800
U.S.A.
Attention: Vice President, Licensing and Alliances
Telefax: 908-231-2257
With a copy to:
Morgan, Lewis & Bockius LLP
214 Carnegie Center
Princeton, New Jersey 08540
Attn: Randall B. Sunberg, Esq.
Telefax: 609-520-6639
Any notice sent under this Article shall be deemed to have been received
on the date actually received, or (i) five (5) Business Days after being
mailed in the case of a notice mailed by registered or certified mail,
postage prepaid; and (ii) one (1) Business Day after being transmitted in
the case of a notice transmitted via telefax.
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ARTICLE 16 - WAIVER
16.1 Any term or provision of this Agreement may be waived at any time by the
party entitled to the benefit thereof by a written instrument duly
executed by such party. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the
right of such party at a later time to enforce the same or any other
provision of this Agreement. No waiver of any condition or of the breach
of any provision of this Agreement in one or more instances shall operate
or be construed as a waiver of any other condition or subsequent breach.
ARTICLE 17 - ENTIRE AGREEMENT
17.1 This Agreement constitutes the entire agreement between the parties hereto
concerning the subject matter hereof and any representation, promise or
condition in connection therewith not incorporated herein shall not be
binding upon either party. This Agreement, including, without limitation,
the Schedules attached hereto, are intended to define the full extent of
the legally enforceable undertakings of the parties hereto, and no promise
or representation, written or oral, which is not set forth explicitly
herein is intended by either party to be legally binding.
17.2 This Agreement shall expressly supersede the 1993 License Agreement
entered by and between Sepracor and HMR (formerly known as Marion Merrell
Dow Inc.) on June 1, 1993. As of the Closing Date, the 1993 License
Agreement shall be of no further force or effect.
ARTICLE 18 - ASSIGNMENT
18.1 Except as otherwise provided herein, this Agreement is not assignable
either in whole or in part without the prior written consent of the other
party; provided, however, that either party may assign this Agreement to
any of its Affiliates or to any successor by merger or sale of
substantially all of the business unit to which the Agreement relates.
18.2 This Agreement will be binding upon successors and permitted assigns of
the parties and the name of a party appearing herein will be deemed to
include the name of such party's successors and permitted assigns to the
extent necessary to carry out the intent of this section.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
ARTICLE 19 - TITLES
19.1 It is agreed that the marginal headings appearing at the beginning of the
numbered Articles hereof have been inserted for convenience only and do
not constitute any part of this Agreement.
ARTICLE 20 - PUBLICITY
20.1 On or shortly after the date hereof, the parties will issue the joint
press release regarding this Agreement attached hereto as Schedule 20.1
(the "Joint Press Release").
20.2 After the date hereof, [**] whether to the [**] stating that [**] or had
[**] insofar as otherwise provided in this Agreement, [**]
20.2.1 Notwithstanding any other provision in this Agreement, [**] after
the date hereof, [**] concerning the subject matter of this
Agreement, [**].
20.2.2 Notwithstanding anything to the contrary in the foregoing, [**] the
Agreement, [**] in any [**] including the [**] to this language in
connection with [**]; provided, however, [**] For the avoidance of
doubt, the parties agree that, [**] in connection with [**] the
statements [**]
20.2.3 Within [**] days of the date hereof, Sepracor shall provide to HMR
the redacted version of this Agreement that Sepracor proposes to
submit to the Securities and Exchange Commission (the "SEC"), and
HMR shall have the right to provide comments thereon. Sepracor
shall consider HMR's comments in good faith and, to the extent
permitted by law, will not unreasonably withhold its acceptance of
such comments. Sepracor shall notify promptly HMR of any comments
of the SEC with respect to such submission.
20.3 HMR may use the Joint Press Release and any Sepracor announcement
concerning the subject matter of this Agreement, and any statements made
in any of the foregoing, without prior notice or approval.
20.3.1 Notwithstanding anything to the contrary in the foregoing, but
subject always to Sections 20.4 and 20.5 below, HMR may use
whatever publicity, news release or public announcements, written
or oral, whether
19
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to the public or press, stockholders, investors, customers,
suppliers or otherwise which it deems, in it sole discretion, to be
appropriate for the purpose of commercializing the Product in the
Territory.
20.3.2 Notwithstanding anything to the contrary in the foregoing, but
subject always to section 20.5 below, HMR may make reference to the
ownership and origin of the technology underlying the Agreement,
including, but not limited to, the outcome of HMR's determination
of priority of invention between the Assigned Patents and the 542
application and the basis of such determination, including but not
limited to the interference arbitrator's decision or opinion.
20.4 Except to the extent set forth in the Joint Press Release, neither party
shall disclose the material business terms of this Agreement except to the
extent required by law or regulation.
20.5 The parties acknowledge that the interference proceeding and arbitration
between them are dissolved and settled by this Agreement, and neither
party shall refer to the interference arbitrator's decision or opinion as
a legally binding decision in or determination of the interference or
arbitration thereof.
20.6 Any publicity, news release or public announcement made out of compliance
with this Article will be considered a material breach of this Agreement
subject only to the provisions of Section 9.1.
ARTICLE 21 - UNENFORCEABLE PROVISIONS
21.1 The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or
entity or any circumstance, is invalid or unenforceable, (i) a suitable
and equitable provision shall be substituted therefore in order to carry
out, so far as may be valid and enforceable, the intent and purpose of
such invalid and unenforceable provision and (ii) the remainder of this
Agreement and the application of such provision to other persons, entities
or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect
such provision, or the application thereof, in any other jurisdiction.
20
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ARTICLE 22 - CONSTRUCTION
22.1 As used in this Agreement, singular includes the plural and plural
includes the singular, wherever so required by fact or context.
ARTICLE 23 - HMR OWNERSHIP
23.1 Nothing in this Agreement shall be construed as conveying or transferring
patent or technology rights of any kind owned by HMR to Sepracor.
23.2 All business decisions, including, but not limited to, decisions
concerning pricing, reimbursement, package design, sales and promotional
activities for Product, and the decision to launch or continue to market
Product in the Territory, shall be within the sole discretion of HMR.
23.3 No right, express or implied, is granted by this Agreement to use in any
manner any trade name or trademark of HMR. When making reference to any
HMR trademark relating to Compound, Sepracor shall include an
acknowledgement that such trademark is the property of HMR. Such
acknowledgement shall be included in an appropriate manner on, for
example, any literature, promotional material or advertising. Sepracor
will not use any of HMR's trademarks or trade names relating to Compound
in a manner which a Third Party could reasonably consider to compromise
the quality and goodwill associated therewith.
ARTICLE 24 - EXECUTION
24.1 This Agreement may be executed in counterparts, each of which shall for
all purposes be deemed an original.
ARTICLE 25 - CLOSING
25.1 The respective obligations of each party to effect the transactions
contemplated under this Agreement shall be subject to the satisfaction, at
or prior to the Closing Date of the following conditions (the performance
of any of which by the other party may be waived in writing by Sepracor or
HMR).
25.1.1 Neither Sepracor nor HMR shall be subject to any order, decree or
injunction by a court of competent jurisdiction which prevents or
materially delays the consummation of the transactions contemplated
hereby.
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25.1.2 No statute, rule or regulation shall have been enacted by the
government, or any governmental agency of the United States or any
state, municipality or other political subdivision thereof, that
makes the consummation of the transactions contemplated hereby
illegal.
25.1.3 The representations and warranties of the other party shall be
accurate in all material respects as of the time of the Closing
Date.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers or representatives as of
the day and year first above written.
SEPRACOR INC.
By: /s/ Timothy J. Barberich
------------------------------
Name: Timothy J. Barberich
Title: President & CEO
HOECHST MARION ROUSSEL, INC.
By: /s/ Peter W. Ladell
------------------------------
Name: Peter W. Ladell
Title: Chief Operating Officer
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SCHEDULE 2.1: FORM OF ASSIGNMENT
ASSIGNMENT
WHEREAS, Sepracor Inc. ("Sepracor"), a Delaware corporation having a place of
business at 111 Locke Drive, Marlborough, Massachusetts 01752, is the sole owner
of U.S. Patent No. 5,375,693, entitled "Methods and Compositions for Treating
Allergic Disorders and Other Disorders using Metabolic Derivatives of
Terfenadine" (the "693 Patent") and U.S. Patent Application Serial No.
08/191,149, entitled "Methods and Compositions for Treating Allergic Disorders
and Other Disorders using Optically Pure Isomers of Metabolic Derivatives of
Terfenadine" (the "149 Application"), and United States patent applications
related thereto; and
WHEREAS, Hoechst Marion Roussel, Inc. ("HMR"), a Delaware corporation having a
place of business at Route 202-206, P.O. Box 6800, Bridgewater, New Jersey
08807, is desirous of obtaining Sepracor's entire right, title, and interest in,
to, and under the 693 Patent, the 149 Application, and United States patent
applications related thereto.
NOW, THEREFORE, in consideration of the premises, one dollar, and other good and
valuable consideration to Sepracor, the receipt and sufficiency of which is
hereby acknowledged, Sepracor hereby assigns to HMR its entire right, title and
interest in, to, and under the 693 Patent and the 149 Application (hereby
incorporated by reference as if fully set forth herein) together with any and
all related United States patent applications, including, but not limited to,
any additions, divisions, continuations, continuations-in-part, reissues,
re-examinations, substitutions, extensions, patent term extensions and renewals
thereof, and patents issuing therefrom, in each case, as fully and entirely as
the same would have been held and enjoyed by Sepracor if this assignment had not
been made.
Sepracor also authorizes and requests that the Commissioner of Patents and
Trademarks of the United States, whose duty it is to issue patents or other
evidence or forms of industrial property protection on applications as
aforesaid, to issue the same to HMR in accordance with the terms of this
instrument.
IN WITNESS WHEREOF, the undersigned duly authorized representative of
Sepracor has affixed his signature.
SEPRACOR INC.
By: _____________________________ Date: ______________________
Timothy J. Barberich
President & CEO
1
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Commonwealth of Massachusetts )
) SS.:
County of Middlesex )
On this _____ day of _________, 1999, before me, a Notary Public in and
for the Commonwealth and County aforesaid, personally appeared Timothy J.
Barberich, to me known and known to me to be the person of that name, who signed
and sealed the foregoing instrument, and he acknowledged the same to be his free
act and deed.
_________________________,
Notary Public.
2
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
SCHEDULE 1.21:
SEPRACOR PATENTS
[**]
<PAGE>
Exhibit 10.31
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
LICENSE AGREEMENT
by and between
SEPRACOR INC.
and
HOECHST MARION ROUSSEL, INC.
[EX-US LICENSE]
August 31, 1999
This document is the confidential information of both parties hereto.
It should be distributed on a need-to-know basis and kept in secure area.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 - DEFINITIONS................................................1
ARTICLE 2 - LICENSE GRANT..............................................5
ARTICLE 3 - PENDING PROCEEDINGS AND ACTIONS............................6
ARTICLE 4 - ROYALTIES..................................................6
ARTICLE 5 - ROYALTY PAYMENTS, REPORTS AND RECORDS......................7
ARTICLE 6 - RIGHTS IN TECHNOLOGY, INVENTIONS AND PATENTS...............9
ARTICLE 7 - INFRINGEMENT INVOLVING PRODUCT............................10
ARTICLE 8 - CONFIDENTIALITY...........................................11
ARTICLE 9 - TERM......................................................12
ARTICLE 10 - BREACH AND TERMINATION...................................12
ARTICLE 11 - RIGHTS AND OBLIGATIONS UPON TERMINATION..................13
ARTICLE 12 - REPRESENTATIONS AND WARRANTIES...........................14
ARTICLE 13 - INDEMNIFICATION..........................................15
ARTICLE 14 - FORCE MAJEURE............................................16
ARTICLE 15 - NOTICES..................................................16
ARTICLE 16 - WAIVER...................................................17
ARTICLE 17 - ENTIRE AGREEMENT.........................................17
ARTICLE 18 - ASSIGNMENT...............................................18
ARTICLE 19 - TITLES...................................................18
ARTICLE 20 - PUBLICITY................................................18
ARTICLE 21 - UNENFORCEABLE PROVISIONS.................................20
ARTICLE 22 - CONSTRUCTION.............................................20
i
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ARTICLE 23 - CHOICE OF LAW............................................20
ARTICLE 24 - HMR OWNERSHIP............................................20
ARTICLE 25 - EXECUTION................................................21
ARTICLE 26 - DISPUTE RESOLUTIONS......................................21
ARTICLE 27 - CLOSING..................................................22
SCHEDULE 1.17 CLAIMS ENCOMPASSING PRODUCT
SCHEDULE 1.19 SEPRACOR PATENTS
SCHEDULE 3.1 RELEASE
SCHEDULE 20.1 JOINT PRESS RELEASE
SCHEDULE 20.2.2 LISTING OF ALLEGRA(R)
SCHEDULE 26 ARBITRATION PROVISIONS
ii
<PAGE>
This License Agreement is made as of this 31st day of August, 1999 (the
"Effective Date") by and between Sepracor Inc. ("Sepracor"), a Delaware
corporation having a place of business at 111 Locke Drive, Marlborough,
Massachusetts 01752, and Hoechst Marion Roussel, Inc. ("HMR"), a Delaware
corporation having a place of business at Route 202-206, P.O. Box 6800,
Bridgewater, New Jersey 08807.
BACKGROUND
WHEREAS, Sepracor owns a portfolio of patents and patent applications generally
directed to Terfenadine Carboxylate Technology and certain know-how relating to
Terfenadine Carboxylate Technology;
WHEREAS, HMR and Sepracor are parties to a number of ongoing actions and
proceedings in various forums and countries, including proceedings in the
Australian, United Kingdom, and European Patent Offices, and actions in Belgium
and England;
WHEREAS, Sepracor is willing to license HMR the exclusive right to use the
Sepracor Technology to develop and sell Product in the Territory; and
WHEREAS, HMR wishes to accept such license.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereinafter set forth, the sufficiency of which is hereby
acknowledged, the parties to this Agreement mutually agree as follows:
ARTICLE 1 - DEFINITIONS
For purposes of this Agreement, the following initially capitalized terms in
this Agreement, whether used in the singular or plural, shall have the following
meanings, unless the context clearly requires otherwise:
1.1 Affiliate. "Affiliate" shall mean, with respect to either party hereto,
any corporation, company, partnership, joint venture or any other entity
which directly or indirectly controls, is controlled by, or is under
common control with such party. For purposes of this definition, "control"
shall mean direct or indirect ownership of at least fifty percent (50%) of
the outstanding voting securities of the entity.
1.2 Agreement. "Agreement" shall mean this License Agreement, including all
Schedules hereto.
1.3 Business Day. "Business Day" shall mean a day on which banks are open for
business in both Marlborough, Massachusetts and Bridgewater, New Jersey.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
1.4 Combination Patent. "Combination Patent" shall mean any and all foreign
equivalents of United States Patent Application Serial No. [**] in the
Territory, and any and all related patent applications in the Territory,
including any additions, divisions, continuations, continuations-in-part,
reissues, reexaminations, substitutions, extensions, patent term
extensions and renewals, and patents issued therefrom.
1.5 Combination Product. "Combination Product" shall mean a Product which is
comprised in part of Compound, and in part of one or more other active
ingredients; provided, however, that Combination Product shall not include
any Product all active ingredients of which are recited in a Live Claim of
one or more issued Sepracor Patents. Notwithstanding the foregoing,
Products containing Compound and pseudoephedrine as the only active
ingredients, including but not limited to the Product currently identified
by the trademark Allegra-D(R), shall not be considered a Combination
Product for the purposes of this Agreement.
1.6 Compound. "Compound" shall mean the terfenadine metabolite known as
terfenadine carboxylate and fexofenadine, also identified by the chemical
name 4-[1-hydroxy-4-[4-(hydroxydiphenylmethyl)-1-piperidinyl]butyl]-
(alpha)-(alpha)-dimethyl benzeneacetic acid, and any stereoisomer,
solvate, clathrate, salt, or non-covalent derivative thereof.
1.7 Confidential Information. "Confidential Information" shall mean all
Sepracor Know-How, and all technical and scientific know-how and
information, pre-clinical and clinical trial results, computer programs,
knowledge, technology, means, methods, processes, practices, formulas,
techniques, procedures, designs, drawings, apparatus, written and oral
representations of data, specifications, and all other scientific,
clinical, regulatory, marketing, financial and commercial information or
data, whether communicated in writing, verbally or electronically, which
is provided by one party to the other party in connection with this
Agreement. When Confidential Information is disclosed in a manner other
than in writing, it shall be reduced to written form, marked
"Confidential" and transmitted to the receiving party within [**] Business
Days of disclosure to the receiving party.
1.8 Control or Controlled. "Control" or "Controlled", when used in connection
with intellectual property rights, shall mean the legal authority or right
of a party hereto to grant a license or sublicense of intellectual
property rights to another party hereto, or to otherwise disclose
proprietary or trade secret information to such other party, without
breaching the terms of any agreement with a Third Party or
misappropriating the proprietary or trade secret information of a Third
Party. Information that is generally known or available to the public as
of the
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Effective Date, or which becomes known or available to the public through
no fault of the party, shall not be deemed Controlled by a party hereto.
1.9 Dollar. "Dollar" shall mean lawful money of the United States of America.
1.10 Generic Equivalent. "Generic Equivalent" shall mean any pharmaceutical
product that is sold by a Third Party without the consent or approval of
HMR or any Affiliate or Licensee thereof, and which includes the same
Compound as an active ingredient as that used in a particular Product for
the same indication and by the same route of administration as the
particular Product. For the purposes of this Section 1.10, an Optically
Pure stereoisomer of a Compound shall be considered a separate and
distinct Compound, and solvates, clathrates, salts or noncovalent
derivatives of a Compound shall be considered one and the same Compound.
1.11 Improvement. "Improvement" shall mean any enhancement of or improvement to
Terfenadine Carboxylate Technology developed, invented or acquired by, or
coming under the Control of, Sepracor during the course or term of this
Agreement.
1.12 Licensee. "Licensee" shall mean any person, corporation, unincorporated
body, or other entity that is not an Affiliate of HMR and to whom HMR
grants a sublicense of the rights granted to HMR pursuant to this
Agreement.
1.13 Live Claim. "Live Claim" shall mean a claim of any issued, unexpired
patent which has not been withdrawn, canceled or surrendered, or held
invalid or unenforceable by a court of competent jurisdiction in a final,
unappealable decision.
1.14 Net Sales. "Net Sales" shall mean the gross amount invoiced by HMR and its
Affiliates and Licensees on account of sales of Product to Third Parties
in the Territory, less the total of [**] and/or [**] and other [**] to the
extent [**] in the [**] and other [**] to the extent [**] in the [**]
pursuant to [**] or the equivalent thereof.
Actual Net Sales for any Combination Product (except Product encompassed
by a Live Claim of an issued Sepracor Patent) shall be multiplied by the
Combination Allocation Portion (as defined below) attributable to such
Combination Product. The "Combination Allocation Portion", as used herein,
shall mean [**] as its [**] only the [**] of the [**] containing as its
active ingredient [**] and the [**] that are [**] by a [**] to a [**]
Section 1.14(a)-
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
(f) above. [**] for the other [**] in the [**] that are [**] on the [**]
for such [**]
1.15 Optically Pure. "Optically Pure" shall mean Compound comprising at least
ninety percent (90%) by weight of one stereoisomer and ten percent (10%)
by weight or less of the other stereoisomer.
1.16 Payment Period. "Payment Period" shall mean a calendar quarter ending on
March 31st, June 30th, September 30th, or December 31st; provided,
however, that the first Payment Period under this Agreement shall include
the calender quarter ending September 30, 1999, and the period from March
1, 1999, to June 30, 1999.
1.17 Product. "Product" shall mean any composition which contains Compound as
an active ingredient, and that is encompassed by a Live Claim of a
Sepracor Patent. Product shall include any Product encompassed by a Live
Claim of an issued Combination Patent. Product containing an Optically
Pure stereoisomer of a Compound shall be considered a separate and
distinct Product. Product containing solvates, clathrates, salts or
noncovalent derivatives of a Compound shall be considered one and the same
Product. If encompassed by a Live Claim of a Combination Patent, Product
containing one or more leukotriene inhibitors and fexofenadine shall be
considered a separate and distinct Product, and not a Combination Product.
Line extensions of a Product shall be considered one and the same Product;
for example, the composition currently identified by the trademark
Allegra-D(R) shall be considered the same Product as the composition
currently identified by the trademark Allegra(R). For the purposes of this
Agreement, claims identical or substantially equivalent to those set forth
in Schedule 1.17 are deemed to be claims that encompass Product as
specified in Schedule 1.17.
1.18 Sepracor Know-How. "Sepracor Know-How" shall mean all proprietary,
non-public Terfenadine Carboxylate Technology, including, without
limitation, processes, techniques, formulas, data, methods, equipment
designs, know-how, show-how and trade secrets, discoveries, practices,
inventions, technology, manufacturing procedures, test procedures,
purification and isolation techniques, instructions, test data and other
intellectual property, patentable or otherwise, tangible or intangible,
that are owned or Controlled by Sepracor as of the Effective Date or which
were developed by or at the request of Sepracor prior to or during the
term of this Agreement and which are not generally known; provided,
however, that "Sepracor Know-How" shall not include any HMR information or
materials.
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1.19 Sepracor Patents. "Sepracor Patents" shall mean all patents and patent
applications in the Territory owned or Controlled by Sepracor at any time
during the term of this Agreement and relating to Terfenadine Carboxylate
Technology, including those set forth in Schedule 1.19 hereto as it may be
updated from time to time, and all additions, divisions, continuations,
continuations-in-part, reissues, re-examinations, substitutions,
extensions, supplementary protection certificates, and renewals thereof
(or foreign equivalents in the Territory of any of the foregoing), and
patents issued therefrom. The term "Sepracor Patents" includes Combination
Patents.
1.20 Sepracor Technology. "Sepracor Technology" shall mean the Sepracor
Patents, Sepracor Know-How and Improvements.
1.21 Terfenadine Carboxylate Technology. "Terfenadine Carboxylate Technology"
shall mean technology related to Compound, including, but not limited to,
methods of use, processes, compositions, or formulations thereof.
1.22 Territory. "Territory" shall mean countries of the entire world aside from
the United States and its territories and possessions as of the Effective
Date.
1.23 Third Party. "Third Party" shall mean any person, corporation,
unincorporated body, or other entity other than Sepracor and HMR and their
respective Affiliates and HMR's Licensees.
ARTICLE 2 - LICENSE GRANT
2.1 Sepracor grants to HMR an exclusive (exclusive even as to Sepracor)
license to develop, have developed, make, have made, use, market, sell,
have sold and distribute Product in the Territory under the Sepracor
Technology, subject to the terms and conditions set forth in this
Agreement.
2.2 The rights and licenses granted hereunder shall be sublicensable by HMR
subject to the terms and conditions set forth in this Agreement, provided
that HMR remains responsible to Sepracor under this Agreement and each
Licensee confirms in writing to HMR that it agrees to be bound by all of
the terms and conditions contained in this Agreement.
ARTICLE 3 - PENDING PROCEEDINGS AND ACTIONS
3.1 The parties will execute a mutual release in substantially the same form
attached as Schedule 3.1, dismissing, withdrawing, releasing or
terminating any and all proceedings or actions currently pending against
the other party before any court,
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
administrative agency, patent authority or other government agency or the
equivalent thereof in the Territory and pertaining to the subject matter
of this Agreement. The provisions of Articles 15, 19, 22, 23 and 25 of
this Agreement shall apply with equal force and effect to the mutual
release set forth in Schedule 3.1.
3.2 HMR shall not be obligated to deliver to Sepracor any amount payable
pursuant to Section 4.1.2 prior to Sepracor's or its agent's or
representative's execution of notifications or other correspondence
substantially in the forms set forth in Exhibits 1-4, 6 and 7 of Schedule
3.1.
ARTICLE 4 - ROYALTIES
4.1 In consideration of the rights and licenses granted under the Sepracor
Technology:
4.1.1 HMR shall pay to Sepracor a royalty of [**] on the Net Sales of
Product in the Territory ("Royalties").
4.1.2 Royalties shall be payable on Net Sales of Product in the Territory,
on a country by country basis, beginning upon the later of March 1,
1999, and the date of issuance of a Sepracor Patent in such country
in the Territory, and continuing on a Product by Product basis until
the first of the following to occur: (1) with respect to a
particular Product line, the introduction in such country in the
Territory of a Generic Equivalent of a Product in such Product line
by a Third Party without approval or consent of HMR or any Affiliate
or Licensee thereof; or (2) with respect to all Products, the
expiration of the last of the Sepracor Patents in such country in
the Territory. The period during which Royalties shall be payable is
hereinafter referred to as the "Royalty Period." In those countries
where Royalties on a Product are payable as of the date of issuance
of a Sepracor Patent in such country, Royalties payable for the
month in which the Sepracor Patent issues shall be calculated on a
pro rata basis, for example, if a Sepracor Patent issues on April
14th, sixteen thirtieths (16/30) of the total April Net Sales for
that Product in the country will be used to calculate the Royalties
due for April of the year of issuance. In addition, on a country by
country basis, Royalties payable for the month during which
Royalties on a Product cease to be payable in a country shall also
be calculated on a pro rata basis.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
4.1.3 With respect to that product which is not encompassed by a Live
Claim of a granted or issued Sepracor Patent, no royalty will be due
under this Agreement.
ARTICLE 5 - ROYALTY PAYMENTS, REPORTS AND RECORDS
5.1 HMR shall deliver to Sepracor within [**] days following the end of each
Payment Period, beginning with the first Payment Period, a written report
(the "Royalty Statement") describing, on a country-by-country basis, for
the applicable Payment Period:
(a) the gross sales during the Payment Period for all Products;
(b) the Net Sales during the Payment Period for all Products, and the
exchange rate used to convert any currency other than Dollars into
Dollars; and
(c) the calculation used to determine the total Royalties due for the
Payment Period.
5.2 Each Royalty Statement for a Payment Period required by Section 5.1 above
shall be accompanied by full payment to Sepracor, made in accordance with
Section 5.3, of Royalties and any interest which may have accrued in
accordance with Articles 4 and 5.
5.3 With regard to any payments due to Sepracor, the following shall apply:
(a) All payments to Sepracor pursuant to this Agreement shall be made by
wire transfer, to Fleet Bank of Massachusetts, 75 State Street,
Boston, Massachusetts 02109 (ABA #011000138) to Account No. [**] or
such other bank or account as Sepracor may from time to time
designate in writing. All such payments shall be made in Dollars.
(b) If Net Sales of any Product for a Payment Period is stated in a
currency other than Dollars, then, for the purpose of determining
the amount of Royalties payable to Sepracor such Net Sales shall be
converted into Dollars using an average exchange rate between those
two currencies during the Payment Period for which such Royalties
become due, wherein such calculated average exchange rate is
calculated as the average of the exchange rates most recently quoted
in the Wall Street Journal in New York on or before each of the last
days for (i) each month in the Payment Period, and (ii) the last
month in the immediately preceding Payment Period. If no such
exchange rates have been quoted in the Wall Street Journal in New
York at any time during the twelve (12) month period
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preceding the date on which such Royalties become due, then such Net
Sales shall be converted to Dollars at the average exchange rate
used by BankBoston during the Payment Period.
(c) Whenever any payment hereunder shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the
immediately succeeding Business Day.
(d) Payments hereunder shall be considered to be made as of the day on
which they are received in Sepracor's designated bank account.
(e) All payments due to Sepracor hereunder but not paid by HMR on the
due date thereof shall bear interest at the rate which is the lesser
of: (i) LIBOR plus two percent (2%) per annum; and (ii) the maximum
lawful interest rate permitted under applicable law. Such interest
shall accrue on the balance of unpaid amounts from time to time
outstanding from the date on which portions of such amounts become
due and owing until payment thereof in full.
5.4 Any income or other taxes which HMR is required by law to pay or withhold
on behalf of Sepracor with respect to Royalties, and any interest thereon,
payable to Sepracor under this Agreement, shall be deducted from the
amount of such Royalties and any interest due, and paid or withheld, as
appropriate, by HMR on behalf of Sepracor. Any such tax required to be
paid or withheld shall be an expense of and borne solely by Sepracor. The
previous two sentences notwithstanding, the parties hereto will reasonably
cooperate in completing and filing documents required under the provisions
of any applicable tax laws or under any other applicable law, in order to
enable HMR to make such payments to Sepracor without any deduction or
withholding.
5.5 HMR shall keep and maintain, and shall cause its Affiliates, Licensees and
assigns to keep and maintain, complete and accurate records and books of
account in sufficient detail and form so as to enable Royalties and any
interest payable to be determined, including but not limited to, true and
accurate records of sales of Products and calculations of Net Sales and
Royalties. Sepracor shall have the right to audit the records of HMR at
its own expense (except as otherwise provided in Section 5.6) using HMR's
independent certified accountants unless good cause can be shown as to why
such accountants should not be used, in which case Sepracor may elect to
use any nationally recognized firm of independent certified accountants to
whom HMR has shown no good cause objection. Such accountants will have
access on reasonable notice to HMR and its Affiliates' and Licensees'
records during reasonable business hours for the purpose of verifying the
Royalties and any interest payable as provided in this Agreement for the
two preceding years. Notwithstanding the foregoing, this right may not be
exercised more than once in any calendar year, and once a
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calendar year is audited it may not be reaudited, and said accountant
shall disclose to Sepracor only information relating solely to the
accuracy of the Royalty Statements provided to Sepracor and the payments
made to Sepracor under this Agreement.
5.6 Any adjustment required as a result of an audit conducted under this
Article shall be made within twenty-five (25) days after the date on
which the accountant conducting the audit issues a written report to
Sepracor and HMR containing the results of the audit. If any
underpayment by HMR is greater than ten percent (10%) of the amount
previously paid to Sepracor for the relevant Payment Period(s), the
costs and expenses of the audit shall be paid for by HMR. In the case
of overpayment, HMR may elect, at its option, to either offset
Royalties and any interest payable to Sepracor by the amount of the
overpayment or request reimbursement and HMR shall, within ten (10)
Business Days of issuance of the auditor's written report, provide
written notice to Sepracor of its election regarding any overpayment. If
HMR elects reimbursement of an overpayment, Sepracor shall have the longer
of a) ten (10) Business Days from its receipt of HMR's written notice,
or b) twenty-five (25) days after the date on which the accountant
conducting the audit issues a written report to Sepracor and HMR
containing the results of the audit, to send HMR the requested
overpayment reimbursement.
5.7 No part of any amount payable to Sepracor under this Agreement may be
reduced due to any counterclaim, set-off, adjustment or other right which
HMR might have against Sepracor, any other party or otherwise, except as
expressly stated to the contrary in this Agreement.
ARTICLE 6 - RIGHTS IN TECHNOLOGY, INVENTIONS AND PATENTS
6.1 Sepracor agrees to use reasonable efforts to continue, at its sole cost
and expense, the prosecution of the Sepracor Patents and maintenance of
the Sepracor Patents and Sepracor Know-How. Prosecution of pending patent
applications shall mean through final patent office appeal and any
opposition proceedings or the like, including but not limited to, re-issue
applications and re-examination proceedings or the equivalent thereof.
6.2 After the Effective Date, Sepracor and HMR shall consult with each other
in connection with prosecution and maintenance of, and annuities for, the
Sepracor Patents. Sepracor agrees to provide HMR with a reasonable
opportunity to comment on all material written correspondence issued by
the relevant patent office in connection with Sepracor Patents, and
Sepracor shall notify HMR of the allowance, grant or acceptance of any
Sepracor Patent. Should Sepracor decide not to pursue or maintain any of
the Sepracor Patents, it shall first offer to assign such Sepracor Patents
to HMR before letting such Sepracor Patents lapse.
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6.3 Sepracor shall consult and cooperate with HMR in good faith with respect
to the filing of any patent applications for Improvements and the
maintenance of patents issued thereon including, without limitation, by
executing and obtaining from employees and other persons all assignments
and other documents reasonably required in connection therewith.
ARTICLE 7 - INFRINGEMENT INVOLVING PRODUCT
7.1 In the event that either HMR or Sepracor becomes aware of Third Party
infringement of any issued Sepracor Patent in the Territory, which
infringement involves Product, it will notify the other party in writing
to that effect. Any such notice shall include evidence to support an
allegation of infringement by such Third Party.
7.1.1 Except as provided in Section 7.1.3, HMR shall have the right, but
not the obligation, to enforce (with Sepracor's cooperation and at
HMR's expense) any Sepracor Patents licensed hereunder against
infringement by Third Parties. Any recovery or damages derived from
enforcement of any Sepracor Patent shall be used to first reimburse
HMR for its documented out-of-pocket legal expenses and costs
relating to such enforcement, then to reimburse Sepracor for its
documented out of pocket legal expenses and costs relating to such
enforcement. Any remaining compensatory damages, such as lost profit
damages and reasonable royalty damages, shall be treated as Net
Sales hereunder for which Sepracor shall be entitled to received a
royalty as provided in Articles 4 and 5 of this Agreement. Any
punitive damages, exemplary damages, or other enhanced damages shall
be shared equally by the parties.
7.1.2 Except as provided in Section 7.1.3, in the event of infringement of
Sepracor Patents, if HMR does not file suit or enter into
negotiations with the Third Party infringer of such Sepracor Patents
within three (3) months of receiving evidence of such infringement
that provides a reasonable basis for jurisdiction of a court, then
Sepracor shall have the right, but not the obligation, to enforce
the Sepracor Patents against such infringement (on its own behalf
and at its own expense). Any recovery or damages derived from
enforcement of any Sepracor Patent shall first be used to reimburse
Sepracor for its documented out of pocket legal expenses and costs
relating to such enforcement, then to reimburse HMR for its
documented out of pocket legal expenses and costs relating to such
enforcement. Any remaining damages shall be divided by allocating
three quarters of such damages to Sepracor and one quarter of such
damages to HMR.
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7.1.3 Notwithstanding any other provisions herein, if HMR, or its
Affiliates or Licensees is not selling any Product encompassed by a
Live Claim of an issued Combination Patent in the Territory, and
infringement by a Third Party involves Product encompassed by such a
Live Claim of an issued Combination Patent, Sepracor shall have the
right, but not the obligation, to enforce the Combination Patents
against such infringement (on its own behalf and at its own
expense), and Sepracor shall retain all recoveries from such
enforcement.
7.2 In any suit or dispute involving infringement of Sepracor Patents by a
Third Party, the parties shall cooperate fully. Upon the request and at
the expense of the party bringing suit, the other party shall make
available to the party bringing suit at reasonable times and under
appropriate conditions all relevant assistance. In particular, the parties
agree to furnish technical and other necessary assistance to each other in
conducting any litigation involving Product necessary to enforce or defend
the Sepracor Patents against Third Parties.
ARTICLE 8 - CONFIDENTIALITY
8.1 During the term of this Agreement, and for a period of five (5) years
thereafter, each party hereto will maintain in confidence all Confidential
Information disclosed by the other party hereto. Neither party shall use,
disclose or grant use of such Confidential Information except as required
under this Agreement. To the extent that disclosure is authorized by this
Agreement, the disclosing party shall obtain prior agreement from its
employees, agents, consultants, Affiliates, Licensees or clinical
investigators to whom disclosure is to be made to hold in confidence and
not make use of such information for any purpose other than those
permitted by this Agreement. Each party shall use at least the same
standard of care as it uses to protect its own Confidential Information to
ensure that such employees, agents, consultants Affiliates, Licensees and
clinical investigators do not disclose or make any unauthorized use of
such Confidential Information. Each party shall promptly notify the other
upon discovery of any unauthorized use or disclosure of Confidential
Information. Confidential Information shall not include any information
which:
8.1.1 was already known to the receiving party, other than under an
obligation of confidentiality, at the time of disclosure by the
other party;
8.1.2 was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the other party;
8.1.3 becomes generally available to the public or otherwise part of the
public domain after its disclosure and other than through any act or
omission of the receiving party in breach of this Agreement;
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8.1.4 was disclosed to the receiving party, other than under an obligation
of confidentiality, by a Third Party who had no obligation to the
other party not to disclose such information; or
8.1.5 was independently developed by the receiving party without reference
to the disclosure by the other party.
8.2 The parties agree that the material financial terms of the Agreement shall
be considered the Confidential Information of both parties.
8.3 Each party may disclose the Confidential Information to the extent such
disclosure is reasonably necessary in filing or prosecuting patent
applications, prosecuting or defending litigation, or complying with any
applicable statute or governmental regulation. In addition, either party
may disclose Confidential Information to its Affiliates, and HMR may
disclose such Confidential Information to its Licensees; provided,
however, in connection with any such disclosure the disclosing party shall
use diligent efforts to secure confidential treatment of such information.
8.4 The parties shall undertake to ensure that all their employees who have
access to Confidential Information of the other party are under
obligations of confidentiality fully consistent with those provided in
this Article 8.
ARTICLE 9 - TERM
9.1 This Agreement will commence as of the Effective Date and, unless sooner
terminated as provided hereunder, shall continue in full force and effect
on a country-by-country basis in the Territory until the expiration of the
last to expire of Sepracor Patents in a country, at which point HMR will
have a fully paid-up, royalty-free and irrevocable non-exclusive license
under the Sepracor Technology in such country.
ARTICLE 10 - BREACH AND TERMINATION
10.1 In the event HMR or Sepracor are in material breach of any of the
respective obligations and conditions contained in this Agreement, the
other party shall be entitled to give the breaching party written notice
requiring it to cure such material breach. If such material breach is not
cured within ninety (90) days after receipt of such written notice, the
notifying party may seek a determination of damages for the uncured breach
from the breaching party. If the uncured breach is an uncured material
breach under Section 20.6 of this Agreement, Sepracor agrees that such
uncured breach may result in irreparable harm to HMR and HMR may seek
temporary or permanent injunctive relief or other equitable relief.
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10.2 HMR may terminate this Agreement for any reason by giving Sepracor sixty
(60) days written notice. In the event of such a termination, HMR shall
relinquish all rights and licenses granted by Sepracor to HMR under the
Agreement and return all Sepracor Know-How, except for one copy of any
documents, which shall be retained for solely for the purpose of
determining any continuing obligations under Articles 8 and 13 of this
Agreement.
10.3 Sepracor shall have the right to terminate this Agreement, effective
immediately, if HMR (i) does not comply with the provisions of Article 3
and Section 27.1.4, or (ii) except as provided in Articles 6 and 7,
without the consent of the other party, at any time after the Effective
Date of this Agreement initiates or participates in (a) any proceeding or
action against Sepracor or its Affiliates involving Compound or Product,
or (b) any proceeding or action involving Sepracor Technology, in each
case before any court, administrative or other government agency, or
patent authority.
10.4 HMR shall have the right to terminate this Agreement, effective
immediately, if Sepracor (i) does not comply with the provisions of
Article 3 and Section 27.1.4, or (ii) except as provided in Articles 6 and
7, without the consent of the other party, at any time after the Effective
Date of this Agreement initiates or participates in (a) any proceeding or
action against HMR or its Affiliates involving Compound or Product, or (b)
any proceeding or action involving HMR's technology relating to Compound,
in each case before any court, administrative or other government agency,
or patent authority.
10.5 In the event that one of the parties hereto becomes bankrupt or insolvent,
a receiver or a trustee is appointed for the property or estate of such
party and said receiver or trustee is not removed within sixty (60) days,
or the party makes an assignment for the benefit of its creditors, and
whether any of the aforesaid events be the outcome of the voluntary act of
that party, or otherwise, the other party shall be entitled to terminate
this Agreement forthwith by giving a written notice to the first party.
10.6 Nothing herein shall prevent either party hereto from exercising such
party's right to obtain temporary or permanent injunctive relief or other
equitable relief.
ARTICLE 11 - RIGHTS AND OBLIGATIONS UPON TERMINATION
11.1 Termination of this Agreement by either party shall not prejudice the
rights of such party under this Agreement, at law or in equity or
otherwise, to seek damages or injunctive relief for any breach of this
Agreement by the other party hereto.
11.2 The termination of this Agreement for any reason shall be without
prejudice to (i) Sepracor's right to receive all payments accrued and
unpaid as of the effective
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date of such termination, (ii) the provisions of Section 5.5 and 5.6
hereof as to Payment Periods, or any portion thereof, prior to the
effective date of such termination, and (iii) the remedy of either party
hereto in respect of any previous breach of any of the covenants herein
contained.
11.3 Articles 8, 11, 13, 20 and 24 shall survive termination of this Agreement.
ARTICLE 12 - REPRESENTATIONS AND WARRANTIES
12.1 Sepracor represents and warrants to HMR that:
12.1.1 The execution, delivery and performance of this Agreement by
Sepracor does not conflict with any agreement, instrument or
understanding, oral or written, to which it is a party or by which
it may be bound, and, to the best of its knowledge, does not
violate any material law or regulation of any court, governmental
body or administrative or other agency having authority over it;
12.1.2 Sepracor is not currently a party to, and during the term of this
Agreement will not enter into, any agreements, oral or written,
that are inconsistent with its obligations under this Agreement;
12.1.3 Sepracor is duly organized and validly existing under the laws of
the state of its incorporation and has full legal power and
authority to enter into this Agreement;
12.1.4 Sepracor is not currently subject to any order, decree or
injunction by a court of competent jurisdiction which prevents or
materially delays the consummation of the transactions contemplated
by this Agreement;
12.1.5 Sepracor is the sole and exclusive owner or licensee of the
Sepracor Patents and the Sepracor Know-How, all of which, to the
best of Sepracor's knowledge, are free and clear of any liens,
charges and encumbrances, and, except for Sepracor's Affiliates, no
other person, corporate or other private entity, or governmental
entity or subdivision thereof has, or shall have, any claim of
control with respect to the Sepracor Patents and the Sepracor
Know-How as they relate to Terfenadine Carboxylate Technology or
Product; and
12.1.6 In the Territory, there are no Third Party claims, judgments or
settlements against or owed by Sepracor pending or, to the
knowledge of Sepracor, threatened, with respect to the Sepracor
Patents and the Sepracor Know-How as they relate to Terfenadine
Carboxylate Technology or Product.
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12.2 HMR represents and warrants to Sepracor that:
12.2.1 The execution, delivery and performance of this Agreement by HMR
does not conflict with any agreement, instrument or understanding,
oral or written, to which it is a party or by which it may be
bound, and, to the best of its knowledge, does not violate any
material law or regulation of any court, governmental body or
administrative or other agency having authority over it;
12.2.2 HMR is not currently a party to, and during the term of this
Agreement will not enter into, any agreements, oral or written,
that are inconsistent with its obligations under this Agreement;
12.2.3 HMR is duly organized and validly existing under the laws of the
state of its incorporation and has full legal power and authority
to enter into this Agreement; and
12.2.4 HMR is not currently subject to any order, decree or injunction by
a court of competent jurisdiction which prevents or materially
delays the consummation of the transactions contemplated by this
Agreement.
12.3 THE LIMITED WARRANTIES CONTAINED IN THIS ARTICLE ARE THE SOLE WARRANTIES
GIVEN BY THE PARTIES AND ARE MADE EXPRESSLY IN LIEU OF AND EXCLUDE ANY
IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
TITLE, INFRINGEMENT OR OTHERWISE, AND ALL OTHER EXPRESS OR IMPLIED
REPRESENTATIONS AND WARRANTIES PROVIDED BY COMMON LAW, STATUTE OR
OTHERWISE ARE HEREBY DISCLAIMED BY BOTH PARTIES.
ARTICLE 13 - INDEMNIFICATION
13.1 HMR agrees to defend, indemnify and hold harmless, Sepracor, its
successors and assigns, and its officers, directors, employees, agents,
Affiliates and any person who controls any of such persons (an
"Indemnified Sepracor Party") from and against any and all liabilities,
claims, demands, judgments, losses, costs, damages, fees or expenses
(including reasonable attorneys', consultants' and other professional fees
and disbursements of every kind, nature and description incurred by such
Indemnified Sepracor Party in connection therewith) (collectively,
"Damages") that such Indemnified Sepracor Party may sustain, suffer or
incur (a) arising out of or in connection with any product liability
action brought by a Third Party purchaser or user (or any heir or assign
thereof) of a Product, including, but not limited to, any actual or
alleged injury, damage, death or other consequence occurring to any person
as a result, directly or indirectly, of
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the possession, use or consumption of any Product, whether claimed by
reason of breach of warranty, negligence, product defect or otherwise, or
(b) arising out of or in connection with acts or omissions by or on behalf
of HMR or any Affiliate or Licensee thereof with respect to
themanufacture, commercialization, marketing, sale or use of any Product.
13.2 Sepracor shall defend, indemnify and hold harmless HMR, its successors and
assigns, and its officers, directors, employees, agents, Affiliates and
any person who controls any of such persons (an "Indemnified HMR Party")
from and against any liabilities, claims, demands, judgments, losses,
costs, damages or expenses whatsoever (including reasonable attorneys',
consultants' and other professional fees and disbursements of every kind,
nature and description incurred by such Indemnified HMR Party in
connection therewith) (collectively, "Damages") that such Indemnified HMR
Party may sustain to the extent that such Damages are attributed to any
breach of any representation, warranty, covenant or agreement of Sepracor
contained in this Agreement.
ARTICLE 14 - FORCE MAJEURE
14.1 No failure or omission by the parties hereto in the performance of any
obligation of this Agreement shall be deemed a breach of this Agreement
nor create any liability if the same shall arise from any cause or causes
beyond the control of the parties, including, but not limited to, the
following which, for the purposes of this Agreement, shall be regarded as
beyond the control of the party in question: act of God; acts or omissions
of any government or any rules, regulations or orders of any governmental
authority or any officer, department, agency or instrument thereof; fire;
storm; flood; earthquake; accident; acts of the public enemy; war;
rebellion; insurrection; riot; invasion; or strikes or lockouts.
ARTICLE 15 - NOTICES
15.1 Any notice required or permitted to be given under this Agreement shall be
mailed by registered or certified air mail, postage prepaid, addressed to
the party to be notified at its address stated below, or at such other
address as may hereafter be furnished in writing to the notifying party or
by telefax to the numbers set forth below or to such changed telefax
numbers as may thereafter be furnished.
If to SEPRACOR: Sepracor Inc.
111 Locke Drive
Marlborough, MA 01752
Attn: Chief Executive Officer
Telefax: 508-357-7495
If to HMR:
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Hoechst Marion Roussel, Inc.
Route 202-206
P.O. Box 6800
Bridgewater, New Jersey 08807-0800
U.S.A.
Attention: Vice President, Licensing and Alliances
Telefax: 908-231-2257
With a copy to:
Morgan, Lewis & Bockius LLP
214 Carnegie Center
Princeton, New Jersey 08540
Attn: Randall B. Sunberg, Esq.
Telefax: 609-520-6639
Any notice sent under this Article shall be deemed to have been received on the
date actually received, or (i) five (5) Business Days after being mailed in the
case of a notice mailed by registered or certified mail, postage prepaid; and
(ii) one (1) Business Day after being transmitted in the case of a notice
transmitted via telefax.
ARTICLE 16 - WAIVER
16.1 Any term or provision of this Agreement may be waived at any time by the
party entitled to the benefit thereof by a written instrument duly
executed by such party. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the
right of such party at a later time to enforce the same or any other
provision of this Agreement. No waiver of any condition or of the breach
of any provision of this Agreement in one or more instances shall operate
or be construed as a waiver of any other condition or subsequent breach.
ARTICLE 17 - ENTIRE AGREEMENT
17.1 This Agreement constitutes the entire agreement between the parties hereto
concerning the subject matter hereof and any representation, promise or
condition in connection therewith not incorporated herein shall not be
binding upon either party. This Agreement, including, without limitation,
the Schedules attached hereto, are intended to define the full extent of
the legally enforceable undertakings of the parties hereto, and no promise
or representation, written or oral, which is not set forth explicitly
herein is intended by either party to be legally binding.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
ARTICLE 18 - ASSIGNMENT
18.1 Except as otherwise provided herein, this Agreement is not assignable
either in whole or in part without the prior written consent of the other
party; provided, however, that either party may assign this Agreement to
any of its Affiliates or to any successor by merger or sale of
substantially all of the business unit to which the Agreement relates.
18.2 This Agreement will be binding upon successors and permitted assigns of
the parties and the name of a party appearing herein will be deemed to
include the name of such party's successors and permitted assigns to the
extent necessary to carry out the intent of this section.
ARTICLE 19 - TITLES
19.1 It is agreed that the marginal headings appearing at the beginning of the
numbered Articles hereof have been inserted for convenience only and do
not constitute any part of this Agreement.
ARTICLE 20 - PUBLICITY
20.1 On or shortly after the date hereof, the parties will issue the joint
press release regarding this Agreement attached hereto as Schedule 20.1
(the "Joint Press Release").
20.2 After the date hereof, [**] whether to the [**] stating that [**] or had
[**] insofar as otherwise provided in this Agreement, [**]
20.2.1 Notwithstanding any other provision in this Agreement, [**] after
the date hereof, [**] concerning the subject matter of this
Agreement, [**].
20.2.2 Notwithstanding anything to the contrary in the foregoing, [**] the
Agreement, [**] in any [**] including the [**] to this language in
connection with [**]; provided, however, [**] For the avoidance of
doubt, the parties agree that, [**] in connection with [**] the
statements [**]
20.2.3 Within [**] days of the date hereof, Sepracor shall provide to HMR
the redacted version of this Agreement that Sepracor proposes to
submit to the Securities and Exchange Commission (the "SEC"), and
HMR shall have the right to provide comments thereon. Sepracor
shall consider
18
<PAGE>
HMR's comments in good faith and, to the extent permitted by law,
will not unreasonably withhold its acceptance of such comments.
Sepracor shall notify promptly HMR of any comments of the SEC with
respect to such submission.
20.3 HMR may use the Joint Press Release and any Sepracor announcement
concerning the subject matter of this Agreement, and any statements made
in any of the foregoing, without prior notice or approval.
20.3.1 Notwithstanding anything to the contrary in the foregoing, but
subject always to Sections 20.4 and 20.5 below, HMR may use
whatever publicity, news release or public announcements, written
or oral, whether to the public or press, stockholders, investors,
customers, suppliers or otherwise which it deems, in it sole
discretion, to be appropriate for the purpose of commercializing
the Product in the Territory.
20.3.2 Notwithstanding anything to the contrary in the foregoing, , but
subject always to section 20.5 below, HMR may make reference to the
ownership and origin of the technology underlying the Agreement,
including, but not limited to, the outcome of HMR's determination
of priority of invention between the Assigned Patents and the 542
application and the basis of such determination, including but not
limited to the interference arbitrator's decision or opinion.
20.4 Except to the extent set forth in the Joint Press Release, neither party
shall disclose the material business terms of this Agreement except to the
extent required by law or regulation.
20.5 The parties acknowledge that the interference proceeding and arbitration
between them are dissolved and settled by this Agreement, and neither
party shall refer to the interference arbitrator's decision or opinion as
a legally binding decision in or determination of the interference or
arbitration thereof.
20.6 Any publicity, news release or public announcement made out of compliance
with this Article will be considered a material breach of this Agreement
subject only to the provisions of Section 10.1.
ARTICLE 21 - UNENFORCEABLE PROVISIONS
21.1 The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or
entity or any circumstance, is invalid or
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unenforceable, (i) a suitable and equitable provision shall be substituted
therefore in order to carry out, so far as may be valid and enforceable,
the intent and purpose of such invalid and unenforceable provision and
(ii) the remainder of this Agreement and the application of such provision
to other persons, entities or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or
unenforceability affect such provision, or the application thereof, in any
other jurisdiction.
ARTICLE 22 - CONSTRUCTION
22.1 As used in this Agreement, singular includes the plural and plural
includes the singular, wherever so required by fact or context.
ARTICLE 23 - CHOICE OF LAW
23.1 The construction, validity and performance of this Agreement shall be
governed in all respects by the laws of the United Kingdom, without giving
effect to principles of conflict of laws and any suit brought pursuant to
this Agreement shall be filed in the appropriate forum in London, England.
ARTICLE 24 - HMR OWNERSHIP
24.1 Nothing in this Agreement shall be construed as conveying or transferring
patent or technology rights of any kind owned by HMR to Sepracor.
24.2 All business decisions, including, but not limited to, decisions
concerning pricing, reimbursement, package design, sales and promotional
activities for Product, and the decision to launch or continue to market
Product in the Territory, shall be within the sole discretion of HMR.
24.3 No right, express or implied, is granted by this Agreement to use in any
manner any trade name or trademark of HMR. When making reference to any
HMR trademark relating to Compound, Sepracor shall include an
acknowledgement that such trademark is the property of HMR. Such
acknowledgement shall be included in an appropriate manner on, for
example, any literature, promotional material or advertising. Sepracor
will not use any of HMR's trademarks or trade names relating to Compound
in a manner which a Third Party could reasonably consider to compromise
the quality and goodwill associated therewith.
ARTICLE 25 - EXECUTION
25.1 This Agreement may be executed in counterparts, each of which shall for
all purposes be deemed an original.
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ARTICLE 26 - DISPUTE RESOLUTIONS
26.1 In the event any dispute, difference or question arises between the
parties pertaining to or in connection with whether a Product is
encompassed by a Live Claim of a Sepracor Patent in a country in the
Territory, then such dispute shall be resolved in the step-wise process
set forth in Sections 26.1(a) to (d) below.
(a) Promptly upon receiving notice of the expected issuance or grant of
a Sepracor Patent in a particular country, HMR shall make a good
faith, reasonable determination as to whether the Product is
encompassed by a Live Claim of a Sepracor Patent in that country.
(b) If in good faith HMR reasonably determines that such Product is not
encompassed by a Live Claim of a Sepracor Patent in the country, HMR
shall provide Sepracor with written notification of its
determination, and the parties shall meet and discuss the reasons
for HMR's determination.
(c) If the parties' discussions do not resolve the dispute as to whether
a Product is encompassed by a Live Claim of a Sepracor Patent in the
country, the parties shall jointly retain a mutually acceptable
attorney with expertise in the field of patents and/or intellectual
property rights in the relevant country to render an independent
expert opinion on the issue. If both parties agree in writing with
the independent expert's opinion, it will be binding upon the
parties.
(d) If either party does not agree in writing with the independent
expert's opinion, within thirty (30) days of the receipt of the
opinion, the disagreeing party may submit the disputed matter to
binding arbitration in accordance with Schedule 26. If the disputed
matter is not submitted to binding arbitration within the thirty
(30) day period, the expert opinion will be final and binding on the
parties for the purpose of determining whether the Product at issue
is encompassed by a Live Claim of a Sepracor Patent in the country
at issue.
ARTICLE 27 - CLOSING
27.1 The respective obligations of each party to effect the transactions
contemplated under this Agreement shall be subject to the satisfaction, at
or prior to the Effective Date of the following conditions (the
performance of any of which by the other party may be waived in writing by
Sepracor or HMR).
27.1.1 Neither Sepracor nor HMR shall be subject to any order, decree or
injunction by a court of competent jurisdiction which prevents or
21
<PAGE>
materially delays the consummation of the transactions contemplated
hereby.
27.1.2 No statute, rule or regulation shall have been enacted by the
government, or any governmental agency of the United States or any
state, municipality or other political subdivision thereof, that
makes the consummation of the transactions contemplated hereby
illegal.
27.1.3 The representations and warranties of the other party shall be
accurate in all material respects as of the time of the Effective
Date and such other party shall have delivered a certificate of an
officer certifying the same.
27.1.4 The parties shall have executed a mutual release in substantially
the form attached as Schedule 3.1, dismissing, withdrawing,
releasing or terminating without prejudice any and all actions or
proceedings currently pending against the other party before any
court, administrative agency, patent authority or other government
agency or the equivalent thereof in the Territory and pertaining to
the subject matter of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers or representatives as of
the day and year first above written.
SEPRACOR INC.
By: /s/ Timothy J. Barberich
------------------------------
Name: Timothy J. Barberich
Title: President & CEO
HOECHST MARION ROUSSEL, INC.
By: /s/ Peter W. Ladell
------------------------------
Name: Peter W. Ladell
Title: Chief Operating Officer
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
SCHEDULE 1.19:
SEPRACOR PATENTS
[**]
<PAGE>
Exhibit 10.32
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
LICENSE AND ASSIGNMENT AGREEMENT
by and between
SEPRACOR INC.
and
RHONE-POULENC RORER SA
September 30, 1999
This document is the confidential information of both parties hereto.
It should be distributed on a need-to-know basis and kept in a secure area.
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS......................................................1
ARTICLE 2 - ASSIGNMENT AND LICENSE GRANT.....................................4
ARTICLE 3 - ROYALTIES AND OTHER CONSIDERATION................................5
ARTICLE 4 - ROYALTY PAYMENTS, REPORTS AND RECORDS............................7
ARTICLE 5 - COOPERATION, TECHNOLOGY TRANSFER, AND INVENTIONS.................8
ARTICLE 6 - INFRINGEMENT....................................................11
ARTICLE 7 - CONFIDENTIALITY.................................................11
ARTICLE 8 - TERM............................................................13
ARTICLE 9 - BREACH AND TERMINATION..........................................13
ARTICLE 10 - REPRESENTATIONS,WARRANTIES AND CONVENANTS......................13
ARTICLE 11 - ADVERSE EVENTS.................................................16
ARTICLE 12 - INDEMNIFICATION................................................16
ARTICLE 13 - CHOICE OF LAW..................................................17
ARTICLE 14 - FORCE MAJEURE..................................................17
ARTICLE 15 - NOTICES........................................................18
ARTICLE 16 - WAIVER.........................................................19
ARTICLE 17 - ENTIRE AGREEMENT...............................................19
ARTICLE 18 - ASSIGNMENT.....................................................19
ARTICLE 19 - TITLES.........................................................19
ARTICLE 20 - PUBLICITY......................................................20
ARTICLE 21 - UNENFORCEABLE PROVISIONS.......................................20
ARTICLE 22 - CONSTRUCTION...................................................20
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ARTICLE 23 - OWNERSHIP......................................................20
ARTICLE 24 - INDEPENDENT CONTRACTORS........................................21
ARTICLE 25 - EXECUTION......................................................21
SCHEDULE 1.15 - RPR PATENT APPLICATIONS
SCHEDULE 2.1 - FORM OF ASSIGNMENT
ii
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
This License and Assignment Agreement is made as of this 30th day of September,
1999 by and between Sepracor Inc., a Delaware corporation having a place of
business at 111 Locke Drive, Marlborough, Massachusetts 01752 ("Sepracor"), and
Rhone-Poulenc Rorer SA, a French corporation having a place of business at 20,
avenue Raymond-Aron, 92165 Antony Cedex, France ("RPR").
BACKGROUND
WHEREAS, Sepracor is the assignee of U.S. Patent No. 5,786,357 issued July 28,
1998, relating to use of (+) zopiclone (the "Sepracor Patent") and is interested
in developing pharmaceutical products containing (+) zopiclone as an active
ingredient for sale in the United States;
WHEREAS, RPR owns U.S. Patent Application Serial No. [**] filed July 29, 1998,
relating to use of (+) zopiclone (the "RPR Application" as further defined
hereinafter), and certain know-how relating to the use of zopiclone, its
enantiomers and metabolites;
WHEREAS, Patent Interference Number 104,423 (the "Interference") was declared by
the U.S. Patent and Trademark Office ("PTO") between the Sepracor Patent and the
RPR Application;
WHEREAS, on the terms and conditions set forth herein, RPR is willing to assign
the RPR Application to Sepracor and license to Sepracor the exclusive right
under certain RPR know-how to make, have made, use, market, sell, offer for
sale, have sold, and distribute pharmaceutical products containing (+)
zopiclone, in the United States; and
WHEREAS, Sepracor wishes to accept such assignment and license.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereinafter set forth, the sufficiency of which is hereby
acknowledged, the parties to this Agreement mutually agree as follows:
ARTICLE 1 - DEFINITIONS
For purposes of this Agreement, the following initially capitalized terms in
this Agreement, whether used in the singular or plural, shall have the following
meanings, unless the context clearly requires otherwise:
1.1 "Affiliate" shall mean, with respect to either party hereto, any
corporation, company, partnership, joint venture or any other entity which
directly or indirectly controls, is controlled by, or is under common
control with such party. For purposes of this definition, "control" shall
mean direct or indirect ownership of at least fifty percent (50%)
outstanding voting securities of the entity.
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1.2 "Agreement" shall mean this License and Assignment Agreement.
1.3 "Business Day" shall mean a day on which banks are open for business in
both Marlborough, Massachusetts and Philadelphia, Pennsylvania.
1.4 "Compound" shall mean the compound known as (+) zopiclone, also identified
by the chemical name (+) 6-(5-chloro-2-pyridinyl)-6,7-dihydro-7-oxo-5H-
pyrrolo [3,4b]pyrazin-5-yl 4-methylpiperazine-1-carboxylate or (+)
6-(5-chloropyri-2-dyl)- 5-(4-methylpiperazin-1-yl) carbonyloxy-7-oxo-6,7-
dihydro-5H-pyrrolo [3,4b] pyrazine.
1.5 "Confidential Information" shall mean all RPR Know-How, and all technical
and scientific know-how and information, pre-clinical and clinical trial
results, computer programs, knowledge, technology, means, methods,
processes, practices, formulas, techniques, procedures, designs, drawings,
apparatus, written and oral representations of data, specifications, and
all other scientific, clinical, regulatory, marketing, financial and
commercial information or data, whether communicated in writing, verbally
or electronically, which is provided by one party to the other party in
connection with this Agreement.
1.6 "Control" or "Controlled", when used in connection with intellectual
property rights, shall mean the legal authority or right of a party hereto
to grant a license or sublicense of intellectual property rights to
another party hereto, or to otherwise disclose proprietary or trade secret
information to such other party, without breaching the terms of any
agreement with a Third Party, or misappropriating the proprietary or trade
secret information of a Third Party. Information that is generally known
or available to the public shall not be deemed Controlled by a party
hereto.
1.7 "Effective Date" shall mean, except to the extent necessary to permit the
initial payment by Sepracor set forth Section 3.2.1 , the latest of (a)
the date on which RPR executes this Agreement; (b) the date on which
Sepracor executes this Agreement; (c) if applicable, the next Business Day
following the expiration or earlier termination of any notice and waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended ("HSR Act"); and (d) the date on which the parties agree that no
filing under the HSR Act is required.
1.8 "Generic Version" shall mean any pharmaceutical product containing
Compound that is introduced in the Territory by a Third Party as a result
of an Abbreviated New Drug Application relying on a New Drug Application
for a Product filed by Sepracor or its Affiliate or Licensee.
1.9 "Improvement" shall mean any enhancement of or improvement to the
formulation, ingredients, preparation, presentation, means of delivery,
dosage, packaging of, manufacture, or any new or expanded therapeutic
indication(s) specifically relating to Compound developed, invented or
acquired by, or coming under the Control of, RPR or
2
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
an Affiliate thereof during the term of this Agreement, including but not
limited to, any patents or patent applications embodying any of the
foregoing.
1.10 "Interference" shall mean Patent Interference Number 104,423.
1.11 "Licensee" shall mean any person, corporation, unincorporated body, or
other entity that is not an Affiliate of Sepracor and to whom Sepracor
grants a license or sublicense of the rights assigned or granted to
Sepracor pursuant to this Agreement.
1.12 "Net Sales" shall mean, with respect to Product, the gross amount invoiced
by Sepracor, its Affiliates and Licensees on all sales of Product (but not
including sales between or among Sepracor, its Affiliates and Licensees)
less (a) [**] (provided that [**] are [**] to the [**] as applicable) [**]
or to [**] including [**] (b) [**] for [**] for [**] or [**], (c) [**] and
[**] and (d) [**] and other [**] with the sale, to the [**] what are [**]
1.13 "Payment Period" shall mean a calendar quarter ending on March 31st, June
30th, September 30th, or December 31st.
1.14 "Product" shall mean any composition which contains Compound as an active
ingredient, including any composition which contains Compound and one or
more other active ingredients.
1.15 "RPR Application" shall mean the patent applications listed in Schedule
1.15, and any and all additions, divisions, continuations,
continuations-in-part, reissues, reexaminations, substitutions,
extensions, patent term extensions and renewals thereof, and patents
issued therefrom.
1.16 "RPR Know-How" shall mean all proprietary, non-public information
specifically relating to Zopiclone Technology, including, without
limitation, processes, techniques, formulas, formulations and formulation
technology, data, methods (including but not limited to analytical
methods), equipment designs, know-how, show-how and trade secrets,
patentable or otherwise, tangible or intangible, that are owned or
Controlled by RPR or an Affiliate thereof as of the date of execution of
this Agreement. RPR Know-How shall include all Chemistry, Manufacturing
and Control ("CMC"), preclinical, and clinical data in the possession of
RPR or its Affiliates relating to Compound, the racemate or the other
enantiomer thereof, or metabolites of any of the foregoing, including
regulatory filings and post-launch European safety dossiers.
1.17 "Regulatory Approval" means, with respect to the Territory, receipt of all
governmental and regulatory registrations and approvals (including, but
not limited to, approvals of all
3
<PAGE>
final Product labeling) required for the marketing and sale of Product in
the Territory.
1.18 "Territory" shall mean the United States of America and its territories
and possessions.
1.19 "Third Party" shall mean any person, corporation, unincorporated body, or
other entity other than RPR and its Affiliates and Sepracor and its
Affiliates and Licensees.
1.20 "Zopiclone Technology" shall mean technology specifically related to
Compound, the racemate or the other enantiomer thereof, or metabolites of
any of the foregoing.
ARTICLE 2 - ASSIGNMENT AND LICENSE GRANT
2.1 Within ten (10) Business Days of the Effective Date of this Agreement, RPR
shall assign all right, title and interest to the RPR Application to
Sepracor pursuant to an assignment substantially in the form attached
hereto as Schedule 2.1. Upon execution by RPR, such assignment shall be
transmitted promptly to Sepracor and Sepracor may, at its sole discretion,
attend to filing and recordation thereof with the U.S. Patent and
Trademark Office (PTO).
2.2 RPR grants to Sepracor an exclusive license (exclusive even as to RPR and
its Affiliates, except as provided under Section 2.7) under the RPR
Know-How and Improvements to develop, have developed, make, have made,
use, market, sell, offer for sale, have sold and distribute Product in the
Territory. RPR agrees not to assert any claims for patent infringement in
the Territory based on manufacture, use or sale of Product made, used or
sold by Sepracor, its Affiliates or Licensees during the term of this
Agreement.
2.3 For the avoidance of any doubt, the parties expressly agree that the grant
set forth in Section 2.2 above shall include, but not be limited to, the
right to read, reference, copy, summarize, and use any and all Chemistry,
Manufacturing and Control ("CMC"), preclinical, and clinical data in the
possession of RPR or its Affiliates, and expert reports relating to any of
the foregoing, relating to Compound, the racemate or the other enantiomer
thereof, or metabolites of any of the foregoing, including regulatory
filings and post-launch European safety dossiers, for the purpose of
development and registration of Product in the Territory,
2.4 Sepracor agrees to use commercially reasonable efforts to obtain
Regulatory Approvals for, commercialize and sell Product in the Territory,
consistent with those efforts used for Sepracor's own ethical
pharmaceutical products with similar market potential, all in accordance
with the terms of this Agreement. The parties acknowledge and agree that
all business decisions including, without limitation, decisions relating
to Sepracor's research, development, regulatory strategy, registration,
manufacture, sale, commercialization, design, price, distribution,
marketing and promotion of Products in the Territory, shall be within the
sole discretion of Sepracor. RPR acknowledges that Sepracor is in the
business
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
of developing, manufacturing and selling pharmaceutical products and,
subject to the provisions of this Section, nothing in this Agreement shall
be construed as restricting such business or imposing on Sepracor the duty
to market and/or sell and exploit Compound or Product for which royalties
are payable hereunder to the exclusion of, or in preference to, any other
product, or in any way other than in accordance with its normal commercial
practices.
2.5 The rights and licenses granted hereunder shall be sublicensable by
Sepracor subject to the terms and conditions set forth in this Agreement,
provided that Sepracor remains responsible to RPR under this Agreement.
2.6 To the extent necessary, each of RPR and Sepracor shall file within twenty
(20) Business Days after the date of this Agreement with the Federal Trade
Commission and the Antitrust Division of the U.S. Department of Justice,
any notification and report form required of it in the reasonable opinion
of both Parties under the HSR Act with respect to the transactions
contemplated hereby. The parties shall cooperate with one another to the
extent necessary in the preparation of any notification and report form
required to be filed under the HSR Act. Each Party shall be responsible
for its own costs, expenses, and filing fees associated with any filing
under the HSR Act.
2.7 Nothing in this Agreement shall impair or limit RPR's, or its Affiliates'
or sublicensees', right under RPR Know-How and Improvements to make or
have made Product within the Territory for marketing, distribution, sale
or use solely and exclusively outside the Territory.
2.8 Notwithstanding anything else to the contrary in this Agreement, neither
the assignment of Section 2.1, the license of Section 2.2, nor beneficial
ownership of any of the assigned assets or licensed rights hereunder shall
be transferred to Sepracor prior to the Effective Date of this Agreement.
ARTICLE 3 - ROYALTIES AND OTHER CONSIDERATION
3.1 In partial consideration of the assignment of the RPR Application and the
rights and licenses granted in Sections 2.2 and 2.3:
3.1.1 Sepracor shall pay to RPR a royalty on the Net Sales of Product in
the Territory ("Royalties") as follows:
[**] of Net Sales of all Product in the Territory.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
3.1.2 Section 3.1.1 notwithstanding, if Product is sold by a Licensee, in
connection with such sales Sepracor shall pay to RPR the amount set
forth in Section 3.1.1 using net sales as reported to Sepracor by
the Licensee as Net Sales by Sepracor.
3.1.3 Section 3.1.1 notwithstanding, if Product is sold containing both
Compound and one or more other substances as active ingredients
excluding (-)-zopiclone ("Combination Product"), the Royalty for
such Combination Product shall be [**] of Net Sales of all
Combination Product in the Territory.
3.1.4 Royalties shall be payable until the introduction in the Territory
of a Generic Version of Product by a Third Party without approval or
consent of Sepracor or any Affiliate or Licensee thereof.
3.2 In partial consideration of the assignment of the RPR Application and the
rights and licenses granted in Sections 2.2 and 2.3, Sepracor shall pay to
RPR an up-front fee and milestone payments as follows:
3.2.1 [**] within [**] Business Days of the execution of this Agreement,
provided, however, such amount shall be refunded to Sepracor if the
assignment and licenses set forth in Article 2 are not made e
ffective under this Agreement ;
3.2.2 [**] within [**] Business Days after initiation by Sepracor or its
Affiliates or Licensee of Phase III clinical studies of Product;
3.2.3 [**] within [**] Business Days after filing of an NDA for Product by
Sepracor or its Affiliates or Licensee; and
3.2.4 [**] within [**] Business Days after approval of Sepracor's or its
Affiliate's or Licensee's NDA for Product; provided, however, that
if the rights granted to Sepracor under Sections 2.2 and 2.3 hereof
enable Sepracor to gain approval of said NDA without conducting any
carcinogenicity trials, any one-year safety study in humans, and
obtaining chronic exposure safety data in humans that, in any such
case, are required by the United States Food and Drug Administration
("FDA") to be completed or obtained prior to FDA approval of the
Product, then the payment shall be [**]
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
ARTICLE 4 - ROYALTY PAYMENTS, REPORTS AND RECORDS
4.1 Sepracor shall deliver to RPR within [**] days following the end of each
Payment Period, beginning with the first Payment Period, a written report
(the "Royalty Statement") describing in sufficient detail, for the
applicable Payment Period:
(a) the calculation of Net Sales from the gross revenues for all
Products; and
(b) the total Royalties due for the Payment Period.
4.2 Each Royalty Statement for a Payment Period required by Section 4.1 above
shall be accompanied by full payment to RPR of the payments due to RPR
under Articles 3 and 4.
4.3 With regard to any payments due to RPR, the following shall apply:
(a) All payments to RPR pursuant to this Agreement shall be made by wire
transfer and in accordance with written instructions to be provided
by RPR in accordance with Article 15. All such payments shall be
made in United States Dollars ("Dollars").
(b) Whenever any payment hereunder shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the
immediately succeeding Business Day.
(c) Payments hereunder shall be considered to be made as of the day on
which they are received in RPR's designated bank account.
(d) All payments due to RPR hereunder but not paid by Sepracor on the
due date thereof shall bear interest at the rate which is the lesser
of: (i) LIBOR plus two percent (2%) per annum; and (ii) the maximum
lawful interest rate permitted under applicable law. Such interest
shall accrue on the balance of unpaid amounts from time to time
outstanding from the date on which portions of such amounts become
due and owing until payment thereof in full.
4.4 Any income or other taxes which Sepracor is required by law to pay or
withhold on behalf of RPR with respect to Royalties, and any interest
thereon, payable to RPR under this Agreement shall be deducted from the
amount of such Royalties and interest due, and paid or withheld, as
appropriate, by Sepracor on behalf of RPR. In such event, Sepracor shall
timely pay or remit all amounts so withheld to the appropriate taxing
authorities on RPR's behalf and promptly provide RPR with a written tax
receipt for such amount issued by such taxing authority. Sepracor shall
obtain for RPR, at its request, any other documentation, receipt or
certificate necessary or desirable for RPR to apply for and/or
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receive any corresponding tax refund or credit under any applicable tax
law or treaty. Any such tax required to be paid or withheld shall be an
expense of and borne solely by RPR. The foregoing sentences
notwithstanding, the parties hereto will reasonably cooperate in
completing and filing documents required under the provisions of any
applicable tax laws or under any other applicable law, in order to enable
Sepracor to make such payments to RPR without any deduction or
withholding.
4.5 Sepracor shall keep and maintain, and shall cause its Affiliates to keep
and maintain, complete and accurate records and books of account in
accordance with Generally Accepted Accounting Principles in sufficient
detail and form so as to enable amounts payable under Articles 3 and 4 to
be determined, including but not limited to, true and accurate records of
sales of Products and calculations of Net Sales and Royalties. RPR shall
have the right, at its own cost and expense, to audit the records of
Sepracor and its Affiliates using a nationally recognized firm of
independent certified accountants reasonably acceptable to Sepracor. Such
accountants will have access on reasonable notice to Sepracor and its
Affiliates' records during reasonable business hours for the sole purpose
of verifying the Royalties payable as provided in this Agreement for the
three preceding years provided, however, that if there is a good faith
dispute between the parties continuing at the end of any such three (3)
year period with respect to such books or records, then the time period
hereunder to maintain such books and records under dispute and for any
subsequent period shall be extended until such time as the dispute is
finally resolved. This right may not be exercised more than once in any
calendar year, and once a calendar year is audited it may not be
reaudited, provided that if there is a dispute as to any audited year,
such year and any subsequent year may be reaudited until such time as the
dispute is resolved. Said accountant shall disclose to RPR only
information relating solely to the accuracy of the Royalty Statements
provided to RPR and the payments made to RPR under this Agreement. The
provisions of this Section 4.5 shall survive the expiration or sooner
termination of this Agreement.
4.6 Any underpayment determined as a result of an audit conducted under this
Article shall be paid to RPR within twenty-five (25) days after the date
on which the accountant conducting the audit issues a written report to
RPR and Sepracor containing the results of the audit. If any underpayment
by Sepracor is greater than ten percent (10%) of the amount previously
paid to RPR for the relevant Payment Period, the costs and expenses of the
audit shall be paid for by Sepracor. Any overpayment shall be credited to
the next payment to RPR due hereunder.
ARTICLE 5 - COOPERATION, TECHNOLOGY TRANSFER, AND INVENTIONS
5.1 RPR shall use good faith reasonable efforts to consult and cooperate with
Sepracor with respect to the filing of any patent applications for
Improvements and the maintenance of patents issued thereon including,
without limitation, by executing and obtaining from employees assignments
and other documents reasonably required in connection therewith,
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<PAGE>
provided, however, that RPR may refuse to execute such documents if RPR
makes a good faith reasonable determination that any such document is
factually or legally incorrect.
5.2 The parties agree to use good faith reasonable efforts to cooperate in
order to avoid loss of any rights which may otherwise be available to the
parties under the U.S. Drug Price Competition and Patent Term Restoration
Act of 1984 and other similar measures. Without limiting the foregoing,
each of Sepracor and RPR agrees to provide the other with reasonable
information and assistance in order to permit the timely filing of an
application for patent term extension within the sixty (60) day period
following NDA approval to market Product in the United States.
5.3 After the Effective Date, RPR shall provide Sepracor full access to the
information referenced in Section 2.3 hereof and shall use good faith
reasonable efforts in fully cooperating with Sepracor in order to enable
Sepracor to obtain Regulatory Approval of Products. At Sepracor's request,
RPR shall disclose to Sepracor in writing, or via mutually acceptable
electronic media, copies or reproductions of all written RPR Know-How
reasonably available to RPR or its Affiliates in order to enable Sepracor
to obtain Regulatory Approval of Products. . In addition, during the term
of this Agreement, RPR shall promptly disclose to Sepracor in writing, or
via mutually acceptable electronic media, on an ongoing basis copies or
reproductions of all Improvements that are reasonably necessary to
research, develop, register, manufacture, market, use or sell Product.
Such Improvements shall be automatically deemed to be within the scope of
the licenses granted herein without payment of any additional
compensation. Sepracor shall have the right to use for all purposes in
connection with Regulatory Approval or any regulatory application for
Product in the Territory all RPR Know-How and other information disclosed
pursuant to this Section and under this Agreement. Upon Sepracor's
request, RPR shall provide reasonable technical assistance to enable
Sepracor to utilize RPR Know-How to obtain Regulatory Approval of
Products, and from time to time at Sepracor's reasonable request, RPR
shall use good faith reasonable efforts to assist Sepracor in providing
responses to questions that may be raised by regulatory authorities in
connection with Sepracor's applications for Regulatory Approval of
Products. Sepracor shall be solely responsible for obtaining all
Regulatory Approvals related to the Product.
5.4 RPR shall use good faith reasonable efforts to cooperate with Sepracor or
its counsel in connection with prosecution of RPR Applications. The
parties acknowledge that assignment of the RPR Application to Sepracor
leaves Sepracor as the only real party in interest in the Interference.
Sepracor shall notify the PTO Administrative Patent Judge assigned to the
Interference of the assignment no later than ten (10) days after the
Effective Date of this Agreement, and shall copy RPR interference counsel
at Finnegan, Henderson, Farabow, Garrett & Dunner on this notification.
Sepracor shall make a good faith determination of priority of invention
and of any other issues that need to be determined relating to the RPR
Application and Sepracor Patent involved in the Interference.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
RPR shall use good faith reasonable efforts to cooperate with Sepracor in
connection with Sepracor's determination(s), including providing
information, documents, or other materials RPR or its Affiliates or
counsel have in its possession that is requested by Sepracor and agreed in
good faith by RPR and Sepracor or its counselto be reasonably necessary to
Sepracor's good faith determination(s). In addition, at Sepracor's or its
counsel's request, RPR shall execute documents reasonably necessary to
Sepracor's good faith determination(s) or prosecution of RPR Applications,
provided, however, that RPR may refuse to execute such documents if RPR
makes a good faith reasonable determination that any such document is
factually or legally incorrect.
5.5 With regard to any cooperation or assistance RPR provides to Sepracor
under Articles 5 and 6, the following shall apply: (1) RPR shall provide a
cumulative total of eighty (80) hours of such cooperation or assistance
free of charge, and (2) thereafter, Sepracor shall reimburse RPR for
reasonable fully allocated costs and expenses incurred by RPR in providing
such cooperation or assistance after receipt of a detailed written invoice
from RPR for such costs and expenses.
ARTICLE 6 - INFRINGEMENT
Sepracor shall have the sole right but not the obligation to enforce at
its expense the RPR Applications. In any suit or dispute involving
infringement of the RPR Applications, or any litigation necessary to
enforce or defend the RPR Applications, the parties shall use good faith
reasonable efforts to cooperate, and upon the request and at the expense
of Sepracor, RPR shall make available to Sepracor at reasonable times and
under appropriate conditions company files that pertain to the RPR
Application or the invention it claims, excluding any materials that are
privileged under the attorney-client privilege or the work-product
doctrine, and RPR employees having personal knowledge concerning the RPR
Application or the invention it claims, and information concerning the
last known address of former RPR employees having personal knowledge
concerning the RPR Application or the invention it claims. Any recovery or
damages derived from enforcement of any RPR Application shall be used to
first reimburse Sepracor for its documented expenses and costs relating to
such enforcement. Thereafter, RPR shall receive the lesser of (a) an
amount equal to [**] of the net sales of Product by the infringing party,
or (b) [**] of the compensatory damages. Any punitive damages, exemplary
damages, or other enhanced damages shall be retained solely by Sepracor.
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ARTICLE 7 - CONFIDENTIALITY
7.1 During the term of this Agreement, and for a period of five (5) years
thereafter, each party hereto will maintain in confidence all Confidential
Information disclosed by the other party hereto. Neither party shall use,
disclose or grant use of such Confidential Information except as permitted
under this Agreement. To the extent that disclosure is authorized by this
Agreement, the disclosing party shall obtain prior agreement from its
employees, agents, consultants, Affiliates, Licensees or clinical
investigators to whom disclosure is to be made to hold in confidence and
not make use of such information for any purpose other than those
permitted by this Agreement. Each party shall use at least the same
standard of care as it uses to protect its own Confidential Information to
ensure that such employees, agents, consultants and clinical investigators
do not disclose or make any unauthorized use of such Confidential
Information. Each party shall promptly notify the other upon discovery of
any unauthorized use or disclosure of the Confidential Information. The
obligations of confidentiality set forth in this Section 7.1 shall not
apply when and to the extent that Confidential Information:
7.1.1 was already known to the receiving party, other than under an
obligation of confidentiality, at the time of disclosure by the
other party as demonstrated by written documents;
7.1.2 was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the other party;
7.1.3 becomes generally available to the public or otherwise part of the
public domain after its disclosure and other than through any act
or omission of the receiving party in breach of this Agreement;
7.1.4 was disclosed to the receiving party, other than under an
obligation of confidentiality, by a Third Party who had no
obligation to the other party not to disclose such information;
7.1.5 can be demonstrated to have been independently developed by the
receiving party without reference to the disclosure by the other
party; or
7.1.6 is required to be disclosed by the receiving party to regulatory
authorities in connection with registration, marketing,
distribution, use, or sale of Product.
7.2 The material financial terms of the Agreement shall be considered the
Confidential Information of both parties.
7.3 Any other provision of this Agreement notwithstanding, each party may
disclose the Confidential Information to the extent such disclosure is
reasonably necessary in filing or prosecuting patent applications,
prosecuting or defending litigation or complying with
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applicable governmental regulations. In addition, either party may
disclose such Confidential Information to its Affiliates, and Sepracor may
disclose such Confidential Information to Licensees; provided, however, in
connection with any such disclosure the disclosing party shall use
diligent efforts to secure confidential treatment of such information.
7.4 The parties shall undertake to ensure that all their employees who have
access to Confidential Information of the other party are under
obligations of confidentiality consistent with those provided in Section
7.1.
7.5 To the extent legally required, the parties agree to comply with the
requirements of 35 U.S.C.ss.135(c) relating to submission of agreements
between the parties to the U.S. Patent and Trademark Office.
ARTICLE 8 - TERM
This Agreement will commence as of the Effective Date and, unless sooner
terminated as provided hereunder, shall terminate on the expiration of the
royalty obligations of Article 3, after which time Sepracor will have a
fully paid-up, royalty-free and irrevocable exclusive license under RPR
Know-How and Improvements to develop, have developed, make, have made,
use, market, sell, offer for sale, have sold and distribute Product in the
Territory. Notwithstanding the foregoing, if each and every milestone
payment in Article 3 should fail to come due within ten (10) years from
the Effective Date, or if Sepracor breaches its obligations under Section
2.4, then this Agreement shall terminate ten (10) years from the Effective
Date, or thirty (30) days after RPR gives notice to Sepracor of such
breach, as applicable. Upon any such early termination of this Agreement,
all rights to RPR Know-How and Improvements licensed hereunder to Sepracor
shall revert to RPR, and Sepracor and its Affiliates and Licensees shall
make no further use of the same.
ARTICLE 9 - BREACH AND TERMINATION
In the event Sepracor or RPR are in material breach of any of the
respective obligations and conditions contained in this Agreement, the
other party shall be entitled to give the party in breach notice requiring
it to cure such material breach. If such material breach is not cured
within ninety (90) days after receipt of such notice, the notifying party
may seek a determination of damages for the breach from the breaching
party. Nothing herein shall prevent either party hereto from exercising
such party's right to obtain specific performance or temporary or
permanent injunctive relief or other equitable relief.
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ARTICLE 10 - REPRESENTATIONS, WARRANTIES AND COVENANTS
10.1 RPR represents and warrants to Sepracor that:
10.1.1 The execution, delivery and performance of this Agreement by RPR
does not conflict with any agreement, instrument or understanding,
oral or written, to which it is a party or by which it may be
bound, and to the best of its knowledge, does not violate any
material law or regulation of any court, governmental body or
administrative or other agency having authority over it;
10.1.2 RPR is not currently a party to, and during the term of this
Agreement will not enter into, any agreements, oral or written,
that are inconsistent with its obligations under this Agreement;
10.1.3 RPR is duly organized and validly existing under the laws of the
state of its incorporation and has full legal power and authority
to enter into this Agreement;
10.1.4 RPR is not subject to any order, decree or injunction by a court
of competent jurisdiction which prevents or materially delays the
consummation of the transactions contemplated by this Agreement;
10.1.5 As of the Effective Date, RPR's right, title and interest in the
RPR Application or RPR Know-How as they relate to Zopiclone
Technology or Product in the Territory are not assigned,
transferred, or conveyed to a Third Party or otherwise encumbered
by a Third Party;
10.1.6 RPR is the sole and exclusive owner of the RPR Application and the
sole and exclusive owner or licensee of the RPR Know-How, all of
which, to the best of RPR's knowledge, are free and clear of any
liens, charges and encumbrances, and, except for RPR's Affiliates,
no other person, corporate or other private entity, or
governmental entity or subdivision thereof has, or shall have, any
claim of control with respect to the RPR Application and the RPR
Know-How as they relate to Zopiclone Technology or Product in the
Territory;
10.1.7 In the Territory, there are no claims, judgments or settlements
against or owed by RPR pending or, to the knowledge of RPR,
threatened, with respect to the RPR Application and the RPR
Know-How as they relate to Zopiclone Technology or Product except
for the Interference;
10.1.8 To the best of RPR's knowledge, there is no RPR Know-How not
disclosed to Sepracor prior to the date of execution hereof that
will substantially adversely affect approval of an NDA for Product
or cause Sepracor to conduct carcinogenicity trials or a one-year
safety study in humans, or to obtain chronic
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<PAGE>
exposure safety data in humans in order to effect registration of
Product in the United States;
10.1.9 The RPR Know-How disclosed to Sepracor prior to the date of
execution hereof is accurate and not contradicted by other RPR
Know-How;
10.1.10 To the best of RPR's knowledge, the development, manufacture, use,
distribution, marketing, promotion and sale of Product in the
Territory do not interfere or infringe on any intellectual
property rights owned or possessed by any Third Party; and
10.1.11 To the best of RPR's knowledge there are no Third Party pending
patent applications which, if issued, may cover the development,
manufacture, use or sale of Product.
10.2 Sepracor represents and warrants to RPR that:
10.2.1 The execution, delivery and performance of this Agreement by
Sepracor does not conflict with any agreement, instrument or
understanding, oral or written, to which it is a party or by which
it may be bound, and to the best of its knowledge, does not
violate any material law or regulation of any court, governmental
body or administrative or other agency having authority over it;
10.2.2 Sepracor is not currently a party to, and during the term of this
Agreement will not enter into, any agreements, oral or written,
that are inconsistent with its obligations under this Agreement;
and
10.2.3 Sepracor is duly organized and validly existing under the laws of
the state of its incorporation and has full legal power and
authority to enter into this Agreement;
10.2.4 Sepracor is not subject to any order, decree or injunction by a
court of competent jurisdiction which prevents or materially
delays the consummation of the transactions contemplated by this
Agreement; and
10.2.5 To the best of Sepracor's knowledge, as of the Effective Date,
there are no patent rights of a Third Party that Sepracor is
required to license in order to manufacture, use or sell a Product
in the Territory.
10.3 Subject to Section 2.7, during the term of this Agreement, RPR convenants
that neither RPR nor any of its Affiliates will develop, use, market,
promote, sell or distribute (or agree with any third party to do any of
the foregoing) in the Territory any product containing Compound, the
racemate or the other enantiomer thereof, as an active ingredient.
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10.4 THE LIMITED WARRANTIES CONTAINED IN THIS ARTICLE ARE THE SOLE WARRANTIES
GIVEN BY THE PARTIES AND ARE MADE EXPRESSLY IN LIEU OF AND EXCLUDE ANY
IMPLIED WARRANTIES INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE, AND ALL OTHER EXPRESS OR IMPLIED REPRESENTATIONS AND
WARRANTIES PROVIDED BY COMMON LAW, STATUTE OR OTHERWISE ARE HEREBY
DISCLAIMED BY BOTH PARTIES.
ARTICLE 11 - ADVERSE EVENTS
Following the Effective Date, Sepracor shall be solely responsible for
complying with all legal and/or regulatory obligations in the Territory
regarding the reporting of adverse events related to Product. Each of RPR
and Sepracor shall report to the other potentially serious alleged adverse
drug experiences with respect to the Product of which it becomes aware
promptly and in no event later than five (5) days after initial receipt of
the information by such party. Each such report shall identify lot numbers
and customers affected, if known. Each of RPR and Sepracor will report to
the other party summaries of other adverse drug experiences with respect
to Product of which it becomes aware every twelve (12) months. The terms
of this Article 11 will survive the expiration or sooner termination of
this Agreement.
ARTICLE 12 - INDEMNIFICATION
12.1 Except as otherwise provided to the contrary in this Agreement, Sepracor
agrees to defend, indemnify, and hold harmless RPR, its successors and
assigns, and its officers, directors, employees, stockholders, agents,
Affiliates and any person who controls any of such persons (an
"Indemnified RPR Party") at Sepracor's cost and expense (including
reasonable attorneys' fees) from and against any and all liabilities,
claims, demands, judgments, losses, costs, damages, fees or expenses
whatsoever (collectively, "Liability") that such Indemnified RPR Party
may sustain, suffer or incur arising out of or in connection with the
manufacture, commercialization, marketing, sale or use of any Product in
the Territory, including, but not limited to, any actual or alleged
injury, damage, death or other consequence occurring to any person as a
result, directly or indirectly, of the possession, use or consumption of
any Product, whether claimed by reason of breach of warranty, negligence,
product defect or otherwise, and regardless of the form in which any such
claim is made. Notwithstanding the foregoing, Sepracor shall have no
obligation under this Agreement to indemnify, defend or hold harmless any
Indemnified RPR Party with respect to any Liability which result from
willful misconduct or negligent acts or omissions of RPR, its Affiliates,
or any of their respective employees, officers, directors or agents.
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12.2 Except as otherwise provided to the contrary in this Agreement, RPR shall
defend, indemnify and hold harmless Sepracor, its successors and assigns,
and its officers, directors, employees, stockholders, agents, Affiliates
and any person who controls any of such persons (an "Indemnified Sepracor
Party") at RPR's cost and expense (including reasonable attorneys' fees
incurred by such Indemnified Sepracor Party in connection therewith) from
and against any and all liabilities, claims, demands, judgments, losses,
costs, damages, fees, or expenses whatsoever (collectively, "Liability")
that such Indemnified Sepracor Party may sustain, suffer or incur to the
extent that such Damages are attributed to any breach of any
representation, warranty, covenant or agreement of RPR contained in this
Agreement. Notwithstanding the foregoing, RPR shall have no obligation
under this Agreement to indemnify, defend or hold harmless any Indemnified
Sepracor Party with respect to any Liability which results from willful
misconduct or negligent acts or omissions of Sepracor, its Affiliates, or
any of their respective employees, officers, directors or agents.
12.3 Each party agrees to promptly give the other party notice of any claim for
which indemnification might be sought. Failure of an indemnified party to
provide notice of a claim to the indemnifying party shall affect the
indemnified party's right to indemnification only to the extent that such
failure has a material adverse effect on the indemnifying party's ability
to defend or the nature or the amount of the Liability. The indemnifying
party shall have the right to assume the defense of any suit or claim
related to the Liability if it has assumed responsibility for the suit or
claim in writing; however, if in the reasonable judgment of the
indemnified party, such suit or claim involves an issue or matter which
could have a materially adverse effect on the business operations or
assets of the indemnified party, the indemnified party may waive its
rights to indemnity under this Agreement and control the defense or
settlement thereof, but in no event shall any such waiver be construed as
a waiver of any indemnification rights such party may have at law or in
equity. If the indemnifying party defends the suit or claim, the
indemnified party may participate in (but not control) the defense thereof
at its sole cost and expense.
12.4 Neither party may settle a claim or action related to a Liability without
the consent of the other party, if such settlement would impose any
monetary obligation on the other party or require the other party to
submit to an injunction or otherwise limit the other party's rights under
this Agreement; provided that such consent shall not unreasonably be
withheld or delayed.
12.5 With respect to any claim by one party against the other arising out of
this Agreement, the parties expressly agree that the liability of such
party to the other party shall be limited under this Agreement or
otherwise at law or equity to direct damages only and in no event shall a
party be liable for, punitive, exemplary or consequential damages.
16
<PAGE>
ARTICLE 13 - CHOICE OF LAW
The construction, validity and performance of this Agreement shall be
governed in all respects by the laws of the State of Delaware, without
giving effect to principles of conflict of laws.
ARTICLE 14 - FORCE MAJEURE
No failure or omission by the parties hereto in the performance of any
obligation of this Agreement shall be deemed a breach of this Agreement
nor create any liability if the same shall arise from any cause or causes
beyond the control of the parties, including but not limited to the
following which, for the purposes of this Agreement, shall be regarded as
beyond the control of the party in question; act of God, acts or omissions
of any government or any rules, regulations or orders of any governmental
authority or any officer, department, agency or instrument thereof; fire,
storm, flood, earthquake, accident, acts of the public enemy, war,
rebellion, insurrection, riot, invasion, strikes or lockouts.
ARTICLE 15 - NOTICES
Any notice required or permitted to be given under this Agreement shall be
mailed by registered or certified air mail, postage prepaid, addressed to
the party to be notified at its address stated below, or at such other
address as may hereafter be furnished in writing to the notifying party or
by telefax to the numbers set forth below or to such changed telefax
numbers as may thereafter be furnished.
If to RPR: Rhone-Poulenc Rorer, Inc.
500 Arcola Road,
Collegeville, PA 19426
Attn: General Counsel
Telefax: (610) 454-8985
If to Sepracor:
Sepracor Inc.
111 Locke Drive
Marlborough, MA 01752
Attn: Chief Executive Officer
Telefax: (508) 357-7495
Any notice sent under this Article shall be deemed to have been received
on the date which is (i) five (5) Business Days after being mailed in the
case of a notice mailed by
17
<PAGE>
registered or certified mail, postage prepaid; and (ii) one (1) Business
Day after being transmitted in the case of a notice transmitted via
telefax.
18
<PAGE>
ARTICLE 16 - WAIVER
Any term or provision of this Agreement may be waived at any time by the
party entitled to the benefit thereof by a written instrument duly
executed by such party. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the
right of such party at a later time to enforce the same or any other
provision of this Agreement. No waiver of any condition or of the breach
of any provision of this Agreement in one or more instances shall operate
or be construed as a waiver of any other condition or subsequent breach.
ARTICLE 17 - ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties hereto
concerning the subject matter hereof and any representation, promise or
condition in connection therewith, not incorporated herein, shall not be
binding upon either party. This Agreement, including without limitation
the Schedules attached hereto, are intended to define the full extent of
the legally enforceable undertakings of the parties hereto, and no promise
or representation, written or oral, which is not set forth explicitly
herein is intended by either party to be legally binding. This Agreement
may only be modified, amended or supplemented by an instrument in writing
executed by RPR and Sepracor.
ARTICLE 18 - ASSIGNMENT
18.1 Except as otherwise provided herein, this Agreement is not assignable
either in whole or in part without the prior written consent of the other
party; provided, however, that either party may assign this Agreement to
any of its Affiliates or to any successor by merger or sale of
substantially of all of its business unit to which the Agreement relates.
18.2 This Agreement will be binding upon successors and permitted assigns of
the parties and the name of a party appearing herein will be deemed to
include the name of such party's successor's and permitted assigns to the
extent necessary to carry out the intent of this section.
ARTICLE 19 - TITLES
It is agreed that the marginal headings appearing at the beginning of the
numbered Articles hereof have been inserted for convenience only and do
not constitute any part of this Agreement.
19
<PAGE>
ARTICLE 20 - PUBLICITY
Except as otherwise specifically provided to the contrary herein, neither
party will issue any press release, publication, presentation, or any
other public announcement relating to this Agreement without obtaining the
other party's prior written approval, which approval will not be
unreasonably withheld. Sepracor shall be permitted to issue a press
release concerning this Agreement, which is agreed to by RPR and Sepracor,
and such agreement shall not be unreasonably withheld or delayed. The
parties further agree to use reasonable efforts to keep terms of this
Agreement confidential, including with respect to submissions that
Sepracor may be required to make to regulatory authorities, to the extent
that such protection may be available through said regulatory authorities.
Notwithstanding any of the foregoing, each party may use the substance of
previously approved public announcements and the substance of other public
announcements of the other party concerning the subject matter of this
Agreement without prior notice.
ARTICLE 21 - UNENFORCEABLE PROVISIONS
The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or
entity or any circumstance, is invalid or unenforceable, (i) a suitable
and equitable provision shall be substituted therefore in order to carry
out, so far as may be valid and enforceable, the intent and purpose of
such invalid and unenforceable provision and (ii) the remainder of this
Agreement and the application of such provision to other persons, entities
or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect
such provision, or the application thereof, in any other jurisdiction.
ARTICLE 22 - CONSTRUCTION
As used in this Agreement, singular includes the plural and plural
includes the singular, wherever so required by fact or context.
ARTICLE 23 - OWNERSHIP
23.1 Nothing in this Agreement shall be construed as conveying or transferring
patent or technology rights of any kind owned by Sepracor to RPR.
23.2 All business decisions, including, but not limited to, decisions
concerning pricing, reimbursement, package design, sales and promotional
activities for Product, and the decision to launch or continue to market
Product in the Territory, shall be within the sole discretion of Sepracor.
20
<PAGE>
ARTICLE 24 - INDEPENDENT CONTRACTORS
In making and performing this Agreement, the parties are acting and shall
act as independent contractors. Nothing in this Agreement shall be deemed
to create an agency, joint venture or partnership relationship between the
parties hereto.
ARTICLE 25 - EXECUTION
This Agreement shall be executed in one or more counterparts, each of
which shall for all purposes be deemed an original.
21
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers or representatives as of
the day and year first above written.
SEPRACOR INC.
By: /s/ Timothy J. Barberich
---------------------------------
Name: Timothy J. Barberich
------------------------------
Title: Chief Executive Officer
------------------------------
RHONE-POULENC RORER SA
By: Guillaume Prache
---------------------------------
Name: Guillaume Prache
------------------------------
Title: Director, Rhone-Poulenc Rorer S.A.
------------------------------
Senior Vice President and Chief Financial
Officer, Rhone-Poulenc Rorer, Inc.,
authorized signer for
Rhone-Poulenc Rorer S.A.
22
<PAGE>
SCHEDULE 1.15
RPR PATENT APPLICATIONS
<PAGE>
RPR PATENT APPLICATIONS
[**]
<PAGE>
SCHEDULE 2.1
FORM OF ASSIGNMENT
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
ASSIGNMENT
WHEREAS, Rhone-Poulenc Rorer SA ("RPR"), a French corporation having a place of
business at 20, avenue Raymond-Aron, F-92160 Antony, France, is the sole owner
of U.S. Patent Application Serial No. [**] (the "[**] Application"), and United
States patent applications related thereto; and
WHEREAS, Sepracor Inc. ("Sepracor"), a Delaware corporation having a place of
business at 111 Locke Drive, Marlborough, Massachusetts 01752, is desirous of
obtaining RPR's entire right, title, and interest in, to, and under the [**]
Application, and United States patent applications related thereto, and RPR
desires to assign to Sepracor its entire right, title and interest in the same.
NOW, THEREFORE, in consideration of the premises, one dollar, and other good and
valuable consideration to RPR, the receipt and sufficiency of which is hereby
acknowledged, RPR hereby assigns to Sepracor its entire right, title and
interest in, to, and under the [**] Application and the related United States
patent applications listed in Attachment A (collectively, the "RPR
Applications", all of which are hereby incorporated by reference as if fully set
forth herein) including, but not limited to, any additions, divisions,
continuations, continuations-in-part, reissues, re-examinations, substitutions,
extensions, patent term extensions and renewals of the RPR Applications, and
patents issuing therefrom, in each case, as fully and entirely as the same would
have been held and enjoyed by RPR if this assignment had not been made.
RPR also authorizes and requests that the Commissioner of Patents and Trademarks
of the United States, whose duty it is to issue patents or other evidence or
forms of industrial property protection on applications as aforesaid, to issue
the same to Sepracor in accordance with the terms of this instrument.
IN WITNESS WHEREOF, the undersigned duly authorized representative of RPR
has affixed his signature.
RHONE-POULENC RORER SA
By: _____________________________ Date: ______________________
Name:
Title:
<PAGE>
State of )
) SS.:
County of )
On this _____ day of _________, 1999, before me, a Notary Public in and
for the State and County aforesaid, personally appeared ___________, to me known
and known to me to be the person of that name, who signed and sealed the
foregoing instrument, and he acknowledged the same to be his free act and deed.
_________________________,
Notary Public.
2
<PAGE>
Attachment A
[**]
<PAGE>
1
Exhibit 10.33
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
LICENSE AGREEMENT FOR LEVOCETIRIZINE
BETWEEN UCB FARCHIM S.A., having its registered office at Z.I de Planchy,
10 chemin de Croix Blanche, C.P. 411, CH-1630 Bulle, Switzerland,
acting in its own name and on behalf of its AFFILIATE (S),
hereinafter "UCB"
on the one hand,
AND SEPRACOR INC., having its registered office at 111 Locke Drive,
Marlborough, MA 01752, USA, hereinafter "SEPRACOR",
on the other hand,
(individually a Party and collectively the Parties)
WITNESSETH:
WHEREAS, SEPRACOR owns patents with respect to Levocetirizine;
WHEREAS, UCB has expertise and resources in manufacturing, marketing,
distribution and management of pharmaceutical products (more particularly in the
field of respiratory diseases) and owns patents in respect of Cetirizine and
Levocetirizine; and
WHEREAS, UCB desires to obtain an exclusive license under SEPRACOR's patents to
manufacture, promote, distribute and sell pharmaceutical products containing
Levocetirizine in the TERRITORY subject to the terms and conditions herein set
forth and SEPRACOR is willing to grant said license.
NOW, THEREFORE, IT HAS BEEN AGREED AS FOLLOWS:
<PAGE>
2
ARTICLE 1 - DEFINITIONS
1.1 "ACTIVE INGREDIENT" means the pharmaceutical compound (-) Cetirizine, also
known as Levocetirizine, or (-) [2-[4-[(4-Chlorophenyl)phenylmethyl]-1-
piperazinyl]ethoxy]acetic acid, including pharmaceutically acceptable
salts and esters thereof. . For the avoidance of any doubt, the parties
expressly agree that racemic Cetirizine is not included within the
definition of ACTIVE INGREDIENT.
1.2 "AFFILIATE" means with respect to a party (i) any company at least fifty
percent (50%) of whose issued and voting capital is owned or controlled,
directly or indirectly, by said party, or (ii) any company which owns or
controls, directly or indirectly, at least fifty percent (50%) of the
issued and voting capital of said party. A company shall be an AFFILIATE
for such time as the above-described ownership or control exists.
1.3. "CALENDAR QUARTER" " shall mean a three (3) month period ending on March
31, June 30, September 30, and December 31.
1.4. "COMBINATION PRODUCT" means any pharmaceutical specialty containing ACTIVE
INGREDIENT and at least one other active substance.
1.5. "MARKETING YEAR" means each calendar year during the term of this
Agreement, provided that the first MARKETING YEAR shall begin on the first
day of the month during which UCB first invoices PRODUCT in the TERRITORY
and shall end on December 31 of the same year, and the last MARKETING YEAR
shall begin on the last January 1 during the term of this Agreement and
shall end upon its expiration or termination.
1.6. "MARKET SALES" means the sales of PRODUCT invoiced to an independent third
party by UCB or by any of its sublicensees or AFFILIATE (S) in a
particular country of the TERRITORY for all therapeutic indications,
exclusive of that portion of that is prescribed by dermatologists ( the
"dermatologist portion"), unless a SEPRACOR PATENT is granted in such
country covering such dermatological applications. The dermatologist
portion shall be determined on a PRODUCT by PRODUCT basis by an
independent third party selected by mutual agreement of the parties. The
dermatologist portion shall deemed to be
<PAGE>
3
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
equal to the number of units of a PRODUCT that is prescribed by
dermatologists in Belgium, Germany, France, Spain, and Italy, divided by
the total number of units of such PRODUCT prescribed in Belgium, Germany,
France, Spain, and Italy, such numbers to be determined by an analysis of
available relevant prescription audit data for PRODUCT. For the avoidance
of doubt, in the event that sales of PRODUCT are invoiced by UCB to its
AFFILIATE(S) or sublicensee(s) in a particular country of the TERRITORY,
such sales shall not be included in the MARKET SALES; rather, Market Sales
shall include the invoiced sale by the UCB AFFILIATE(S) or sublicensee to
their customers. MARKET SALES in a legal tender which is not the United
States Dollar ("Dollar"), shall be converted into Dollars for the purposes
hereof at the average of the exchange rate of the currency of invoicing
into Dollars, as reported in the Wall Street Journal (Eastern Edition)
during the CALENDAR QUARTER of invoicing of the PRODUCT.
1.7. "MONO-PRODUCT" means any pharmaceutical specialty containing the ACTIVE
INGREDIENT as its sole active substance.
1.8. "NET SALES" means the net value of the MARKET SALES, being the gross
amount minus [**] and [**] for [**] for [**] or [**] included in the [**]
and [**] included in the [**]
1.9. "PATENT COMBINATION PRODUCT" means a COMBINATION PRODUCT covered by one or
more claims of granted SEPRACOR COMBINATION PATENTS.
<PAGE>
4
1.10. "PRODUCT" means any pharmaceutical specialty containing the ACTIVE
INGREDIENT as an active substance. PRODUCT shall include MONO-PRODUCT and
COMBINATION PRODUCT.
1.11. "SEPRACOR KNOW-HOW" shall mean information which (i) as of the effective
date hereof, is in the possession of SEPRACOR, which it is allowed to
disclose to UCB and which relates specifically to the manufacture, sale,
distribution, registration, use or testing of ACTIVE INGREDIENT or
PRODUCT, or (ii) hereafter, during the term of this Agreement, is
developed solely by SEPRACOR independent of any third party and which
relates specifically to the manufacture, sale, distribution, registration,
use or testing of ACTIVE INGREDIENT or PRODUCT.
1.12. "SEPRACOR PATENT" means the patents and patent applications in the
TERRITORY listed in Schedule1.12 (a) together with the patents and patent
applications in the TERRITORY listed in Schedule 1.12(b), together with
continuations, continuations in part, divisionals and reissues thereof in
the TERRITORY, and any extensions or SPCs of any of the foregoing.
SEPRACOR BASIC PATENTS shall mean the patents and patent applications in
the TERRITORY listed in Schedule 1.12(a) together with any continuations,
continuations in part, divisionals and reissues thereof in the TERRITORY,
and any extensions or SPCs of any of the foregoing. SEPRACOR COMBINATION
PATENTS shall mean the patent application listed in Schedule 1.12(b)
together with any continuations, continuations in part, divisionals and
reissues thereof in the TERRITORY, and any extensions or SPCs of any of
the foregoing.
1.13. "TERRITORY" means the entire world, less the USA and Japan.
ARTICLE 2 - OBJECT OF THE AGREEMENT
2.1 Grant of license
Subject to the terms and conditions of this Agreement, SEPRACOR hereby
grants UCB, and UCB hereby accepts, (i) an exclusive license in the
TERRITORY, including the right to sublicense within the TERRITORY, under
SEPRACOR PATENT(S), to manufacture, have manufactured, promote,
<PAGE>
5
distribute and sell PRODUCT in the TERRITORY and (ii) a nonexclusive
license in the TERRITORY, including the right to sublicense within the
TERRITORY, under SEPRACOR KNOW-HOW, to manufacture, have manufactured,
promote, distribute and sell PRODUCT in the TERRITORY.
2.2 SEPRACOR KNOW-HOW
Promptly upon execution of this Agreement and throughout the term hereof
SEPRACOR shall disclose to UCB the SEPRACOR KNOW-HOW. At UCB's request,
SEPRACOR shall request in writing from third parties towards which it may
be bound by confidentiality obligations (if any) their consent to the
disclosure, by SEPRACOR to UCB, of SEPRACOR KNOW-HOW.
2.3 Trademark
UCB shall be free to select the trademark for the sale and marketing of
PRODUCT in the TERRITORY; such trademark will be and remain the sole
property of UCB.
2.4 Clinical development, PRODUCT Registration
(a) UCB shall, at UCB's expense, use good faith reasonable efforts to
develop, and obtain marketing authorization for the MONO-PRODUCT in
the TERRITORY.
(b) UCB shall be responsible for conducting all clinical trials with the
ACTIVE INGREDIENT and obtaining for PRODUCT marketing authorization
from the regulatory authorities in those countries of the TERRITORY
in which UCB in its sole discretion shall so elect, the initial list
of which is attached in Schedule 2.4.
2.5 Development Reports
Within one month after the end of each CALENDAR QUARTER, UCB shall provide
SEPRACOR with a quarterly report of the status of the research and
development activities and progress of any application for marketing
authorization, as applicable, in connection with PRODUCT in the TERRITORY.
Further, UCB shall inform SEPRACOR of commencement, completion, and
results of the major phases of clinical development of the
<PAGE>
6
PRODUCT, including but not limited to Phase II and Phase III clinical
trials, submission of applications for marketing authorization, approval
letters, and launch. It is, however, understood that UCB shall not be
required to disclose confidential parts of the results of the said
clinical development. In case SEPRACOR enters into a license agreement
with a third party to make, use, or sell Product under SEPRACOR PATENTS
for the territory of the United States of America and/or Japan (i)
SEPRACOR shall not be entitled to communicate the confidential content of
the said reports to such licensee (ii) UCB shall be immediately and
automatically released of any obligation under this Section 2.5
2.6 USA and Japan
During the four month period following the execution of this Agreement
SEPRACOR and UCB shall initiate and pursue good faith negotiations on the
terms and conditions under which UCB may be granted a license to make,
use, and sell Product under SEPRACOR's intellectual property relating to
Product in the United States of America and Japan.
If Parties do not reach an agreement within the said four month period,
SEPRACOR shall be free to enter into negotiations with third parties.
ARTICLE 3 - ROYALTIES
3.1 Calculation
(a) In partial consideration for granting the license pursuant to Section
2.1 of this Agreement, UCB shall pay to SEPRACOR a running royalty at the rates
set out in Schedule 3.1 hereto calculated as a percentage of the total NET SALES
of MONO-PRODUCT. Royalties shall be payable on sales of MONO-PRODUCT in each
country of the TERRITORY in which the SEPRACOR BASIC PATENTS have been granted
at the time of such sale. Royalties shall be payable until such time as the
SEPRACOR BASIC PATENT expires in the country in question or is held invalid or
unenforceable in such country in a binding decision from which no appeal has
been taken or from which
<PAGE>
7
no appeal has been taken in the time allowed for appeal, subject to the
following two sentences. If the SEPRACOR BASIC PATENT is held invalid or
unenforceable in a country of the Territory, and if an independent third party
generic equivalent of MONO-PRODUCT is legally introduced in such country, the
royalty obligation of this Section 3.1(a) shall be suspended as to such
MONO-PRODUCT in such country. If SEPRACOR successfully appeals against the
decision which holds the SEPRACOR BASIC PATENT invalid or unenforceable, UCB
shall upon notification of such appeals decision retroactively pay to SEPRACOR
royalties on the sales during the time period from the suspension of the royalty
obligation until the appeals decision.
(b) In partial consideration for granting the license pursuant to Section
2.1 of this Agreement, UCB shall pay to SEPRACOR a running royalty at the rates
set out in Schedule 3.1 hereto calculated as a percentage of the total NET SALES
of PATENT COMBINATON PRODUCT as follows: Royalties shall be payable on NET SALES
of PATENT COMBINATION PRODUCT in each country of the TERRITORY in which such
claim of the SEPRACOR COMBINATION PATENTS has been granted at the time of such
sale. Royalties shall be payable until such time as the SEPRACOR COMBINATION
PATENT expires in the country in question or is held invalid or unenforceable in
such country in a binding decision from which no appeal has been taken or from
which no appeal has been taken in the time allowed for appeal, subject to the
following two sentences. If a SEPRACOR COMBINATION PATENT covering a PATENT
COMBINATION PRODUCT is held invalid or unenforceable in a country of the
TERRITORY, and if an independent third party generic equivalent of the PATENT
COMBINATION PRODUCT is legally introduced in such country, the royalty
obligation of this Section 3.1(b) shall be suspended as to such product in such
country. If SEPRACOR successfully appeals against the decision which holds the
SEPRACOR COMBINATION PATENTS invalid or unenforceable, UCB shall upon
notification of such appeals decision retroactively pay to SEPRACOR royalties on
the sales during the time period from the suspension of the royalty obligation
until the appeals decision. The full amount of NET SALES of PATENT COMBINATION
PRODUCT shall be subject to the royalty obligation of this Section 3.1(c).
<PAGE>
8
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
(c) As regards COMBINATION PRODUCT containing ACTIVE INGREDIENT and
pseudoephedrine as the sole active substances, the royalty obligation of Section
3.1 (a) shall apply to [**] of the full amount of NET SALES of such PRODUCT.
(d) As regards COMBINATION PRODUCT other than the ones referred to under
points (b) and (c) of this Section 3.1, the royalty obligation of Section 3.1
(a) shall apply, and NET SALES subject to the royalty rate set forth in Schedule
3.1 shall be calculated by multiplying number of grams of ACTIVE INGREDIENT in
the COMBINATION PRODUCT by the weighted average Net Sales price of a gram of
ACTIVE INGREDIENT sold in the form of MONO-PRODUCT in the country of sale;
provided, however, that if MONO-PRODUCT is not available in the country of sale,
the full amount of NET SALES of such COMBINATION PRODUCT shall be subject to the
royalty rate set forth in Schedule 3.1. ".
3.2 Financial Reporting
UCB shall provide a report in writing to SEPRACOR within thirty (30) days
of the end of each CALENDAR QUARTER which will set forth the NET SALES for
the considered CALENDAR QUARTER and the detailed calculation of the
royalties due to SEPRACOR pursuant to Section 3.1 for the same period.
3.3 Terms of payment
At the same time as the report required under Section 3.2 above, UCB shall
pay to SEPRACOR at its address set forth in Section 3.7 below, the full
amount of royalties due as per Section 3.1 here above for the said period.
At the end of each MARKETING YEAR, UCB shall reconcile the amount of
royalty due SEPRACOR against the actual amounts paid for the MARKETING
YEAR concerned. In case of underpayment by UCB, UCB shall promptly pay the
difference; in case of overpayment by UCB, UCB shall be entitled to offset
the difference against the royalties due for the next CALENDAR QUARTER.
<PAGE>
9
Any such payment shall be made in U.S. Dollars.
3.4 Taxes
All royalties to be paid to SEPRACOR by UCB pursuant to this Agreement
shall be paid after deduction of the withholding taxes lawfully imposed
thereon, which taxes shall be paid by UCB for the account of SEPRACOR;
provided that UCB shall upon request supply SEPRACOR with original or
certified copies of official certificates stating that the aforesaid taxes
have been actually paid for the account of SEPRACOR. The previous sentence
notwithstanding, the parties hereto will reasonably cooperate in
completing and filing documents required under the provisions of any
applicable tax laws or under any other applicable law, in order to enable
UCB to make such payments to SEPRACOR without any deduction or
withholding.
3.5 Records
UCB shall keep and maintain, and shall cause its AFFILIATE(S),
sublicensees and assigns to keep and maintain, complete and accurate
records and books of account in sufficient detail and form so as to enable
royalties to be determined, including but not limited to, true and
accurate records of sales of PRODUCT and calculations of NET SALES and
royalties. SEPRACOR shall have the right to audit the records of UCB at
its own expense using a nationally recognized firm of independent
certified accountants. Such accountants will have access on reasonable
notice to UCB and its AFFILIATE(S) and sublicensees' records during
reasonable business hours for the purpose of verifying the royalties for
the two preceding years. Notwithstanding the foregoing, this right may not
be exercised more than once in any calendar year, and once a calendar year
is audited it may not be reaudited, and said accountant shall disclose to
SEPRACOR only information relating solely to the accuracy of the reports
<PAGE>
10
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
provided to SEPRACOR and the payments made to SEPRACOR under this
Agreement.
Any adjustment required as a result of an audit conducted under this
Article shall be made within twenty-five (25) days after the date on which
the accountant conducting the audit issues a written report to SEPRACOR
and UCB containing the results of the audit. If any underpayment by UCB is
greater than five percent (5%) of the amount previously paid to SEPRACOR
for the relevant quarter, the costs and expenses of the audit shall be
paid for by UCB. In the case of overpayment, UCB may, at its option,
offset royalties and interest (if any) payable to SEPRACOR by the amount
of the overpayment.
3.6 No part of any amount payable to SEPRACOR under this Agreement may be
reduced due to any counterclaim, set-off, adjustment or other right which
UCB might have against SEPRACOR, any other party or otherwise, except as
expressly stated to the contrary in this Agreement.
3.7 All payments to SEPRACOR pursuant to this Agreement shall be made by wire
transfer, to Fleet Bank of Massachusetts, 75 State Street, Boston,
Massachusetts 02109 (ABA #011000138) to Account No. [**] or such other
bank or account as SEPRACOR may from time to time designate in writing.
<PAGE>
11
ARTICLE 4 - SALES
4.1 Reasonable efforts
UCB shall use reasonable efforts to extend and develop the sales of
MONO-PRODUCT within the TERRITORY and to promote the same to all potential
purchasers thereof, all in a manner consistent with the efforts used by
UCB in connection with other products of similar strategic and financial
significance.
4.2 Launch date
Unless the approved price of PRODUCT, or other market conditions, does not
warrant launch, UCB shall launch PRODUCT within three (3) months from the
date of obtention of marketing authorization and any required government
price and reimbursement approvals in a particular country of the
TERRITORY. However, UCB may extend this three (3) month period after due
consultation with SEPRACOR, up to maximum six (6) months, so as to allow
UCB to launch the PRODUCT shortly before the pollen season in a particular
country of the TERRITORY. For the avoidance of doubt, the parties
expressly agree that possible encroachment of PRODUCT sales into sales by
UCB, its affiliates or licenses, of products containing racemic cetirizine
shall not constitute grounds for delaying launch of PRODUCT pursuant to
this Section 4.2.
ARTICLE 5 - INTELLECTUAL PROPERTY RIGHTS
5.1 Patent protection
SEPRACOR shall be responsible for maintaining and prosecuting at its own
expense the SEPRACOR PATENTS.
5.2 Registration of license
UCB shall be entitled to register the present license at any Patent
Offices if such registration is permissible or needed under the law of the
countries in respect of which the license is granted. SEPRACOR shall give
UCB any powers and authorization necessary for this purpose. The expenses
of such registrations shall be borne by UCB.
<PAGE>
12
5.3 Infringement of SEPRACOR PATENTS
UCB shall inform SEPRACOR in writing of all cases of infringement of any
of the SEPRACOR PATENTS that come to UCB's attention.
SEPRACOR shall have the right, but not the obligation, to take legal
action against third parties for infringement of any SEPRACOR PATENTS in
the TERRITORY, provided it promptly (but in no event later than four weeks
after it was informed by UCB of the case of infringement) notifies UCB in
writing of its decision to take legal action. If SEPRACOR decides it will
take action, it shall have full control thereover. UCB shall have the
right to consult with SEPRACOR and be represented by its own counsel at
its own expense, and SEPRACOR shall in good faith consider UCB's interests
in the conduct of any such suit. UCB shall have the right, prior to
commencement of an action brought by SEPRACOR, to join such action as a
party; provided, however, that SEPRACOR shall retain control of such
action as set forth above. UCB shall reasonably cooperate with SEPRACOR in
any such action (including but not limited to joining such action as a
party in the event that UCB's absence as a party would adversely affect
the action). In the event that UCB has been joined in the action, no
settlement, consent judgment or other voluntary final disposition of the
action may be entered into without the consent of UCB.
The cost of an action brought by SEPRACOR against an infringer shall be
borne by SEPRACOR. Any amounts recovered shall, after deduction of the
costs of litigation, be apportioned between UCB and SEPRACOR, proportional
to their respective damage; provided however, that any punitive,
exemplary, or other enhanced damages shall be apportioned equally between
the parties.
In case SEPRACOR notifies UCB that it will not take legal action against
the infringer or in case SEPRACOR has not notified UCB of its decision to
take action within the four week period referred to in the first paragraph
of this Section 5.3, UCB shall have the right to undertake the same at its
own cost and
<PAGE>
13
discretion, and any amounts recovered shall be retained by UCB. Pending
the conduct, by UCB, of such legal action against the infringer and until
UCB has obtained a binding decision from which no appeal has been taken or
from which no appeal has been taken in the time allowed for appeal, UCB
shall be released of the obligation to pay royalties on the NET SALES in
the country or countries in which a third party infringes the SEPRACOR
PATENTS.
5.4 Infringement of third party rights
In the event of institution of an infringement action in the TERRITORY by
a third party against UCB alleging infringement of any intellectual
property rights of such third party in connection with the manufacture,
use, or sale of PRODUCT UCB, UCB shall undertake the defense thereof at
their own expense and discretion.
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES
SEPRACOR warrants and represents that it has all right, title and interest in
the SEPRACOR PATENTS.
SEPRACOR warrants and represents that, to the best of its knowledge, the
SEPRACOR PATENTS that are granted as of the effective date hereof are valid and
enforceable .
SEPRACOR warrants and represents that it has not and will not enter into any
agreement, oral or written, with any third party preventing the use of the
SEPRACOR PATENTS in the TERRITORY by UCB.
UCB warrants and represents that it is not currently a party to, and during the
term of this Agreement will not enter into, any agreements, oral or written,
that are inconsistent with its obligations under this Agreement.
<PAGE>
14
ARTICLE 7 - CONFIDENTIALITY
7.1 Each party ("Receiving Party") acknowledges that any information supplied
to it by the other party ("Disclosing Party") under this Agreement
relating to the Disclosing Party's and/or the Disclosing Party's
AFFILIATE(S)' business and/or the ACTIVE INGREDIENTS and/or PRODUCT is
confidential and undertakes to keep secret any such confidential
information. The Receiving Party shall not without the Disclosing Party's
prior written consent disclose the confidential information to any third
party nor use the same for any purpose other than the fulfillment of its
obligations under the terms of this Agreement.
7.2 The Receiving Party shall ensure that each of its employees to whom any
such information is disclosed is made aware prior to such disclosure of
the restrictions herein contained and that such employees observe such
restrictions.
7.3 The obligations of Section 7.1 shall have no application when and to the
extent that confidential information: was known to the receiving party
prior to receipt from the disclosing party; was generally available to the
trade or to the public prior to receipt thereof from the disclosing party;
through no act on the part of the receiving party, hereafter becomes
information generally available to the trade or to the public; corresponds
in substance to information received in good faith by the receiving party
from a third party and is not subject to an obligation of confidentiality
owed by the third party to the disclosing party; is hereafter
independently developed by an employee or agent of the receiving party
without reference to information received hereunder; or is required to be
disclosed by law, regulation, or other act of governmental authority,
provided, however, that the receiving party shall give prompt notice to
the disclosing party of any such required disclosure in order to afford
the disclosing party an opportunity to oppose or limit the required
disclosure.
7.4 Nothing in this Article 7 shall prevent UCB or its sublicensees to
exercise their rights granted under or pursuant to this Agreement.
<PAGE>
15
ARTICLE 8 - TERM AND TERMINATION
8.1 Term
This Agreement shall be effective on the date of last signature hereof and
shall continue for the duration of the SEPRACOR PATENTS.
8.2 Termination by either party
In addition to other termination rights provided in this Agreement, either
Party may terminate this Agreement on written notice to the other party,
effective immediately
(i) if the other Party commits a material breach of any of its obligations
under this Agreement which is not cured within ninety (90) days of written
notice from the other Party specifying the breach. SEPRACOR may effectuate
termination on a country-by-country basis in connection with breach by UCB
arising out of Section 2.4, 4.1, or 4.2.
Such right of termination shall be without prejudice, and in addition to
any other remedy the non-defaulting Party may have at law or in equity due
to the other Party's breach of its obligations hereunder.
(ii) if the other party is dissolved or liquidated, files or has filed
against it a petition under any bankruptcy or insolvency law, makes an
assignment for the benefit of its creditors or has a receiver appointed
for all or substantially all of its property.
<PAGE>
16
8.3 Termination by SEPRACOR
SEPRACOR shall have the right to terminate this Agreement, effective
immediately, if after the effective date, UCB, its AFFILIATE(S),
sublicensees or assigns, or any third party of which SEPRACOR can
demonstrate it acts on the behalf of UCB, its AFFILIATE(S), sublicensees
or assigns, persists despite a written notice sent by SEPRACOR in any
proceeding or action alleging invalidity or unenforceability of SEPRACOR
PATENT(S) in the TERRITORY, or non-infringement of SEPRACOR PATENT(S) by
any PRODUCT for any use, before any court, administrative or other
government agency, or patent authority in the TERRITORY, or initiates or
participates in any such proceeding or action before any court,
administrative or other government agency, or patent authority in the
TERRITORY.
ARTICLE 9 - EFFECTS OF TERMINATION
9.1 No relief
Expiration or termination of this Agreement in whole or in part shall not
relieve the parties of the obligation to pay any amounts owing between
them, nor shall it relieve the parties of their obligations under Sections
7, 9, 10 and 11, and any other Section providing for its survival, which
shall survive such expiration or termination, in accordance with their
terms.
9.2 Stocks
On termination of this Agreement for any reason whatsoever SEPRACOR shall
grant UCB sufficient time (which period of time shall not exceed twelve
months) to sell its existing stocks of PRODUCT including stock on order at
that time (subject to payment to the applicable royalty obligations of
this Agreement).
ARTICLE 10 - GOVERNING LAW - JURISDICTION
This Agreement shall be ruled and interpreted according to the laws of England.
Any dispute concerning the validity, the interpretation or the performance of
this Agreement shall be finally settled under the Rules of the International
Chamber of Commerce by one or more arbitrator(s) appointed in accordance with
the said Rules.
<PAGE>
17
The place of arbitration shall be London. The proceedings shall be conducted in
the English language.
ARTICLE 11 - GENERAL PROVISIONS
11.1 Force majeure
The failure of either of the parties hereto to perform any obligation
under this Agreement solely by reason of causes beyond its control,
including but not limited to acts of God, acts of government, riots, wars,
strikes, natural disasters, shall not be deemed to be a breach of this
Agreement; provided, however, that the party so prevented from complying
herewith shall continue to take all reasonable actions within its power to
comply as fully as possible herewith. If such event causes or is
reasonably anticipated to cause delay in performance for more than ninety
(90) days, then either party may terminate this Agreement, effective upon
written notice to the other party.
11.2 Assignment - Subcontracting
This Agreement and each and every covenant, term and condition herein is
binding upon and enures to the benefit of the parties hereto and their
respective successors.
Neither Party may without the prior written approval of the other:
(i) assign this Agreement in whole to any party other than its
respective AFFILIATE(S), provided, however, either party may,
without such approval, assign the Agreement and its rights and
obligations hereunder in connection with the transfer or sale of all
or substantially all of its assets related to the division or the
subject business, or in the event of its merger or consolidation or
change in control or similar transaction, or
(ii) designate or cause any party other than its respective AFFILIATE(S)
or one or more UCB sublicensees to perform all or part of its
activities hereunder or to have the benefit of all or part of its
rights hereunder.
<PAGE>
18
In the event of subcontracting to an AFFILIATE or assignment, the
respective AFFILIATE or assignee shall be bound by the provisions of this
Agreement.
11.3 Indemnification
UCB agrees to defend SEPRACOR, its successors and assigns, and its
officers, directors, employees, stockholders, agents, AFFILIATE(S) and any
person who controls any of such persons at UCB's cost and expense, and
will indemnify and hold harmless SEPRACOR, its successors and assigns, and
its, officers, directors, employees, stockholders, agents, AFFILIATE(S)
and any person who controls any of such persons (an "Indemnified SEPRACOR
Party") (including reasonable attorneys', consultants' and other
professional fees and disbursements of every kind, nature and description
incurred by such Indemnified SEPRACOR Party in connection therewith)
(collectively, "Damages") that such Indemnified SEPRACOR Party may
sustain, suffer or incur from and against any and all liabilities, claims,
demands, judgments, losses, costs, damages, fees or expenses whatsoever
arising out of or in connection with the manufacture, commercialization,
marketing, sale or use of any PRODUCT, including, but not limited to,
claims by a third party alleging infringement of any intellectual property
rights of such third party in connection with the manufacture, use, or
sale of PRODUCT, and any actual or alleged injury, damage, death or other
consequent occurring to any person as a result, directly or indirectly, of
the possession, use or consumption of any PRODUCT, whether claimed by
reason of breach of warranty, negligence, product defect or otherwise, and
regardless of the form in which any such claim is made.
SEPRACOR shall indemnify and hold harmless UCB its successors and assigns,
and its officers, directors, employees, stockholders, agents, AFFILIATE(S)
and any person who controls any of such persons (an "Indemnified UCB
Party") from and against any liabilities, claims, demands,
<PAGE>
19
judgments, losses, costs, damages or expenses whatsoever (including
reasonable attorneys', consultants' and other professional fees and
disbursements of every kind, nature and description incurred by such
Indemnified UCB Party in connection therewith) (collectively, "Damages")
that such Indemnified UCB Party may sustain, suffer or incur to the extent
that such Damages are attributed to it from any breach of any
representation, warranty, covenant or agreement of SEPRACOR contained in
this Agreement.
See attached Appendix A which is hereby incorporated by reference.
11.4. Publicity
SEPRACOR and UCB shall jointly issue a press release promptly after the
execution hereof concerning this Agreement, which press release shall be
agreed to between the parties prior to issue. A party may not publicize or
disclose the terms or conditions hereof without the prior written consent
of the other party. Nothing in the foregoing, however, shall prohibit a
party from making such disclosures to the extent deemed necessary under
applicable federal or state securities laws or any rule or regulation of
any nationally recognized securities exchange, provided same is accurate
and complete. In such event, however, the disclosing party shall use good
faith efforts to consult with the other party prior to such disclosure
and, where applicable, shall request confidential treatment to the extent
available.
11.5 Headings
Headings are inserted for convenience and shall not affect the meaning or
interpretation of this Agreement or any article thereof.
11.6 Waiver
No waiver of any default hereunder by either party or any failure to
enforce any rights hereunder shall be deemed to constitute a waiver of any
subsequent default with respect to the same or any other provision hereof.
<PAGE>
20
11.7 Severability
Should any part of this Agreement be held unenforceable or in conflict
with the applicable laws or regulations of any jurisdiction, the invalid
or unenforceable part or provision shall be replaced with a provision
which accomplishes, to the extent possible, the original business purpose
of such part or provision in a valid and enforceable manner, and the
remainder of this Agreement shall remain binding upon the parties hereto.
11.8 Notices
All notices given by one party to the other party shall be in writing.
They shall be deemed given the sooner of receipt or three business days
after having been posted.
They shall be addressed to the addresses indicated on the first page of
this Agreement:
if to UCB: UCB FARCHIM S.A.
Attn: General Manager
if to SEPRACOR: SEPRACOR Inc.
Attn: President, Pharmaceuticals
or to the latest address of such party as shall have been communicated in
writing to the other party.
11.9 Entire agreement
This Agreement and the Schedules hereto constitute the whole understanding
between the parties on the subject matter hereof and shall prevail on any
other terms. Any amendment or modification to this Agreement shall only be
made in writing and shall only be valid when signed by both parties.
<PAGE>
21
11.10 Independent Contractor
The activities to be performed by either Party hereunder are undertaken by
it as an independent contractor and not as an agent of the other Party.
Neither Party shall at any time, enter into or incur, or hold itself out
to third parties as having authority to enter into or incur on behalf of
the other Party, any commitments, expenses or liabilities whatsoever. It
is not the intent of the Parties hereto to form any partnership or joint
venture and it is understood and agreed that no such partnership or joint
venture shall be created by this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives.
Done in two copies, each party having received its copy.
UCB FARCHIM S.A. SEPRACOR Inc.
/s/ Croufer /s/ David S. Barlow
- ---------------------------- -------------------
Name: Croufer Name: David S. Barlow
Title: Vice President Title: President, Pharmaceuticals
/s/ Marc Wiers
- ---------------------------- ------------------------
Name: Marc Wiers Name:
Title: President Title:
Place: Atlanta Place: Atlanta
Date: May 27, 1999 Date: May 27, 1999
<PAGE>
22
LIST OF SCHEDULES
to the License Agreement between SEPRACOR Inc. and UCB FARCHIM S.A., signed on
May 27, 1999
<PAGE>
23
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
SCHEDULE 1.12 SEPRACOR PATENTS
<TABLE>
<CAPTION>
Our Ref. No. Country Application No. Filing Date Patent No. Issue Date Subject Status
<S> <C> <C> <C> <C> <C> <C> <C>
[**]
</TABLE>
<PAGE>
24
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
SCHEDULE 2.4 Initial list of countries in which MARKETING AUTHORIZATION will be
sought
[**]
<PAGE>
25
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
SCHEDULE 3.1
To the extent the cumulative applicable NET SALES in a given MARKETING YEAR are
below USD [**]
On the part of applicable NET SALES between USD [**]
On the part of applicable NET SALES between USD [**]
On the part of applicable NET SALES exceeding USD [**].
<PAGE>
CONFIDENTIAL
Exhibit 10.34
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Co-Promotion Agreement
Between
Ross Products Division of
Abbott Laboratories Inc.
and
Sepracor Inc.
Dated As Of November 19, 1999
<PAGE>
CONFIDENTIAL
Table of Contents
Article 1. Definitions.......................................................1
Article 2. APPOINTMENT TO CO-PROMOTE.........................................7
2.1 Appointment.......................................................7
2.2 Marketing Committee...............................................8
2.3 Perform the tasks or functions specified in Section 1.31,
Section 1.32, Section 3.6.2, and Section 4.15. 2..................9
Article 3. ABBOTT PROMOTIONAL EFFORTS........................................9
3.1 Abbott Promotional Efforts........................................9
3.2 Product Manager and Sales Force..................................11
3.3 Abbott Representative Training...................................11
3.4 Abbott Representatives' Incentive Compensation...................12
3.5 Requests for Medical Information by Third Parties................12
3.6 Abbott Reports...................................................12
3.7 Other Abbott Costs and Expenses..................................13
Article 4. SEPRACOR RESPONSIBILITIES AND PROMOTIONAL EFFORTS................13
4.1 Pediatric Expanded Approval......................................13
4.2 Maintenance of Product NDA.......................................13
4.3 Product Formulations.............................................13
4.4 Regulatory Responsibilities......................................13
4.5 Patent and Proprietary Protection................................14
4.6 Consultation with Abbott.........................................14
4.7 Product Manufacture..............................................14
4.8 Complaints, Product Defects and Returns..........................15
4.9 Product Supply...................................................15
4.10 Sepracor Promotional Efforts.....................................15
4.11 Product Manager..................................................16
4.12 Sepracor Representative Training.................................16
4.13 Sepracor Representatives' Incentive Compensation.................17
4.14 Requests for Medical Information by Third Parties................17
4.15 Sepracor Reports.................................................17
4.16 Other Sepracor Costs and Expenses................................17
Article 5. LABELING, SAMPLING AND PROMOTIONAL MATERIALS.....................18
5.1 Product Labeling.................................................18
5.2 Sampling.........................................................18
5.3 Development of Sepracor Promotional Materials....................18
5.4 Distribution of Sepracor Promotional Materials...................18
5.5 Identification of Abbott on Sepracor Promotional Materials.......19
5.6 Abbott Product Materials.........................................20
5.7 Identification of Sepracor on Abbott Product Materials...........20
i
<PAGE>
CONFIDENTIAL
Article 6. PRICING, QUOTATIONS, ORDERS, BILLING, COLLECTION AND
SALES TRACKING...................................................21
6.1 Pricing..........................................................21
6.2 Pricing and Rebate Contracts.....................................21
6.3 Quotations and Orders; Billing and Collection....................21
6.4 Electronic Database..............................................21
Article 7. COMPENSATION TO ABBOTT...........................................22
7.1 Commission.......................................................22
7.2 Commission Payment...............................................22
7.3 Audit............................................................22
Article 8. MEDICAL INQUIRIES; NOTIFICATION OF ADVERSE
DRUG EXPERIENCE..................................................23
8.1 Communication....................................................23
8.2 Notification.....................................................23
8.3 Product Report...................................................24
8.4 Product Recall...................................................24
Article 9. OTHER PRODUCTS...................................................24
9.1 Product Rights Ex-U.S............................................24
9.2 Product Rights to Geriatric Market...............................24
9.3 Rights of Negotiation for Other Products.........................25
Article 10. REPRESENTATIONS AND WARRANTIES; COVENANTS........................25
10.1 Mutual Representations and Warranties............................25
10.2 Abbott Covenants.................................................25
10.3 Other Abbott Representations and Warranties......................26
10.4 Other Sepracor Representations and Warranties....................27
10.5 Sepracor Covenants...............................................28
Article 11. INDEPENDENT CONTRACTOR RELATIONSHIP..............................29
Article 12. TERM AND TERMINATION.............................................29
12.1 Initial Term.....................................................29
12.2 Early Termination by Abbott......................................29
12.3 Early Termination by Either Party................................30
12.4 Grace Period.....................................................31
Article 13. CONSEQUENCES OF TERMINATION......................................31
13.1 Confidential Information.........................................31
13.2 Accrued Obligations..............................................31
13.3 Return of Promotional Materials..................................31
13.4 Commission.......................................................32
13.5 Residual Commission..............................................32
13.6 Remedies.........................................................32
ii
<PAGE>
CONFIDENTIAL
13.7 Survival.........................................................32
Article 14. INDEMNIFICATION..................................................33
14.1 Sepracor Indemnification.........................................33
14.2 Abbott Indemnification...........................................34
14.3 Sepracor Indemnification Under Sampling Act......................35
14.4 Abbott Indemnification Under Sampling Act........................36
14.5 Control of Defense...............................................37
14.6 Settlement of Claims.............................................38
Article 15. CONFIDENTIALITY..................................................38
15.1 Definition.......................................................38
15.2 Exceptions to the Definition of Confidential Information.........38
15.3 Confidentiality Obligations......................................39
15.4 Previous Agreement...............................................39
Article 16. PUBLIC ANNOUNCEMENTS.............................................39
16.1 Joint Announcement...............................................39
16.2 Non-Publicity....................................................40
Article 17. TRADEMARKS.......................................................40
17.1 Promotion........................................................40
17.2 Compliance with Laws.............................................40
17.3 No Assertion of Right............................................40
Article 18. FORCE MAJEURE....................................................41
Article 19. ALTERNATIVE DISPUTE RESOLUTION...................................41
Article 20. GENERAL..........................................................41
20.1 Property Interest................................................41
20.2 Assignment.......................................................41
20.3 Headings.........................................................42
20.4 Notices..........................................................42
20.5 Waiver...........................................................43
20.6 Severability.....................................................43
20.7 Governing Law....................................................43
20.8 Counterparts.....................................................43
20.9 Entire Agreement.................................................43
SCHEDULE 1.32. Sample Pediatric Sales Calculation
SCHEDULE 10.4.6. Other Agreements Regarding Product
SCHEDULE 10.4.7. Notices From The FDA
SCHEDULE 19 Alternative Dispute Resolution
iii
<PAGE>
CONFIDENTIAL
CO-PROMOTION AGREEMENT
THIS CO-PROMOTION AGREEMENT (the "Agreement") is entered into as of
November 19, 1999 (the "Effective Date"), by and between Sepracor Inc., having
its principal offices at 111 Locke Drive, Suite 2, Marlborough, Massachusetts
01752 ("Sepracor"), and Abbott Laboratories Inc., through its Ross Products
Division, having its principal offices at 625 Cleveland Avenue, Columbus, Ohio
43215 ("Abbott").
WITNESSETH:
WHEREAS, Sepracor has received FDA approval for an inhalation solution of
levalbuterol hydrochloride which is currently marketed in the United States of
America under Sepracor's trademark, Xopenex(TM);
WHEREAS, Abbott has a well-established and highly trained pediatric sales
force for promoting pharmaceutical products; and
WHEREAS, Sepracor and Abbott wish to enter into this Agreement for Abbott
to co-promote the product(s) described herein in the Territory;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements set forth herein, the parties agree as follows:
Article 1. DEFINITIONS.
For the purposes of this Agreement, the following initially capitalized
terms in this Agreement, whether used in the singular or plural, shall have the
following meanings, unless the context clearly requires otherwise.
1.1 "Abbott" means the Ross Products Division of Abbott Laboratories
Inc., a Delaware corporation.
1.2 "Abbott Diversion Violation" means a violation of the Sampling Act
that is caused by Abbott, its officers, directors, or other
employees or representatives of Abbott in the performance of
Abbott's obligations under this Agreement, which occurs and is
deemed a conviction against Sepracor pursuant to 21 U.S.C.
ss.333(b)(2).
1.3 "Abbott Marks" means the corporate names "Abbott Laboratories" and
"Abbott Laboratories Inc.," the division names "Ross Products
Division" and "Ross Pediatrics," and Abbott's logo "a" and the
"Ross" logo.
1.4 "Abbott Product Materials" means all forms and formats of
information produced by or at the request of Abbott regarding or
describing, in whole or in part, the Product, developed for use in
promoting the Product.
1.5 "Abbott Promotional Efforts" means Abbott's activities to promote
and sell the Product as defined in Article 3 of this Agreement.
1
<PAGE>
CONFIDENTIAL
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
1.6 "Abbott Representative" means an individual who is an employee
person of Abbott, who has been trained by Abbott to make sales
presentations for Abbott's pediatric pharmaceutical and nutritional
products, and who has been trained pursuant to this Agreement to
make effective sales presentations for the Product.
1.7 "Abbott Targeted Hospitals" means all hospitals classified as Outlet
Subcategory Codes [**] using Drug Distribution Data.
1.8 "ADR" means the alternative dispute resolution process set forth in
Article19.
1.9 "Affiliate" means, with respect to each Party, any legal entity
which, during the Term, controls, is controlled by, or is under
common control with such Party. For purposes of this definition, an
entity shall be deemed to control another entity if it owns or
controls, directly or indirectly, at least fifty percent (50%) of
the voting interest of all equity interests of the other entity (or
other comparable ownership interest for an entity other than a
corporation).
1.10 "Agreement" means this Co-Promotion Agreement executed by both
Parties, as may be amended from time to time in accordance with the
terms and conditions hereof.
1.11 "Approved Indication" for the Product means:
1.11.1 Prevention and/or treatment of bronchospasm in adolescents
12 years of age and older with reversible obstructive airway
disease; or
1.11.2 Any other indications approved by the FDA during the Term.
1.12 "Average Net Selling Price/Dose Vial" means the Net Sales of unit
dose vials of Product during a Sales Quarter, divided by the number
of unit dose vials of Product actually sold during such Sales
Quarter (excluding actual rejections and returns in such Sales
Quarter).
1.13 "Average Net Selling Price/Dose Bottle" means the Net Sales of
multidose bottles of Product during a Sales Quarter, divided by the
number of multidose bottles of Product actually sold during such
Sales Quarter (excluding actual rejections and returns in such Sales
Quarter).
1.14 "cGMP" means current Good Manufacturing Practices, as defined by the
FDA pursuant to applicable statutes and the regulations adopted from
time to time under authority of the Federal Food, Drug and Cosmetics
Act.
1.15 "Commission" means the dollar amount of compensation paid to Abbott
for the Abbott Promotional Efforts and other obligations of Abbott
hereunder, based on Pediatric Sales for any given Sales Year during
the Term, as computed and paid on a quarterly basis.
2
<PAGE>
CONFIDENTIAL
1.16 "Commission Payments" means the quarterly payments made by Sepracor
to Abbott calculated in accordance with the provisions set forth in
Section 7.1.
1.17 "Confidential Information" shall have the meaning set forth in
Section 15.1.
1.18 "Effective Date" means the date first above written in the Preamble
to this Agreement.
1.19 "Extension Term" means the twelve-month period of time following the
end of the Initial Term , which is an extension of the Term in
accordance with the provisions of Section 12.1.1.
1.20 "FDA" means the United States Food and Drug Administration or any
successor entity thereto.
1.21 "Geriatric Market" means the population segment of people age 65
years and older.
1.22 "Initial Term" means the period of time commencing on the Effective
Date and ending on the sixth anniversary of January 1, 2000.
1.23 "Initial Training" means the training of the Abbott Representatives
by Sepracor in accordance with the provisions set forth in Section
3.3.1.
1.24 "Line Extension" shall mean any (a) new formulation or dosage
strength of levalbuterol hydrochloride inhalation solution for use
in a standard nebulization unit, (b) new indication for levalbuterol
hydrochloride inhalation solution, or (c) new packaging or labeling
configurations for levalbuterol hydrochloride inhalation solution.
1.25 "Marketing Committee" means a committee comprised of two (2)
designees of each Party, which shall meet as set forth in Section
2.2 regarding the matters set forth therein.
1.26 "Medical Affairs Liaison" of each Party shall mean a person
appointed by each Party, with notice to the other Party of the name,
address, telephone number and facsimile number for such person, to
facilitate the communications described in Article 8.
1.27 "NDA" means a new drug application (or a supplemental new drug
application) submitted to the FDA for approval of the Product for
commercial sale for indicated uses pursuant to the Federal Food,
Drug, and Cosmetic Act.
1.28 "Net Sales" means the gross amount invoiced by Sepracor or its
Affiliates on sales of a Product in the Territory, less the
following as they specifically relate to the Product:
3
<PAGE>
CONFIDENTIAL
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
1.28.1 [**] and [**];
1.28.2 [**] or [**] for [**], and [**]
1.28.3 [**] with respect to sales of Product (including [**] or
otherwise [**] the sale of Product, including [**] when
included in the [**] with respect to [**] included in the
[**]
1.28.4 [**] costs incurred in [**] included in the [**]
1.28.5 [**] and [**] or to [**] and [**] and [**] or to [**]
including, [**]
1.28.6 [**] provided that such [**] and are [**]
1.28.7 in the event [**] the Product, then, if possible, the [**]
shall be [**] to which [**], including the Product. In the
event [**] including the Product, [**] shall be [**]
including the Product.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
In addition, the following shall apply for the purposes of
calculating Net Sales: (a) if [**] to a [**] to the [**] of Product
[**] which is the [**] and the [**] which is the [**] for each and
every [**]; (b) if [**] to a [**] by or for such [**] for such
Product shall be [**] or the [**]; and (c) if Product is [**] any
other [**] or any [**] of any [**] to such [**] in connection with
[**] shall be [**] in the [**].
1.29 "Party" means either Abbott or Sepracor and their respective
successors and assigns; and "Parties" is both Abbott and Sepracor,
and their respective successors and assigns.
1.30 "Pediatric Bronchospasm Expanded Approval" means FDA's approval of
Sepracor's NDA for the Product for use in children below age 12 and
at least down to age 4.
1.31 "Pediatric Market" means pediatricians identified by Medical
Education number (a list of such pediatricians to be agreed to by
the Marketing Committee and amended from time to time, as
appropriate), general and family physician practitioners with high
birth practices identified by Medical Education number (a list of
such physicians to be agreed to by the Marketing Committee and
amended from time to time, as appropriate), and Abbott Targeted
Hospitals, and clinics, mail-order and staff model health
maintenance organizations for the purpose of pediatric care;
provided, however, that all pediatric allergists and pediatric
pulmonologists are excluded from the Pediatric Market; further,
provided, however, that Abbott shall have a right of first refusal
to add pediatric allergists, pediatric pulmonologists, or both, to
the Pediatric Market in the event that during the Term, Sepracor
decides that it would like sales personnel other than Sepracor
Representatives to promote Product to pediatric allergists,
pediatric pulmonologists, or both, as appropriate, and in such case,
expansion of the Pediatric Market to include one or both of
pediatric allergists and pediatric pulmonologists shall be discussed
by the Marketing Committee.
1.32 "Pediatric Sales" means sales of Product by Sepracor and its
Affiliates, as calculated by adding (a) the product determined by
multiplying the Average Net Selling Price/Dose Vial or Average Net
Selling Price/Dose Bottle during an applicable period by the number
of unit dose vials or multidose bottles of Product, as appropriate,
sold during such period through pediatricians identified by Medical
Education number (a list of such pediatricians to be agreed to by
the Marketing Committee and amended from time to time, as
appropriate), and those general and family physician practitioners
with high birth practices identified by Medical Education number (a
list of such physicians to be agreed to by the Marketing Committee
and amended from time to time, as appropriate), that are dispensed
by retail drug stores (independent, chains, food and mass
merchandise stores), clinics, and mail-order and staff model health
maintenance organizations (determined by multiplying the number of
prescriptions generated by such pediatricians and general and family
practitioners and so dispensed
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(using Xponent data) by the average number of unit dose vials per
pediatric script (which is equal to the unit dose ratio (the
numerator of which is the total milliliter volume of the Product
dispensed in unit dose vials to fill pediatric prescriptions, and
the denominator of which is dose size in milliliters) divided by the
number of unit dose vial prescriptions written by pediatricians) or
by the average number of multidose bottles per pediatric script
(which is equal to the multidose ratio (the numerator of which is
the total milliliter volume of the Product dispensed in multidose
bottles to fill pediatric prescriptions, and the denominator of
which is the bottle volume in milliliters) divided by the number of
multidose bottle prescriptions written by pediatricians) , as
appropriate, (using the National Prescription Audit), and (b)
pediatric purchases of Product by hospitals, which shall be
calculated by multiplying the number of unit dose vials or multidose
bottles of Product, as appropriate, sold to Abbott Targeted
Hospitals during an applicable period as reported by Drug
Distribution Data by the Average Net Selling Price/Dose Vial or
Average Net Selling Price/Dose Bottle, as appropriate, during such
period and by the fraction equal to the number of unit dose vials or
multidose bottles, as appropriate, prescribed by pediatricians in
the retail segment (as reported by the National Prescription Audit)
divided by the number of all unit dose vials or multidose bottles,
as appropriate, prescribed in the retail segment (as reported by the
National Prescription Audit) during such period. For example
purposes only, a mock sample calculation of Pediatric Sales is set
forth in Schedule 1.32 hereto.
1.33 "Product" means Sepracor's levalbuterol hydrochloride inhalation
solution, a pharmaceutical product for human use, currently marketed
under the Trademark. Product shall include any Line Extensions.
1.34 "Purchasers" means any person or entity purchasing the Product,
including, but not limited to, wholesalers, distributors and
Sepracor customers.
1.35 "Residual Commission" means a Commission paid by Sepracor to Abbott
following of the Term as set forth in Section 13.5.
1.36 "Sales Quarter" means each period of three (3) consecutive months
during the Term; provided, however, that the first Sales Quarter
shall be the partial Sales Quarter beginning on the date that the
first Abbott Representatives begin Abbott Promotional Efforts and
ending on December 31, 1999. The second Sales Quarter shall begin on
January 1, 2000, with successive Sales Quarters being each
successive three (3)-month period thereafter.
1.37 "Sales Year" means a period of twelve (12) consecutive calendar
months during the Term commencing on January 1, 2000, and each
anniversary thereof.
1.38 "Samples" means small quantities of the Product offered for
evaluation.
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1.39 "Sampling Act" means the Prescription Drug Marketing Act of 1988, as
amended from time to time, and any regulations promulgated
thereunder.
1.40 "Sepracor" means Sepracor Inc., a Delaware corporation.
1.41 "Sepracor Diversion Violation" means a violation of the Sampling Act
that is caused by Sepracor, its officers, directors, or other
employees or representatives of Sepracor in the performance of
Sepracor's obligations under this Agreement, which occurs and is
deemed a conviction against Abbott pursuant to 21 U.S.C.
ss.333(b)(2).
1.42 "Sepracor Marks" means the corporate names "Sepracor Inc.," and
"Sepracor", and the Trademark and other tradenames and logos of
Sepracor.
1.43 "Sepracor Promotional Efforts" means all of Sepracor's activities to
promote and sell the Product as defined in Section 4.10 of this
Agreement.
1.44 "Sepracor Promotional Materials" means original printed matter,
including printed literature and reprints, or original graphic
matter relating or referring to the Product, that is provided by
Sepracor to Abbott for use by the Abbott Representatives in Abbott
Promotional Efforts.
1.45 "Sepracor Representative" means an individual who is an employee of
Sepracor or contract sales person retained or engaged by Sepracor,
who has been trained by Sepracor to make effective sales
presentations for the Product.
1.46 "Term" means the period of time from the Effective Date until the
expiration or early termination of this Agreement in accordance with
its terms and conditions. In any event, the Term of this Agreement
shall not be longer than seven (7) years from the January 1, 2000.
1.47 "Territory" means the fifty (50) states of the United States of
America, the District of Columbia, and all United States territories
and possessions, but excluding Puerto Rico.
1.48 "Third Party" means a party other than Abbott, Sepracor, or their
Affiliates.
1.49 "Trademark" means the statutory United States of America trademark
Xopenex(TM) for the Product, in the Territory, and any other
trademark under which the Product is marketed during the Term in the
Territory.
Article 2. APPOINTMENT TO CO-PROMOTE.
2.1 Appointment. Sepracor hereby appoints Abbott as the exclusive
co-promoter of the Product to the Pediatric Market in the Territory
for the Term, except as set forth in Section 4.10.1 below. Sepracor
and Abbott hereby agree that Sepracor and Abbott, and their
respective Representatives, shall be the sole
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commercial promoters of the Product to the Pediatric Market in the
Territory for the Term, subject to the terms and conditions of this
Agreement. Sepracor shall retain all other rights exclusively to
promote Product, and all other Sepracor prescription and
non-prescription pharmaceutical and non-pharmaceutical products.
2.2 Marketing Committee. Immediately following the Effective Date,
Abbott and Sepracor shall each appoint two (2) representatives on
behalf of their respective companies to serve as the "Marketing
Committee", and the Marketing Committee shall meet within thirty
(30) calendar days of the Effective Date. The Marketing Committee
shall:
2.2.1 Discuss preferred pricing for the Product and the strategy
for implementing such pricing, and develop the strategy for
marketing and distributing the Product in the Pediatric
Market in the Territory;
2.2.2 Establish forecasted Pediatric Sales of Product for each
individual Sales Year in advance of such Sales Year, showing
anticipated Pediatric Sales for each calendar month during
such Sales Year;
2.2.3 Establish Product promotion goals for the Pediatric Market
in the Territory and the preferred means to attain such
goals, and review and establish a plan for the distribution
of the Sepracor Promotional Materials and Abbott Product
Materials;
2.2.4 Provide advice and guidance regarding budget, scope and
extent of the Abbott Promotional Efforts; provided, however,
Abbott shall make all strategic decisions with respect to
Abbott Promotional Efforts and budget for the Abbott
Promotional Efforts, which strategic decisions shall be
consistent with the terms of this Agreement;
2.2.5 Provide advice and guidance regarding budget, scope, and
extent of the Sepracor training of Abbott Representatives;
provided, however, Abbott shall make all strategic decisions
with respect to training of Abbott Representatives (other
than with respect to the Initial Training), which decisions
shall be in accordance with the terms of this Agreement; and
further provided, however, Sepracor shall make all strategic
decisions with respect to training of Sepracor
Representatives;
2.2.6 Serve as an advisory panel to address any matter either
Party brings before the Marketing Committee pursuant to the
terms and conditions of this Agreement;
2.2.7 Meet at least once during each Sales Quarter to discuss
matters assigned to the Marketing Committee. Marketing
Committee
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
meetings shall be held at mutually agreed upon dates, times
and places, or by conference call;
2.2.8 Serve as a conduit for the exchange of information and input
relating to the further development of the Product by
Sepracor pursuant to Section 4.1, for the purpose of
Sepracor seeking the Pediatric Bronchospasm Expanded
Approval; provided, however, that appropriate technical
personnel of each Party shall attend any Marketing Committee
meeting where subject matter relating to this Subsection
2.2.8 is on the meeting agenda; and
2.3 Perform the tasks or functions specified in Section 1.31, Section
1.32, Section 3.6.2, and Section 4.15. 2.
Decisions of the Marketing Committee shall be by a vote of either four (4)
to zero (0) or three (3) to one (1). In the event that such a decision
cannot be reached on any matter or issue before the Marketing Committee,
the matter or issue shall first be referred to a panel consisting of one
(1) senior management designee from each Party. If the matter or issue is
not decided by the panel, Sepracor shall unilaterally decide the matter or
issue.
Article 3. ABBOTT PROMOTIONAL EFFORTS.
3.1 Abbott Promotional Efforts.
Abbott Promotional Efforts shall be as follows:
3.1.1 Abbott Representatives. Abbott shall use its reasonable
commercial efforts to promote the Product to the Pediatric
Market for sale in the Territory through Abbott
Representatives [**]. With Sepracor's prior written
approval, which approval shall not be unreasonable withheld,
Abbott may carry out any of its Abbott Promotional Efforts
through Affiliates of Abbott or temporary contract
resources, which shall be bound by all terms and conditions
of this Agreement. Subject to the provisions of Section
12.4, commencing in December 1999, Abbott shall promote the
Product to the Pediatric Market in the Territory . Abbott
Promotional Efforts shall include:
3.1.1.1 Promotion to Pediatricians. Abbott shall use their
[**] pediatric sales force, including a minimum of
[**] Abbott Representatives[**], and Abbott
Representatives shall provide a minimum of [**] on
an [**] in the Pediatric Market ([**] will be part
of such [**] and will be [**]), wherein [**] of the
[**], and a minimum of [**] of the [**] in the
[**].
3.1.1.2 Promotion to Abbott Targeted Hospitals. Abbott
shall use [**] Abbott Representatives [**]
(referred to herein
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
as "Abbott [**] Representatives"), [**] Abbott
Targeted Hospitals, wherein at each such Abbott
Targeted Hospital, [**] is the [**] and such [**]
shall include [**] of the [**]. On an annual basis,
Abbott [**] Representatives shall provide a minimum
of [**] is the [**], and a minimum of [**] of the
[**] by Abbott [**] Representatives [**] in the
[**]. Additionally, from the Effective Date through
December 31, 2000, Abbott shall use reasonable
commercial efforts to utilize [**] its existing
Abbott Representatives who are academic specialty
representatives (referred to herein as "Abbott
Academic Representatives") [**] academic Abbott
Targeted Hospitals wherein at each such academic
Abbott Targeted Hospital, [**], and such [**] shall
include [**] of the [**]. Beginning January 1,
2001, Abbott shall use [**] Abbott Academic
Representatives [**] Abbott Targeted Hospitals. On
an annual basis, from the Effective Date through
December 31, 2000, Abbott shall use reasonable
commercial efforts to have Abbott Academic
Representatives [**] is the [**] and a minimum of
[**] of the [**] Abbott Academic Representatives
shall be [**] in the [**]. Beginning on January 1,
2001, on an annual basis, Abbott Academic
Representatives [**] is the [**] and a minimum of
[**] of the [**] Abbott Academic Representatives
shall be [**] in the [**].
3.1.2 Calling Cycle and Call Tracking. In performing Abbott
Promotional Efforts, Abbott shall use reasonable commercial
efforts to ensure that the calling cycle of Abbott
Representatives during a Sales Year is distributed
throughout that Sales Year in a manner that reflects the
seasonality of the Approved Indications and the fluctuating
demand for Product during the course of the Sales Year. [**]
including [**], and will [**] on a [**]. Unless otherwise
agreed by the Parties [**] including [**], and [**] and
beginning [**] will [**] on a [**] with a [**]. Abbott, in
its discretion, may promote the Product through additional
Abbott Representatives from time to time, provided they
receive appropriate training with respect to promoting the
Product.
3.1.3 Manner of Promotion Abbott shall perform Abbott Promotional
Efforts taking into consideration the advice, guidance and
decisions of the Marketing Committee, and Abbott shall
perform in accordance with all applicable federal, state and
local laws, rules, and regulations of the Territory,
including, but not limited to, the Federal Food, Drug and
Cosmetic Act. Abbott shall not be in default of any
obligation hereunder as a result of any administrative or
judicial determination
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
that either Sepracor Promotional Material or Sepracor's
advertisements for the Product violates:
3.1.3.1 The approved Product labeling; or
3.1.3.2 Any applicable federal, state or local laws, rules,
and regulations of the Territory.
3.1.4 Distribution of Sepracor Promotional Materials. As part of
the Abbott Promotional Efforts, and in accordance with
Sections 5.3 and 5.4 hereof, Abbott Representatives shall
distribute Sepracor Promotional Materials to the Pediatric
Market, potential and existing Purchasers, and others to
whom the Abbott Representatives make Abbott Promotional
Efforts in the Territory.
3.1.5 Compliance with Sampling Act. Abbott shall distribute
Samples only in strict conformance with the Sampling Act.
3.2 Product Manager and Sales Force. Abbott shall assign a Product
manager, who is an Abbott Representative, to oversee and manage the
Abbott Promotional Efforts in the Territory. At all times during the
Term, Abbott shall maintain a sales force of Abbott Representatives
to promote the Product to the Pediatric Market throughout the
Territory.
3.3 Abbott Representative Training.
3.3.1 Initial Training. Sepracor shall be responsible for the
Initial Training of the Abbott Representatives in the
co-promotion of the Product. The format and content of the
Initial Training shall be agreed upon by the Parties.
Initial Training will begin with home training of Abbott
Representatives in late November/early December 1999.
Sepracor shall also provide Initial Training to the Abbott
Representatives who are territory managers in December 1999,
and to Abbott Representatives at Abbott's regional sales
meetings during January 2000, at agreed upon times and
places. In addition, Sepracor shall provide training to
Abbott Representatives at Abbott's national sales meetings
in March 2000, at agreed upon times and places. Abbott shall
use its commercially reasonable efforts to ensure that all
Abbott Representatives who may initially promote the Product
attend the Initial Training. [**] at such training. For
purposes of Initial Training, Sepracor shall supply sales
force training materials in sufficient quantities to train
the Abbott Representatives. [**] with the printing of the
training materials for Initial Training of the Abbott
Representatives. Sepracor shall consult with Abbott
regarding the appropriate levels of sales force training
materials and shall assist Abbott in Abbott's initial
start-up efforts.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
3.3.2 Additional Training. Following the Initial Training,
Sepracor shall provide training to and consult with the
Abbott Representatives on an on-going basis in the promotion
of the Products, upon mutual agreement of the Parties. The
Marketing Committee shall determine the frequency, scope and
attendees for subsequent training sessions. Subject to the
Marketing Committee's determination, such on-going training
shall include, but not be limited to, training sessions
[**] for purposes of remedial training, education on
current developments, new uses or indications, and new
Sepracor marketing materials or programs; the time
dedicated to, and the nature of, such training being
subject to approval by Abbott. Each Party shall [**]
agreed upon by the Parties. Abbott and Sepracor shall
[**] for such additional training of Abbott
Representatives.
3.4 Abbott Representatives' Incentive Compensation. Abbott, in its sole
discretion and at its expense, shall compensate the Abbott
Representatives for promoting the Product in an appropriate manner
to reflect individual Abbott Representative's efforts in performing
the Abbott Promotional Efforts in the Territory; provided, however,
that Abbott's compensation of Abbott Representatives, including
compensation, incentive compensation, bonuses, and prizes, shall be
consistent with Abbott satisfying its obligations under this
Agreement. During the Term, Abbott, at its expense, shall award
incentive compensation, bonuses or prizes to Abbott Representatives
for achieving goals for volume of Product sales.
3.5 Requests for Medical Information by Third Parties. In the event
Abbott's Medical Affairs Liaison receives inquiries from third
parties which relate to the efficacy, safety or other medical issues
regarding the Product, Abbott's Medical Affairs Liaison shall direct
such inquiries within two (2) business days of such Medical Affairs
Liaison's receipt of such inquiry to Sepracor's Medical Affairs
Liaison, unless such inquiry is of a routine nature and the response
is clearly set forth in the Product labeling. Within a reasonable
time period following the Effective Date, Sepracor's Medical Affairs
Liaison shall supply Abbott's Medical Affairs Liaison with
Sepracor's standard responses to questions of a routine nature
directed to Sepracor with respect to the Product.
3.6 Abbott Reports.
3.6.1 Reports on Promotion Efforts. Subject to the provisions of
Section 12.4, not later than [**] days after the end of each
Sales Quarter during the Term, Abbott shall supply Sepracor
with a report summarizing the Abbott Promotional Efforts
during such period in a manner which
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
permits Sepracor to evaluate Abbott's compliance with its
obligations regarding Abbott Promotional Efforts [**] made,
[**] of the [**] during the Sales Quarter, unless otherwise
agreed by the Parties in writing.
3.6.2 Format of Reports. The Marketing Committee shall determine
the format, content, and detail of reports required by this
Section.
3.7 Other Abbott Costs and Expenses. Except as otherwise specifically
stated in this Agreement, Abbott shall be solely and exclusively
responsible for all costs and expenses relating to or arising from
marketing, promotion (including distribution of Samples, Sepracor
Promotional Materials, and Abbott Product Materials), and sale of
Product incurred by Abbott, its Affiliates, and their employees and
agents.
Article 4. SEPRACOR RESPONSIBILITIES AND PROMOTIONAL EFFORTS.
4.1 Pediatric Expanded Approval. At its sole expense, Sepracor shall use
good faith reasonable efforts in connection with the further
development of the Product, including the conduct of clinical
trials, for the purpose of obtaining Pediatric Bronchospasm Expanded
Approval, and shall take all regulatory actions necessary to file
the NDA or sNDA for such Pediatric Bronchospasm Expanded Approval by
[**]
4.2 Maintenance of Product NDA. During the Term, Sepracor shall use its
reasonable commercial efforts to maintain, at Sepracor's sole cost
and expense, all NDA's which the FDA has granted as of the Effective
Date or during the Term.
4.3 Product Formulations. Sepracor shall be solely responsible for the
formulation, indications, labeling and packaging for the Product.
Sepracor may change any formulation, labeling, and/or packaging at
its own discretion with thirty (30) days prior written notice to
Abbott, unless such change requires pre-approval by the FDA, in
which case Sepracor shall obtain Abbott's prior written approval
which shall be promptly given and not unreasonably withheld.
Sepracor shall be responsible for the cost of such changes and the
cost to change any and all Sepracor Promotional Materials.
4.4 Regulatory Responsibilities. Subject to its obligations set forth in
Sections 4.1 and 4.2, Sepracor shall have responsibility at its sole
discretion for all regulatory submissions and other matters
regarding the Product, including without limitation the Approved
Indications, filing of all NDAs and other applications relating to
the Product. Sepracor shall promptly communicate with Abbott
regarding all significant matters communicated between Sepracor and
the FDA that relate to the foregoing or to the promotion, sale or
use of the Product.
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4.5 Patent and Proprietary Protection. Sepracor shall have
responsibility at its sole discretion for prosecuting and
maintaining all patent applications and patents relating to the
Product, as well as all trademark applications and trademarks
relating to the Trademark and any other Sepracor Marks, service
marks, copyrights and other intellectual property relating to the
Product. Sepracor shall use its reasonable commercial efforts to (a)
maintain in the Territory its patents and Sepracor Marks relating to
the Product and (b) prosecute in good faith in the Territory its
patent applications relating to the Product. Sepracor shall use its
reasonable commercial efforts to enforce patents relating to the
Product against Third Parties who infringe those patents in the
Territory. Any compensatory damages derived from enforcement of any
patents relating to Product shall be used to first reimburse
Sepracor for its costs and expenses relating to such enforcement,
with any remaining compensatory damages to be treated as Net Sales.
A proportion of such Net Sales will be deemed Pediatric Sales
subject to the Commission set forth in Section 7.1(a), and this
proportion will be determined by calculating the average proportion
of Pediatric Sales to Net Sales over the four Sales Quarters
preceding the award of compensatory damages. Any punitive damages,
exemplary damages, or other enhanced damages shall be retained
solely by Sepracor.
4.6 Consultation with Abbott. Sepracor agrees to consult with Abbott,
upon Abbott's reasonable request, regarding regulatory matters,
patent and trademark strategy, and other related matters to a
reasonable extent to maximize Pediatric Sales; provided, however,
that Sepracor shall retain responsibility for all such matters at
its sole discretion as provided in this Article 4.
4.7 Product Manufacture. Sepracor shall manufacture, or have
manufactured, the Product, in accordance with cGMP and the
specifications for the Product as approved by the FDA, and shall be
responsible for all quality assurance issues arising therefrom.
Sepracor shall be responsible for all manufacture, labeling,
packaging and distribution of the Product in the Territory, and
shall comply with all applicable federal laws, rules, and
regulations regarding the same.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
4.8 Complaints, Product Defects and Returns. Abbott shall notify
Sepracor within two (2) business days of any Product complaints
received by Abbott. As between Sepracor and Abbott, Sepracor shall
be responsible for all manufacturing defects in Product. In
addition, Sepracor shall be responsible for addressing all customer
complaints regarding any alleged manufacturing defects of any
Product. Sepracor shall be responsible for handling and covering the
cost of all recalls and returns of Product and replacement of
defective Product. Abbott, its Affiliates, officers, directors,
employees or agents shall in no way be responsible for any defects
or damages with respect to Product, or its shipment or delivery,
provided, however, that Abbott shall be responsible for Samples
delivered to Abbott from and after the time Abbott or its agents or
representatives takes delivery of such Samples (except for defects
in the Samples or packaging thereof present prior to delivery to
Abbott).
4.9 Product Supply. At all times during the Term, Sepracor shall sell
and supply sufficient quantities of the Product to meet the
requirements of Purchasers in the Pediatric Market in the Territory.
Sepracor shall notify Abbott in writing of any Product manufacturing
difficulties which cause or may cause shortages of Product within
fifteen (15) business days of Sepracor's becoming aware of such
manufacturing difficulties. If Sepracor is unable to fill in a
timely manner all orders for Product in the Pediatric Market in the
Territory because a
Product is out of stock, Sepracor shall distribute available Product
among all customers on a fair and practical basis, keeping in mind
the best interests of the Parties. Sepracor shall immediately notify
Abbott if Sepracor anticipates delays in the shipment of Product to
Purchasers.
4.10 Sepracor Promotional Efforts.
Sepracor Promotional Efforts shall be as follows:
4.10.1 Sepracor Representatives. Sepracor shall use its reasonable
commercial efforts to promote the Product to the Pediatric
Market for sale in the Territory through the Sepracor
Representatives. Notwithstanding anything to the contrary in
this Agreement, the Parties agree that Sepracor and the
Sepracor Representatives retain the right to promote the
Product to Abbott Targeted Hospitals, [**] pediatricians
prescribing albuterol (referred to herein as [**]) in the
Territory, and to any other portion of the Pediatric Market
that Abbott and Sepracor may mutually agree upon, it being
agreed that Abbott and Abbott Representatives shall have the
sole right to promote the Product to pediatricians other
than those in the [**] in the Territory and the co-exclusive
right to promote the Product to Abbott Targeted Hospitals
and pediatricians in the [**] in the Territory.
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4.10.2 Continued Promotional Activity. Sepracor shall promote
Product during the Term in the Territory at least as
diligently as it had prior to the Effective Date; provided,
however, that Sepracor shall be permitted to cease any and
all contract sales force activity at its sole discretion.
During the Term, Sepracor shall advertise the Product for
Approved Indications to the Pediatric Market in the
Territory in substantially the same manner as Sepracor
advertised the product prior to the Effective Date,
including, but not limited to, continuing to place
advertisements in quality medical journals.
4.10.3 Manner of Promotion. Sepracor shall perform Sepracor
Promotional Efforts taking into consideration the advice,
guidance and decisions of the Marketing Committee, and
Sepracor shall perform in accordance with all applicable
federal, state and local laws, rules, and regulations of the
Territory, including, but not limited to, the Federal Food,
Drug and Cosmetic Act. Sepracor shall be responsible for and
shall indemnify Abbott, its Affiliates, officers, directors,
employees and agents, in accordance with and subject to
Section 14.1, for any liability or expense that may arise as
a result of any administrative or judicial determination
that either a Sepracor Promotional Material or Sepracor's
advertising for the Product to the Pediatric Market in the
Territory violates:
4.10.3.1 The approved Product labeling; or
4.10.3.2 Any applicable federal, state or local laws, rules,
and regulations of the Territory.
4.10.4 Distribution of Sepracor Promotional Materials. Sepracor
Representatives shall distribute Sepracor Promotional
Materials to potential and existing Purchasers of Product
and others to whom the Sepracor Representatives promote the
Product.
4.10.5 Compliance with Sampling Act. Sepracor shall distribute
Samples only in strict conformance with the Sampling Act.
4.11 Product Manager. Sepracor shall assign a Product manager, who is a
Sepracor Representative, to oversee and manage the Sepracor
Promotional Efforts in the Territory
4.12 Sepracor Representative Training. Sepracor shall be responsible for
the training of all Sepracor Representatives in the co-promotion of
the Product. Sepracor shall supply, at Sepracor's cost, sales force
training materials to train the Sepracor Representatives.
Sepracor shall continue to train and consult with the Sepracor
Representatives on an on-going basis in the promotion of the
Products.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
4.13 Sepracor Representatives' Incentive Compensation. Sepracor, in its
sole discretion and at its expense, shall compensate the Sepracor
Representatives for promoting the Product in an appropriate manner
to reflect individual Sepracor Representatives efforts in promoting
the Product in the Territory. Sepracor, at its expense, shall award
incentive compensation, bonuses or prizes to Sepracor
Representatives for achieving goals for volume of Product sales.
4.14 Requests for Medical Information by Third Parties. In the event
Sepracor's Medical Affairs Liaison receives inquiries from third
parties which relate to the efficacy, safety or other medical issues
regarding the Product, Sepracor's Medical Affairs Liaison shall
prepare standard responses to questions of a routine nature directed
to Sepracor with respect to the Product and shall use the standard
responses in addressing inquiries.
4.15 Sepracor Reports.
4.15.1 Reports on Promotion Efforts. Subject to the provisions of
Section 12.4, not later than [**] days after the end of each
Sales Quarter during the Term, Sepracor shall supply Abbott
with a report summarizing the Sepracor Promotional Efforts
to the Pediatric Market in the Territory during such period.
4.15.2 Format of Reports. The Marketing Committee shall determine
the format, content, and detail of reports required by this
Section.
4.15.3 Pediatric Sales Tracking. Within [**] days of Sepracor's
receipt, after each applicable Sales Quarter, of all data
from external sources necessary to calculate the Commission,
Sepracor shall provide to Abbott (a) total gross invoice
amount of Product for the Sales Quarter, (b) total Net Sales
for the Sales Quarter, and (c) a reconciliation of Net Sales
to Pediatric Sales for the Sales Quarter. In addition, for
each Sales Year, within [**] days of Sepracor's receipt,
after the fourth Sales Quarter in a Sales Year, of all data
from external sources necessary to calculate the Commission,
Sepracor shall provide to Abbott a reconciliation of total
gross invoiced amount to Net Sales (including total amounts
for each of the components set forth in Section 1.28 used by
Sepracor in calculating Net Sales from the total gross
invoiced amount) for each Sales Quarter in the Sales Year.
4.16 Other Sepracor Costs and Expenses. Except as otherwise specifically
stated in this Agreement, Sepracor shall be solely and exclusively
responsible for all costs and expenses relating to or arising from
marketing, promotion (including distribution of Samples, Sepracor
Promotional Materials, and Abbott Product Materials), and sale of
Product incurred by Sepracor, its Affiliates, and their employees
and agents.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Article 5. LABELING, SAMPLING AND PROMOTIONAL MATERIALS.
5.1 Product Labeling. All Product labeling decisions shall be made by
Sepracor, and Sepracor shall have sole responsibility therefor.
Product labels and packaging shall not bear any Abbott Marks or any
other Abbott identifying material.
5.2 Sampling. Except as otherwise provided in this Agreement, Sepracor,
[**], shall produce all Samples for use in the promotion of the
Product. Samples shall be marked "Sample - Not for Sale."
Sepracor shall establish the guidelines for sampling, and
shall consult with Abbott with respect thereto. Sepracor shall
supply such quantities of Samples to Abbott as Abbott and Sepracor
mutually agree is appropriate in connection with Abbott Promotional
Efforts. Each party shall bear its own cost of distribution of
Samples to the Pediatric Market. Sepracor shall [**] to the
production of [**]. [**] from any [**] for the [**]; provided,
however, [**] shall not be [**] during any 12-month period (from
April through March) thereafter; and, provided further, in the [**]
pursuant to [**] for the first twelve (12) months. Abbott shall
track Sample distribution and provide to Sepracor all reports
relating the sampling that Sepracor may require in order to comply
with applicable laws, rules, or regulations.
5.3 Development of Sepracor Promotional Materials. Except as otherwise
provided in this Agreement, Sepracor, at its cost and expense
(including any agency fees), shall develop Sepracor Promotional
Materials for Abbott's use in the promotion of the Product. Sepracor
shall consult with Abbott with respect to the development of
Sepracor Promotional Materials. Abbott shall have an opportunity to
review the Sepracor Promotional Materials and make suggestions
regarding format and content. Abbott shall provide Sepracor with any
objections to or suggestions regarding format or content of Sepracor
Promotional Materials for Abbott's use within thirty (30) calendar
days of delivery to Abbott of any proposed Sepracor Promotional
Materials. If in the opinion of Abbott's counsel any Sepracor
Promotional Material may conflict with any law, rule or regulation
in the Territory, and if Abbott so informs Sepracor in writing
within the thirty (30) day period, Abbott shall not be required to
distribute or pay any share of expenses relating to such Sepracor
Promotional Material. If Abbott does not notify Sepracor within the
thirty (30) day period, the Parties shall [**] the direct
out-of-pocket costs of printing and reprinting any Sepracor
Promotional Materials for distribution by Abbott's Representatives.
In any event, Abbott Representatives shall not be required to
distribute Sepracor Promotional Materials which, in the opinion of
Abbott's counsel, conflicts with any law, rule or regulation in the
Territory.
5.4 Distribution of Sepracor Promotional Materials. In connection with
the Abbott Promotional Efforts, Abbott Representatives shall
distribute Sepracor Promotional Materials to the Pediatric Market.
Sepracor shall consult with
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Abbott with respect to the distribution of Sepracor Promotional
Materials. Sepracor shall supply such quantities of Sepracor
Promotional Materials to Abbott as Abbott and Sepracor mutually
agree is appropriate in connection with Abbott Promotional Efforts.
5.5 Identification of Abbott on Sepracor Promotional Materials. During
the Term and subject to the provisions of this Agreement, Abbott
Marks and Sepracor trade names and logos shall be jointly presented
on Sepracor Promotional Materials and Sepracor's advertising of the
Product for the Pediatric Market in the Territory. Certain Abbott
Marks, as agreed in writing by the parties, shall be displayed on
all Sepracor Promotional Materials (other than such materials in
existence as of the Initial Training date of Abbott Representatives)
for distribution by Abbott Representatives with substantially equal
prominence and frequency as Sepracor's trade names and logos.
Sepracor shall not distribute any printed promotional materials
relating to pediatric use of Product, other than Sepracor
Promotional Materials, to the Pediatric Market in the Territory.
5.5.1 Limited License to Abbott Marks. Abbott hereby grants to
Sepracor a limited non-exclusive license, without payment of
any royalty or licensing fees, to the Abbott Marks solely
for the purposes of developing, producing, and using the
Sepracor Promotional Materials for the Product and
advertisements for the Product to the Pediatric Market in
the Territory during the Term, and in accordance with the
terms of this Agreement.
5.5.2 Sepracor's Use of Abbott Marks. All uses of the Abbott Marks
shall be approved in advance by Abbott. Abbott shall retain
all rights to the Abbott Marks and Abbott's copyrights,
trademarks, and logos, which shall remain Abbott's sole
property, free of any claims thereon or thereto by Sepracor.
Sepracor agrees that all Product advertising bearing the
Abbott Marks shall contain appropriate legends, markings and
notices as mutually agreed upon by the Parties. Sepracor
shall place the following legend "___ is a trademark of
Abbott Laboratories" on each Product or Promotional Material
which bears the Abbott Marks.
5.5.3 Abbott's Retention of Rights to the Abbott Marks. All
goodwill associated with the Abbott Marks inure solely to
the benefit of Abbott. Sepracor shall notify Abbott in
writing of any infringements or imitations by third parties
of the Abbott Marks which may come to Sepracor's attention.
5.5.4 Discontinuation of Use of Abbott Marks. Upon termination or
expiration of this Agreement, Sepracor shall discontinue all
use of the Abbott Marks
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5.6 Abbott Product Materials. In addition to Sepracor Promotional
Materials developed and prepared by Sepracor, Abbott may
develop, at its expense, Abbott Product Materials, to be used
by Abbott in connection with Abbott Promotional Efforts. Prior
to distribution to Abbott Representatives or others, Abbott
shall give Sepracor the opportunity to review the Abbott
Product Materials and make suggestions regarding format and
content, and shall not print or distribute any Abbott Product
Materials prior to receiving Sepracor's written approval.
Sepracor shall use reasonable efforts to review and approve
the Abbott Product Materials within thirty (30) days after
receipt of proposed Abbott Product Materials. Sepracor shall
submit any such Abbott Product Material to FDA, as may be
required by law or regulation. In the event of any change to
any Product formulation, labeling, or packaging which requires
a change in any Abbott Product Materials, after notice from
Sepracor of any such change, Abbott shall revise, and receive
Sepracor's approval on all such revisions, on all Abbott
Product Materials affected by such change before any further
distribution of any affected Abbott Product Materials. The
cost and expense of modifications to Abbott Product Materials
shall be borne by Abbott. Abbott shall retain all rights,
including copyrights, to the Abbott Product Materials, except
with respect to any Sepracor Marks, which shall remain
Sepracor's sole property, free of any claims thereto by
Abbott. Abbott shall use any Abbott Product Materials
containing the Trademark or Sepracor Marks only in connection
with the promotion of the Product to the Pediatric Market in
the Territory. Abbott shall have no obligation to pay any
royalties or other compensation to Sepracor on the use of the
Sepracor Marks used in the Abbott Product Materials. During
the Term, Sepracor may use, at its expense, the Abbott Product
Materials in connection with Sepracor's promotion of the
Product to the Pediatric Market in the Territory. After the
Term, Sepracor shall have a royalty-free non-exclusive license
to use Abbott Product Materials, exclusive of any Abbott Marks
or any other Abbott intellectual property that may appear or
is described therein, and to make and use derivative works
thereof.
5.7 Identification of Sepracor on Abbott Product Materials. During
the Term and subject to the provisions of this Agreement,
Abbott Marks and Sepracor Marks shall be jointly presented on
Product advertising developed by Abbott and Abbott Product
Materials. Sepracor Marks shall be displayed on all Abbott
Product Materials with substantially equal prominence as
Abbott Marks.
5.7.1 Limited License to Sepracor Marks. Sepracor hereby
grants to Abbott a limited non-exclusive license,
without payment of any royalty or licensing fees, to
Sepracor Marks, solely for the purposes of developing,
producing, using the Abbott Product Materials for the
Product and advertisements for the Product to the
Pediatric Market in the Territory during the Term, and
in accordance with the terms of this Agreement.
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5.7.2 Abbott's Use of Sepracor Marks. All uses of the Sepracor
Marks by Abbott shall be approved in advance by
Sepracor. Sepracor shall retain all rights to Sepracor
Marks, and Sepracor's copyrights, trademarks, and logos,
which shall remain Sepracor's sole property, free of any
claims thereon or thereto by Abbott. Abbott agrees that
all Product bearing the Sepracor Marks shall contain
appropriate legends, markings and notices as mutually
agreed upon by the Parties. Abbott shall place the
following legend "___ is a trademark of Sepracor Inc."
on each item which bears the Sepracor Marks.
5.7.3 Sepracor's Retention of Rights to the Sepracor Marks.
All goodwill associated with the Sepracor Marks inure
solely to the benefit of Sepracor. Abbott shall notify
Sepracor in writing of any infringements or imitations
by third parties of the Sepracor Marks which may come to
Abbott's attention.
5.7.4 Discontinuation of Use of Sepracor Marks. Upon
termination or expiration of this Agreement, Abbott
shall discontinue all use of the Sepracor Marks.
Article 6. PRICING, QUOTATIONS, ORDERS, BILLING, COLLECTION AND SALES TRACKING.
6.1 Pricing. Sepracor shall consider the recommendations of the
Marketing Committee in developing strategies for the pricing, sale
and distribution of Product for the Pediatric Market in the
Territory. Sepracor shall, in its sole discretion, determine prices
and terms of sale to Purchasers for Product, and may change such
prices following at least thirty (30) days prior written notice to
Abbott. Abbott shall not change any pricing or grant any discounts
or rebates on any Product without the prior written consent of
Sepracor.
6.2 Pricing and Rebate Contracts. Sepracor shall be a party and
signatory to any and all pricing and rebate contracts with
Purchasers for or regarding the sale of Product.
6.3 Quotations and Orders; Billing and Collection. Sepracor shall have
sole responsibility for the preparation and delivery of all
quotations and offers of prices hereunder, for the acceptance and
fulfillment of all orders, and for the
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
6.4 invoicing and collection of amounts due from Purchasers. Sepracor
shall use reasonable efforts in its collection activities.
6.5 Electronic Database. Sepracor shall utilize a computerized system
accurately to account for all Product orders and assist with Net
Sales tracking as set forth in Section 4.15.3. The system shall be
capable of reporting: (a) gross invoiced dollar and unit sales on a
daily basis, (b) Net Sales on a monthly basis, and (c) the
components of the reconciliation of total gross invoiced amounts to
Net
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Sales and Net Sales to Pediatric Sales. Sepracor shall assure
appropriate back-up and information storage for its system.
Article 7. COMPENSATION TO ABBOTT.
7.1 Commission. (a) In consideration of Abbott's efforts hereunder,
Sepracor shall pay Abbott a Commission on Pediatric Sales in
accordance with this Article 7. The Commission shall be based upon
Pediatric Sales of Product for each Sales Year in the Territory
using the following incremental Commission rates: (i) on those
annual Pediatric Sales up to and including [**], the commission rate
is [**]; (ii) on the incremental annual Pediatric Sales over [**]
and up to and including [**], the commission rate is [**]; and (iii)
on the incremental annual Pediatric Sales over [**], the commission
rate is [**].
(b) Commencing April 1, 2000, and ending June 30, 2001, if the
Commission received by Abbott in any Sales Quarter does not
exceed [**], Sepracor shall reimburse the difference between
[**] and the Commission received by Abbott for such Sales
Quarter. The calculation and payment of such difference shall
occur within fifteen (15) days of Sepracor's receipt, after
each applicable Sales Quarter, of all data from external
sources necessary to calculate the Commission.
7.2 Commission Payment. Sepracor shall pay the Commission for each Sales
Quarter on or prior to [**] days after Sepracor's receipt, after
each applicable Sales Quarter, of all data from external sources
necessary to calculate the Commission .
7.3 Audit. If Abbott, in its reasonable judgment, determines that an
audit of Sepracor's relevant books and records is necessary to
verify Pediatric Sales of Product, then upon notice to Sepracor
Abbott shall have the right, at Abbott's cost and expense, to have a
nationally recognized independent certified public accounting firm
reasonably acceptable to Sepracor perform an audit of all relevant
books and records of Sepracor for the sole purpose of verifying the
Commissions payable as provided in this Agreement for no more than
the three preceding years; provided, however, that as part of any
audit on behalf of Abbott, Abbott's auditors must rely on Sepracor's
independent certified public accounting firm as to the details and
underlying data utilized in the calculation of Net Sales, although
Abbott's auditors may review the details of the calculation of Net
Sales from gross invoice amounts for the sole purpose of verifying
the reasonableness of such calculation and to determine whether the
calculation is consistent with the terms of Section 1.28 of this
Agreement. Any such audit shall be conducted during Sepracor's
normal business hours, at Sepracor's facilities, at a mutually
agreed upon date and time. This right may not be exercised more than
once in any calendar year, and once a calendar year is audited it
may not be reaudited, provided that if there is a material disputed
issue as to any audited year, such year, the two (2) preceding years
and any
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subsequent year may be reaudited solely as to material disputed
issue until such time as the dispute is resolved. An issue shall be
deemed to be a material disputed issue if it results in an
underpayment of Commission to Abbott for the period under review of
more than five percent (5%). The independent certified public
accounting firm shall disclose to Abbott only information relating
solely to the accuracy of the Commission provided to Abbott and
Commission Payments made to Abbott under this Agreement, and such
information shall be subject to the provisions of Article 15. If
such audit reveals that Sepracor has under-reported aggregate annual
Pediatric Sales to Abbott: (a) by five percent (5%) or less,
Sepracor shall pay all past due Commissions within thirty (30) days
following completion of the audit, or (b) by more than five percent
(5%), Sepracor shall pay all past due Commissions plus interest
thereon at the rate of ten percent (10.0%) simple interest per
annum, plus all reasonable costs of Abbott's audit, within thirty
(30) days following completion of the audit.
Article 8. MEDICAL INQUIRIES; NOTIFICATION OF ADVERSE DRUG EXPERIENCE.
8.1 Communication. Within thirty (30) days after the Effective Date,
each Party shall appoint its Medical Affairs Liaison to communicate
with the other with regard to information required pursuant to this
Article 8. Either Party may change its Medical Affairs Liaison by
notice to the other Party. Sepracor shall be solely responsible for
(a) addressing all medical inquiries from Purchasers and Abbott
Representatives with respect to side effects of the Product, (b)
investigating any adverse drug experience or adverse event matters,
and (c) reporting any adverse drug experience to the FDA.
8.2 Notification. During the Term, Abbott shall give Sepracor notice as
set forth in this Section 8.2 of any adverse drug experience, as
defined in 21 C.F.R. ss. 314.80, associated with the Product as to
which Abbott obtains information in accordance with the following:
8.2.1 Any adverse drug experience information obtained by Abbott
shall be reported to Sepracor's Medical Affairs Liaison, by
telephone or by facsimile within three (3) working days
after Abbott's initial receipt of any such information;
provided, however, any report of a serious unlabeled event
or any report of a death shall be reported by telephone and
facsimile to Sepracor's Medical Affairs Liaison within
twenty-four (24) hours after Abbott's receipt of the
information;
8.2.2 Abbott shall maintain a record of the adverse drug
experience reports received by Abbott to assist Sepracor in
complying with 21 C.F.R. ss. 314.80 , including:
8.2.2.1 A copy of the drug experience report;
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8.2.2.2 The date the report was received; and
8.2.2.3 The date the report was provided to Sepracor.
8.2.3 Sepracor shall keep Abbott reasonably informed of adverse
drug experience, as defined in 21 C.F.R. ss. 314.80,
associated with the Product in a manner and with details
sufficient to facilitate Abbott's performance hereunder.
8.2.4 Sepracor will provide Abbott with a copy of quarterly safety
reports for Product and fifteen-day alert reports for
Product which Sepracor reports to the FDA.
8.3 Product Report. If, during the Term, Sepracor determines it is
necessary to issue a report to Sepracor Representatives with respect
to the medical efficacy or side effects of the Product, Sepracor
shall also provide such report to Abbott's Medical Affairs Liaison
within two (2) business days of its issuance to the Sepracor
Representatives, which report Abbott shall immediately distribute to
Abbott Representatives.
8.4 Product Recall. In the event any Product is recalled by the FDA or
Sepracor in the Territory, Sepracor shall be responsible for all
expenses relating to such recall and for all activities to be
performed relating to such recall. Prior to any such recall,
Sepracor shall advise Abbott of the situation. Sepracor shall
provide Abbott with a prepared statement, subject to Abbott's
approval, for use in response to inquiries regarding the Product
recall which Abbott shall provide to Abbott Representatives
promoting the Product. Abbott and the Abbott Representatives and
Sepracor and the Sepracor Representatives shall use such prepared
statement to respond to any inquiries received with regard to the
Product recall and shall not make any other statement regarding the
recall.
Article 9. OTHER PRODUCTS.
9.1 Product Rights Ex-U.S. In the event Sepracor desires to have an
entity other than Sepracor, or a Sepracor Affiliate market, sell,
distribute, or promote the Product to the Pediatric market in any
country outside the Territory, Sepracor shall give Abbott first
notice of the opportunity to have Abbott market, sell, distribute,
promote, co-promote or co-market the Product to the Pediatric Market
in such country through aright of first negotiation for not more
than thirty (30) calendar days after Sepracor's notice to Abbott
hereunder.
9.2 Product Rights to Geriatric Market. In the event Sepracor desires to
have an entity other than Sepracor or a Sepracor Affiliate market,
sell, distribute, or promote the Product specifically for use by the
Geriatric Market in the Territory (and, if Abbott and Sepracor enter
into any agreement with respect to the Geriatric Market in the
Territory, in any country outside the Territory), Sepracor shall
give Abbott first notice of the opportunity to have Abbott market,
sell, distribute, promote, co-promote or co-market the Product for
use by the
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Geriatric Market in the Territory (and, if Abbott and Sepracor enter
into any agreement with respect to the Geriatric Market in the
Territory, in such country outside the territory) through a right of
first negotiation for not more than thirty (30) calendar days after
Sepracor's notice to Abbott hereunder.
9.3 Rights of Negotiation for Other Products. In the event that Sepracor
markets a pharmaceutical product containing levalbuterol as an
active ingredient other than Product (meter-dose inhaler or CFC-free
pulmonary formulation; oral formulation of the Product), or a
pharmaceutical product containing R,R-formoterol as an active
ingredient, for the Pediatric Market in the Territory, and Sepracor
desires to have an entity other than Sepracor or a Sepracor
Affiliate market, co-market, sell, distribute, promote or co-promote
such pharmaceutical product to the Pediatric Market in the
Territory, Sepracor shall provide notice ("Other Product Notice) to
Abbott prior to any discussions with or proposals to any party other
than Sepracor's Affiliates, and Abbott shall have a right of first
negotiation with respect to the rights to market, co-market, sell,
distribute, promote or co-promote such pharmaceutical product to the
Pediatric Market in the Territory through a right of first
negotiation for not more than thirty (30) calendar days after
Sepracor's notice to Abbott hereunder. As of the date of the Other
Product Notice, Sepracor shall make available to Abbott the
following information relating to the product identified in the
Other Product Notice: development plan; patent applications and
other patent information; relevant material portions of FDA
submissions; summary clinical trial and study information or final
study reports, where appropriate.
Article 10. REPRESENTATIONS AND WARRANTIES; COVENANTS.
10.1 Mutual Representations and Warranties. Each Party hereby represents
and warrants to the other Party as of the Effective Date that:
10.1.1 Such Party has the full power and authority to enter into
and perform this Agreement;
10.1.2 The person(s) signing this Agreement on its behalf has been
properly authorized and empowered to enter into this
Agreement; and
10.1.3 No consents or approvals which such Party has not previously
obtained are necessary for such Party to enter into this
Agreement and perform all of such Party's obligations
hereunder.
10.2 Abbott Covenants. Abbott hereby covenants during the Term that:
10.2.1 This Agreement shall not conflict with any other Abbott
contractual obligation.
10.2.2 Abbott shall perform its obligations hereunder in accordance
with all applicable federal, state and local laws, rules,
and regulations of the Territory; provided, however, Abbott
shall not be in default of the
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terms and conditions of this Agreement if Abbott violates
any applicable federal, state or local laws, rules or
regulations in the Territory as a result of Abbott's use of
or reliance on the Sepracor Promotional Materials, Sepracor
Product labeling, Sepracor Product advertising or use of
Sepracor Marks.
10.2.3 Abbott shall not take any action or fail to take any action
which is in conflict with any of the representations and
warranties made by Abbott in Sections 10.1 and 10.3.
10.2.4 All uses of the Abbott Marks in Sepracor Promotional
Materials or Abbott Product Materials shall not violate any
applicable laws, rules, and regulations in the Territory.
10.2.5 Abbott, and its agents or representatives shall maintain
adequate insurance to cover any loss or damage with regard
to Samples in the possession of Abbott, or its agents or
representatives.
10.2.6 Abbott, and its agents or representatives shall ensure that
inventory of Samples in the possession of Abbott, or its
agents or representatives, is properly managed to ensure
that Samples are distributed on a first-in, first-out basis.
10.3 Other Abbott Representations and Warranties. Abbott hereby
represents and warrants to Sepracor, as of the Effective Date that:
10.3.1 Abbott is the sole and exclusive owner of all right, title
and interest in and to the Abbott Marks.
10.3.2 To the best of Abbott's knowledge, as of the Effective Date,
there are no patents or trademarks owned by third parties
which would be infringed by the manufacture, marketing,
sale, distribution, import, export or use of Abbott Marks in
the Territory.
10.3.3 There are no suits, claims, or proceedings pending against
Abbott or any of its Affiliates in any court or by or before
any governmental body or agency with respect to Abbott Marks
which may limit any Sepracor Promotional Efforts or Abbott
Promotional Efforts or create any liability to Sepracor; and
to the best of Abbott's knowledge, no such actions, suits,
or claims have been threatened against Abbott or any of
Abbott's Affiliates.
10.3.4 Prior to the Effective Date, Abbott has not entered into any
agreement which could limit Abbott in the performance of
their obligations under this Agreement.
10.3.5 Prior to the Effective Date, Abbott has not received any
notice from the FDA of any violation of the Sampling Act or
any other law, rule or
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regulation which could limit Sepracor or Abbott in the
performance of their respective obligations under this
Agreement.
10.4 Other Sepracor Representations and Warranties. Sepracor hereby
represents and warrants to Abbott, as of the Effective Date that:
10.4.1 Sepracor has the sole and exclusive right to market, promote
and sell, or license others to market, promote and sell, the
Product under the Trademark within the Territory.
10.4.2 To the best of Sepracor's knowledge, as of the Effective
Date, there are no patents or trademarks owned by Third
Parties which would be infringed by the manufacture,
marketing, sale, distribution, import, export or use of the
Product or its Trademark in the Territory, and Sepracor has
not received any notification from a Third Party claiming
that the manufacture, marketing, sale, distribution, import,
export or use of the Product or its Trademark in the
Territory would infringe a patent or trademark owned by a
Third Party.
10.4.3 There are no suits, claims, or proceedings pending against
Sepracor or any of its Affiliates in any court or by or
before any governmental body or agency with respect to the
Product, the Trademark or Sepracor marks which may limit any
Abbott Promotional Efforts or create any liability to
Abbott; and to the best of Sepracor's knowledge, no such
actions, suits, or claims have been threatened against
Sepracor or any of Sepracor's Affiliates.
10.4.4 Sepracor has obtained and is the owner of the NDA for the
Approved Indication under Section 1.11.1 and Sepracor's
officers have no knowledge of any pending FDA actions to
revoke or withdraw such Approved Indication under the NDA.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
10.4.5 Sepracor's net sales of the Product in the Territory in
calendar year 1999 through September 30, 1999, were
approximately [**].
10.4.6 Prior to the Effective Date, except as set forth in Schedule
10.4.6, Sepracor has not entered into any agreement
regarding the Product which could limit Sepracor or Abbott
in the performance of their respective obligations under
this Agreement.
10.4.7 Prior to the Effective Date, except as set forth in Schedule
10.4.7, Sepracor has not received any notice from the FDA of
any violation of the Sampling Act or any other law, rule or
regulation which could limit Sepracor or Abbott in the
performance of their respective obligations under this
Agreement;
10.4.8 Sepracor is the sole and exclusive owner of all right, title
and interest in and to the Sepracor Marks.
10.5 Sepracor Covenants. Sepracor hereby covenants during the Term that:
10.5.1 This Agreement shall not conflict with any other Sepracor
contractual
obligation.
10.5.2 Sepracor shall perform its obligations hereunder in
accordance with all applicable federal, state and local
laws, rules and regulations of the Territory; provided,
however, Sepracor shall not be in default of the terms and
conditions of this Agreement if Sepracor violates any
applicable federal, state or local laws, rules or
regulations in the Territory as a result of Sepracor's use
of or reliance on the Abbott Product Materials, Abbott
Product advertising or use of Abbott Marks.
10.5.3 Sepracor shall manufacture or have manufactured the Product
in accordance with cGMP, Product specifications, all FDA
approved labeling, and all other applicable federal, state
and local laws, rules and regulations.
10.5.4 Sepracor shall prepare keep and maintain its financial
statements and related schedules and records in accordance
with Generally Accepted Accounting Principles (GAAP).
10.5.5 Sepracor shall not take any action or fail to take any
action which is in conflict with any of the representations
and warranties made by Sepracor in Section 10.1 or 10.4.
10.5.6 Sepracor's database referenced in Section 6.4 shall not be
damaged or corrupted as a result of the passage of time from
December 31, 1999 to January 1, 2000.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
10.5.7 All uses of the Sepracor Marks in Sepracor Promotional
Materials and Abbott Product Materials shall not violate any
applicable laws, rules and regulations in the Territory.
Article 11. INDEPENDENT CONTRACTOR RELATIONSHIP. The parties agree that they are
independent contractors. Neither party nor any employee of such party is an
employee, officer, agent, partner, business representative, or legal
representative of, or joint venturer with, the other party. Neither party has
authority to assume any obligation on behalf of the other party and shall not
hold out to third parties that it has any authority to do so; thus, neither
party shall take any action that might mislead or confuse third parties in this
regard. Unless otherwise provided herein, each party shall be responsible for
its own expenses and shall not incur expenses for the other party's account
unless expressly authorized in writing to do so by the other party.
Article 12. TERM AND TERMINATION.
12.1 Initial Term. This Agreement shall commence as of the Effective Date
and shall continue for a period of six (6) years from January 1,
2000 ("Initial Term"):
12.1.1 Subject to extension for an additional twelve (12) months
(the "Extension Term") in the event Pediatric Bronchospasm
Expanded Approval does not occur before [**]; and
12.1.2 Subject to any earlier termination of the Initial Term or
any Extension Term as set forth in Section 12.2 or Section
12.3.
12.2 Early Termination by Abbott. This Agreement may be terminated by
Abbott upon written notice to Sepracor prior to the expiration of
the Term or the Extension Term in the event:
12.2.1 Pediatric Sales Threshold. Pediatric Sales of Product in the
Territory to the Pediatric Market do not exceed [**] during
calendar year 2000;
12.2.2 Approved Indication. On or before [**], Sepracor has not
received Pediatric Bronchospasm Expanded Approval,
provided, however, that in such event Abbott shall only
have the right to terminate under this Section 12.2.2 by
giving written notice thereof to Sepracor on or before
[**] or
12.2.3 Price Threshold. The average for any two consecutive
calendar quarters of the actual Average Net Selling
Price/Dose Vial of the Product is less than [**]; or
12.2.4 One Year's Notice. At any time after December 31, 2000, upon
one year's prior written notice without cause.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
12.3 Early Termination by Either Party. This Agreement may be terminated
by either Party upon written notice to the other Party prior to the
expiration of the Term or the Extension Term as follows:
12.3.1 Material Breach. Ninety (90) days after notice from one
Party to the other Party that the receiving Party has
committed a material breach of this Agreement and at the end
of such ninety (90)-day period the receiving Party has not
cured or has not diligently, continuously, and in good faith
attempted to cure the described breach, with clear evidence
that such breach shall be cured within a period of an
additional sixty (60) days following the initial ninety
(90)-day period; provided, however, that the period for sure
shall be tolled during the pendency of an ADR initiated
pursuant to Article 19 to resolve whether such material
breach occurred; further provided, however, that Sepracor
shall not be in material breach for late payment if the
reason for late payment is lack of timely availability to
Sepracor of audit or survey data needed to make calculations
of Commissions.
12.3.2 Force Majeure. Either Party giving ninety (90) days' prior
notice to the other Party if an event of Force Majeure as
described in Article 18 continues for more than six (6)
months. Termination pursuant to the application of this
Section shall not be deemed termination due to a material
breach of this Agreement by either Party.
12.3.3 Bankruptcy. Either Party giving notice to the other Party in
the case of any adjudication of bankruptcy or insolvency,
appointment of a receiver by a court of competent
jurisdiction, assignment for the benefit of creditors, or
institution of liquidation proceedings by or against the
other Party. Termination pursuant to the application of this
Section shall not be deemed termination due to a material
breach of this Agreement by either Party.
12.3.4 Price Established by Law. If any national or federal
legislation or regulation in the Territory shall establish a
maximum price which can be charged for the Product, which
price is less than [**] of the immediately preceding month's
average selling price per unit of Product, either Party may
give the other Party notice of termination at least ninety
(90) days prior to the effective date of termination.
12.3.5 Conviction. If either Party, or one of its corporate
officers who is involved in the activities and business
arrangements set forth in this Agreement, shall be convicted
in any court of a violation of law, or found liable in a
civil action, from which no appeal can be taken, under
circumstances that materially negatively affect the rate of
reimbursement and eligibility for reimbursement with state
and government agencies that provide reimbursement for the
use of the
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Product by Purchasers, then ninety (90) days after notice
from the other Party this Agreement shall terminate.
12.3.6 Merger/Acquisition. In the event a Third Party acquires
control of a Party, or all or substantially all of the
assets or stock of a Party is acquired by a Third Party,
through purchase, merger, consolidation or otherwise
(collectively referred to herein as an "Acquisition Event"),
the acquired Party will send the other Party written notice
of the Acquisition Event, and by no later than thirty (30)
days following the other Party's receipt of such notice, if
in the reasonable business judgment of the other Party such
Acquisition Event would have an adverse impact on the
co-promotion arrangement established by this Agreement, the
other Party may terminate this Agreement upon thirty (30)
days written notice to the acquired Party.
12.4 Grace Period. The Parties hereby agree that from the Effective Date
through March 31, 2000 (the "Grace Period"), while each Party will
use reasonable commercial efforts to satisfy its obligations under
this Agreement, a Party's failure to completely satisfy its
obligations under Section 3.1.1, Section 3.1.2, Section 3.6, Section
4.10.1, Section 4.10.2, or Section 4.15, as appropriate, during the
Grace Period shall not constitute a material breach of the
Agreement.
Article 13. CONSEQUENCES OF TERMINATION.
13.1 Confidential Information. In the event of expiration or termination
of this Agreement for any reason, both Parties shall cease using all
Confidential Information, as defined in Section 15.1, supplied by
the other Party. Upon either Party's request, the other shall return
to its owner all written and/or tangible Confidential Information,
except for one archive copy that may be retained by the legal
department of a Party solely for the purpose of determining any
continuing obligations. Both Parties and their Affiliates shall
continue to be bound by the provisions of Article 15 for a period of
five (5) years after the expiration or termination of this Agreement
or ten (10) years after the execution of this Agreement, whichever
is later.
13.2 Accrued Obligations. Termination of this Agreement shall not relieve
the Parties of any liability which accrued prior to the effective
date of such termination, nor prejudice either Party's right to
obtain performance of any obligation provided for in this Agreement
which expressly survives termination.
13.3 Return of Promotional Materials. Upon termination or expiration of
this Agreement: (a) Abbott shall, at Sepracor's election and
expense, either destroy or return to Sepracor all Sepracor
Promotional Materials relating to the Product then in Abbott's
possession; and (b) Sepracor shall, at Abbott's election and
expense, either destroy or return to Abbott all Abbott Product
Materials then in Sepracor's possession.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
13.4 Commission. If this Agreement is terminated prior to the expiration
of the Term or any Extension Term, then the applicable Commission
for the Product for the Sales Year in which such termination
occurred shall be the product of (a) the Pediatric Sales during such
Sales Year, and (b) a blended Commission rate determined by
annualizing the Pediatric Sales during such Sales Year.
13.5 Residual Commission. The Parties acknowledge and agree that in the
Territory, through the Abbott Promotional Efforts, Abbott will
enhance the Product and the goodwill associated with the Product,
Trademarks and other property of Sepracor. Therefore, upon
expiration of this Agreement or early termination of this Agreement
(a) by Abbott [**] or (b) by Sepracor [**] or (c) by or on behalf of
Sepracor [**], Sepracor shall pay to Abbott the Residual Commission
for a period of [**] immediately following any such early
termination or expiration of the Term in an amount equal to:
13.5.1 For the [**] period after such termination or expiration of
the Term, the Residual Commission shall be equal to [**] of
the Pediatric Sales during such 12-month period;
13.5.2 For the [**] period after such termination or expiration of
the Term, the Residual Commission paid shall be an amount
equal to [**] of the Pediatric Sales during such 12-month
period; and
13.5.3 For the [**] period after such termination or expiration of
the Term, the Residual Commission paid shall be an amount
equal to [**] of the Pediatric Sales during such 12-month
period.
Sepracor shall pay the Residual Commission in quarterly installments
due within fifteen (15) days after Sepracor's receipt, after the
last day each applicable quarter, of all data from external sources
necessary to calculate the Residual Commission during the three (3)
periods of twelve (12) months.
13.6 Remedies. Excepting any award granted pursuant to Article 19,
neither Party shall be liable to the other Party for any
compensation, reimbursement, damages for loss of prospective profits
on anticipated revenue, or on account of expenses incurred,
investments made, leases, commitments, or any other obligations
incurred in connection with this Agreement as a result of any
termination of this Agreement according to the terms of this
Agreement or by reason of non-renewal of the Term. In any event,
neither Party shall be liable to the other Party for any exemplary,
indirect, incidental, or consequential damages.
13.7 Survival. Upon termination of this Agreement or expiration of the
Term, each Party shall provide to the other Party the reports and
information necessary to calculate the Commission and any Residual
Commission and compensation to Sepracor Representatives and Abbott
Representatives. Without limitation, the
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following Articles or Sections shall survive termination of this
Agreement or expiration of the Term for a period of five (5) years
(unless otherwise stated in such Article or Section): Article 1
(Definitions), Article 10 (Representations and Warranties and
Covenants), Article 13, Article 14, Article15, Article17, Article19
and Sections 20.1, 20.4 and 20.7.
Article 14. INDEMNIFICATION.
14.1 Sepracor Indemnification. Except as may be otherwise provided
herein, Sepracor shall defend, indemnify and hold Abbott, its
Affiliates, their successors and assigns, and all of their officers,
directors, employees and representatives harmless from and against
all suits, claims, liabilities, costs, damages, judgments and other
expenses (including, but not limited to, reasonable legal expenses)
suffered or incurred in connection with:
14.1.1 Sepracor's breach of any of the Sepracor representations,
warranties, covenants or other terms or conditions of this
Agreement;
14.1.2 A claim arising from the promotion of the Product or use of
the Trademark or Sepracor Marks in Sepracor Promotional
Materials or Abbott Product Materials;
14.1.3 Any patent infringement claim arising from the manufacture,
marketing, promotion, importation, sale or use of the
Product;
14.1.4 Any claim (including, but not limited to claims made with
respect to Sepracor advertising, Sepracor training of Abbott
Representatives or Sepracor Promotional Materials) made by a
Third Party against Abbott, its Affiliates, their successors
or assigns, or their officers, directors, employees or
representatives relating to the Product or the manufacture,
marketing, promotion, importation, sale or use of the
Product, including, but not limited to, death or personal
injury; or
14.1.5 The negligence, recklessness or willful misconduct on the
part of Sepracor, its officers, directors, employees, agents
(except to the extent Abbott may be deemed an agent of
Sepracor by operation of law) or representatives with
respect to the Product or Samples, or in the performance of
the Agreement;
provided, however, that Sepracor shall not be required to defend,
indemnify or hold harmless Abbott, its Affiliates, their successors
and assigns, or their officers, directors, employees or
representatives with respect to any claim arising out of or
resulting from (a) the negligence, recklessness, or willful
misconduct of Abbott, its Affiliates, their successors and assigns,
or their officers, directors, employees or representatives in the
performance of their obligations hereunder, or (b) any breach by
Abbott of this Agreement. For purposes of this Section, Abbott shall
not be considered negligent if such claim arises in connection with
Abbott's performance under this Agreement, so long
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as such performance was in accordance with the terms of this
Agreement; nor shall Abbott be considered negligent for purposes of
this Section, if (a) such claim arises with respect to content of
Sepracor's advertising, Sepracor Promotional Materials, Product
labeling or other materials provided to Abbott by Sepracor as long
as such Sepracor Promotional Materials are used in their original
form and Abbott has distributed or employed such Sepracor
Promotional Materials or other such materials as directed herein, or
(b) such claim arises with respect to the Abbott Promotion Efforts
by Abbott Representatives performed in accordance with direction,
goals, or strategy for promoting Product described in this
Agreement.
14.2 Abbott Indemnification. Except as may be otherwise provided herein,
Abbott shall defend, indemnify and hold Sepracor, its Affiliates,
their successors and assigns, and all of their officers, directors,
employees and representatives harmless from and against all suits,
claims, liabilities, costs, damages, judgments and other expenses
(including, but not limited to, reasonable legal expenses) suffered
or incurred in connection with:
14.2.1 Abbott's breach of any Abbott representations, warranties,
covenants or terms or conditions of this Agreement;
14.2.2 A claim arising from Sepracor's use of the Abbott Marks in
Sepracor Promotional Materials or Abbott Product Materials;
14.2.3 Any claim arising out of or in connection with Abbott's
promotion of Product not in accordance with direction,
goals, or strategy for promoting Product pursuant to this
Agreement; or
14.2.4 The negligence, recklessness or willful misconduct on the
part of Abbott, its officers, directors, Abbott
Representatives, and other Abbott employees, agents, or
representatives with respect to the Product or Samples, or
in the performance under this Agreement;
provided, however, that Abbott shall not be required to defend,
indemnify, or hold harmless Sepracor, its Affiliates, their
successors and assigns, or their officers, directors, employees or
representatives with respect to any claim arising out of or
resulting from (a) the negligence, recklessness, or willful
misconduct of Sepracor, its Affiliates, their successors and
assigns, or their officers, directors, employees or representatives
in the performance of their obligations hereunder or (b) any breach
by Sepracor of this Agreement. For purposes of this Section, Abbott
shall not be considered negligent if such claim arises in connection
with Abbott's performance under this Agreement so long as such
performance was in accordance with the terms of this Agreement; nor
shall Abbott be considered negligent for purposes of this Section,
if (a) such claim arises with respect to the content of Sepracor's
advertising, the Sepracor Promotional Materials, Product labeling or
other materials provided to Abbott by Sepracor as long as such
Sepracor Promotional Materials are used in their
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original form and Abbott has distributed or employed such Sepracor
Promotional Materials or such other materials as directed herein, or
(b) such claim arises with respect to Abbott Promotional Efforts by
Abbott Representatives performed in accordance with direction and
teachings of the training described in this Agreement.
14.3 Sepracor Indemnification Under Sampling Act. Without limiting any
other provision herein:
14.3.1 Sepracor shall perform under this Agreement in strict
accordance with the provisions of the Sampling Act.
14.3.2 Sepracor shall defend, indemnify and hold Abbott and
Abbott's officers, directors, employees and sales
representatives harmless from and against all suits, claims,
liabilities, costs, damages, penalties, judgments and other
expenses (including, but not limited to, reasonable legal
expenses) arising out of or resulting from any violations of
the Sampling Act that are caused by Sepracor, its officers,
its directors, Sepracor representatives, and other
employees, agents, or representatives of Sepracor in
performance hereunder.
14.3.3 If the conviction of a Sepracor representative under any
provision referred to in 21 U.S.C. ss.333(b)(2) occurs and
is deemed a Sepracor Diversion Violation for which Sepracor
is required to indemnify Abbott as set forth in Section
14.3.2, then:
14.3.3.1 If a Sepracor Diversion Violation is the first
Abbott violation of the provisions referred to in
21 U.S.C.ss.333(b)(2), then Sepracor shall
indemnify Abbott for any civil penalties incurred
by Abbott under 21 U.S.C.ss.333(b)(2)(A) on
account of such Sepracor Diversion Violation.
However, if, within a 10-year period following
such Sepracor Diversion Violation, Abbott receives
a third conviction for violating a provision
referred to in 21 U.S.C. ss.333(b)(2), Sepracor
shall indemnify Abbott for civil penalties
incurred by Abbott under 21 U.S.C.ss.333(b)(2)(B)
on account of such third conviction, less any
civil penalties incurred by Abbott under 21
U.S.C.ss.333(b)(2)(A) for which Sepracor has
indemnified Abbott hereunder.
14.3.3.2 If a Sepracor Diversion Violation is the second or
third conviction of Abbott for violating the
provisions referred to in 21 U.S.C. ss.333(b)(2)
in any 10-year period, then Sepracor shall
indemnify Abbott for any civil penalties incurred
by Abbott pursuant to 21 U.S.C.ss.333(b)(2)(A) or
(B), as applicable, on account of such Sepracor
Diversion Violation and, in addition, shall pay
Abbott as
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liquidated damages all reasonable legal,
accounting, and other costs Abbott incurred in
defending any Sepracor Diversion Violation. Such
liquidated damages, together with Sepracor's
payment of all civil penalties incurred by Abbott,
shall be Abbott's sole and exclusive remedy under
this Section 14.3.3.2 notwithstanding any other
provisions of this Agreement.
14.3.3.3 Except pursuant to Section 14.3.2 above or in the
event of Sepracor Diversion Violations, Sepracor
shall not have any obligation or liability of any
kind to Abbott in the event of a fourth or
subsequent violation of the provisions referred to
in 21 U.S.C.ss.333(b)(2) within a ten (10) year
period, regardless of whether one (1) or more of
the first three (3) convictions against Abbott was
an Sepracor Diversion Violation.
14.4 Abbott Indemnification Under Sampling Act. Without limiting any
other provision herein:
14.4.1 Abbott shall perform under this Agreement in strict
accordance with the provisions of the Sampling Act.
14.4.2 Abbott shall defend, indemnify and hold Sepracor and
Sepracor's officers, directors, employees and sales
representatives harmless from and against all suits, claims,
liabilities, costs, damages, penalties, judgments and other
expenses (including, but not limited to, reasonable legal
expenses) arising out of or resulting from any violations of
the Sampling Act that are caused by Abbott, its officers,
its directors, Abbott Representatives, and other employees,
agents, or representatives of Abbott in performance
hereunder.
14.4.3 If the conviction of an Abbott representative under any
provision referred to in 21 U.S.C. ss.333(b)(2) occurs and
is deemed an Abbott Diversion Violation for which Abbott is
required to indemnify Sepracor as set forth in Section
14.4.2, then:
14.4.3.1 If an Abbott Diversion Violation is the first
Sepracor violation of the provisions referred to
in 21 U.S.C.ss.333(b)(2), then Abbott shall
indemnify Sepracor for any civil penalties
incurred by Sepracor under 21
U.S.C.ss.333(b)(2)(A) on account of such Abbott
Diversion Violation. However, if, within a 10-year
period following such Abbott Diversion Violation,
Sepracor receives a third conviction for violating
a provision referred to in 21 U.S.C.ss.333(b)(2),
Abbott shall indemnify Sepracor for
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civil penalties incurred by Sepracor under 21
U.S.C.ss.333(b)(2)(B) on account of such third
conviction, less any civil penalties incurred by
Sepracor under 21 U.S.C.ss.333(b)(2)(A) for which
Abbott has indemnified Sepracor hereunder.
14.4.3.2 If an Abbott Diversion Violation is the second or
third conviction of Sepracor for violating the
provisions referred to in 21 U.S.C.ss.333(b)(2) in
any 10-year period, then Abbott shall indemnify
Sepracor for any civil penalties incurred by
Sepracor pursuant to 21 U.S.C.ss.333(b)(2)(A) or
(B), as applicable, on account of such Abbott
Diversion Violation and, in addition, shall pay
Sepracor as liquidated damages all reasonable
legal, accounting, and other costs Sepracor
incurred in defending any Abbott Diversion
Violation. Such liquidated damages, together with
Abbott's payment of all civil penalties incurred
by Sepracor, shall be Sepracor's sole and
exclusive remedy under this Section 14.4.3.2
notwithstanding any other provisions of this
Agreement.
14.4.3.3 Except pursuant to Section 14.4.2 above or in the
event of Abbott Diversion Violations, Abbott shall
not have any obligation or liability of any kind
to Sepracor in the event of a fourth or subsequent
violation of the provisions referred to in 21
U.S.C.ss.333(b)(2) within a ten (10) year period,
regardless of whether one (1) or more of the first
three (3) convictions against Sepracor was an
Abbott Diversion Violation.
14.5 Control of Defense. Each party agrees to promptly give the other
party notice of any claim for which indemnification might be sought.
Failure of an indemnified party to provide notice of a claim to the
indemnifying party shall affect the indemnified party's right to
indemnification only to the extent that such failure has a material
adverse effect on the indemnifying party's ability to defend or the
nature or the amount of the indemnified claim, liability, costs,
damages, penalties, judgments and other expenses (referred to in
this Section as "Liability"). The indemnifying party shall have the
right to assume the defense and settlement of any suit or claim
related to the Liability if it has assumed responsibility for the
suit or claim in writing; provided, however, if in the reasonable
judgment of the indemnified party, such suit or claim involves an
issue or matter which could have an adverse impact on the assets of
the indemnified party, or such suit or claim could require the
indemnified party to engage in any activities that would have an
adverse effect on the business operations or good will of the
indemnified party, the indemnified party may waive its rights to
indemnity under this Agreement and control the defense or settlement
thereof, but in no event shall any such waiver be construed as a
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waiver of any indemnification rights such party may have at law or
in equity. If the indemnifying party defends the suit or claim, the
indemnified party may participate in (but not control) the defense
thereof at its sole cost and expense.
14.6 Settlement of Claims. Neither party may settle or compromise a claim
or action related to an indemnified matter without the written
consent of the other party, if such settlement would impose any
monetary obligation on the other party or require the other party to
submit to an injunction or otherwise limit the other party's rights
under this Agreement; provided that such consent shall not
unreasonably be withheld or delayed, unless such settlement would
have an adverse impact on the assets of the indemnified party, or
such settlement would require the indemnified party to engage in any
activities that would have an adverse effect on the business
operations or good will of the indemnified party.
Article 15. CONFIDENTIALITY.
15.1 Definition. Subject to Section 15.2, "Confidential Information"
shall mean any and all notebooks, documents, memoranda, reports,
files, books, correspondence, customer and other lists, other
written, graphic and computer-stored records, information, data, and
the like, whether in written, graphic, or verbal form, stored now or
hereafter existing during the Term, together with all subsequent
changes and additions of one Party (the "Owner") which was received
directly by the other Party (the "Holder") or the Holder's agents,
officers, or employees, which the Holder shall use, construct,
observe, possess, or control, which affect or relate to the Product
or the business of the Owner solely with regard to the Product,
including but not limited to all information relating to: (a)
marketing, sales, investigations, clinical trials, patient data,
related materials, NDA, IND, copyrights, trademarks, all
applications, submissions, modifications, supplements, permits,
approvals, authorizations, licenses, customer lists, and records, to
the extent all such items listed in this Section are not a matter of
public record; (b) improvements to and inventions made to improve
the Product, whether or not patentable, which Owner, Holder, or
others makes, conceives, learns and/or reduces to practice, either
alone or jointly with each other or with others, directly relating
to the Product; and (c) financial, marketing, sales, billing,
collection, Third Party payment procedures and issues, and customer
data relating to the Product or Owner.
15.2 Exceptions to the Definition of Confidential Information.
Notwithstanding the provisions in Section 15.1, the term
"Confidential Information" shall not include the following:
15.2.1 Information which is now in the public domain or
subsequently enters the public domain without disclosure or
delivery thereof to the public on the part of the Holder in
breach of this Agreement;
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15.2.2 Information which the Holder receives in good faith from a
Third Party and the Holder has no knowledge of such Third
Party obtaining the information by wrongful means;
15.2.3 Information which has been independently developed by or for
the Holder without reference to the Confidential Information
of the Owner;
15.2.4 Information which has been lawfully received by the Holder
without an obligation of confidentiality from a source other
than the Owner; and
15.2.5 Information which is required to be disclosed by law,
government order or judicial order, but only to the extent
of disclosure to such authorities.
15.3 Confidentiality Obligations. Holder shall use Confidential
Information of the Owner solely for the purposes of this Agreement.
Holder will disclose Confidential Information to Holder's and its
Affiliates' employees, contractors and agents only on a need-to-know
basis. Except for the uses permitted pursuant to the terms of this
Agreement, Holder shall not disclose, make use of, or make available
to any person any portion of the Confidential Information without
Owner's prior written consent. Holder shall take all reasonable
steps to ensure that the Confidential Information of Owner is held
in confidence by Holder, its Affiliates and their employees,
contractors and agents, except for the use permitted pursuant to the
terms and conditions of this Agreement. Upon the termination or
expiration of this Agreement the restrictions against disclosing any
Confidential Information without Owner's prior written consent shall
continue for the period set forth in Section 13.1.
15.4 Previous Agreement. As of the Effective Date, this Agreement shall
supersede the Confidentiality Agreement effective July 1, 1999,
between the Parties as it relates to the Product. Any information
received by either Party with respect to the Product shall hereafter
be governed by the terms and conditions of this Agreement.
Article 16. PUBLIC ANNOUNCEMENTS.
16.1 Joint Announcement. Each Party agrees that prior to any joint
announcement of the Parties with respect to this Agreement, except
as may be required by law, it shall not disclose the substance or
details of this Agreement without the prior written consent of the
other Party; provided, however, nothing contained herein shall be
deemed to prohibit Sepracor from issuing any publicity, press
release or announcement relating to the Product which does not
mention Abbott or refer to this Agreement. In cases in which
disclosure may be required by law, the disclosing Party, prior to
such disclosure, shall notify the non-disclosing Party of the
contents of the proposed disclosure. Consistent with applicable law,
the
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non-disclosing Party shall have the right to make reasonable changes
to the disclosure to protect its interests. The disclosing Party
shall not unreasonably refuse to include such changes in its
disclosure. Once a joint announcement has been made, neither Party
shall have any obligation of non-disclosure with respect to, but
only to the extent of, information thereby announced.
16.2 Non-Publicity.
16.2.1 The Parties agree that the terms and conditions of this
Agreement are Confidential Information and, unless otherwise
specifically permitted hereby, may not be the subject of any
public announcement or press release by either, unless
permitted by Section 16.1. The Parties agree that upon
execution of this Agreement, a press release approved by
both Parties will be issued. Neither Party may:
16.2.2 Issue or originate any publicity, public announcement, or
news release (written or oral) whether to the public press
or otherwise; or
16.2.2.1 Use the name of the other Party in any publicity,
public announcement, or news release regarding the
Agreement without the prior approval of the other
Party.
16.2.3 There shall be a fourteen (14) day period of review of any
publicity or press release proposed by either Party,
allowing the other Party the opportunity to request and make
changes and to determine approval of such publicity or press
release. This document shall not be filed in any public
office or records without the written approval of the other
Party, including the right of redaction of language to
protect the reviewing Party's confidential and strategic
information and right to review language in any public
filings.
Article 17. TRADEMARKS.
17.1 Promotion. Abbott shall promote the Product in the Territory only
under the Trademark or other such marks as the Parties mutually
agree in writing and using trade names, service marks and devices
approved by Sepracor and only using Sepracor Promotional Materials
or Abbott Product Materials approved by Sepracor pursuant to Section
5.6.
17.2 Compliance with Laws. Abbott shall, when referring to Sepracor Marks
and the Trademark and labels, trade names, trade dress, service
marks or devices, comply with all laws pertaining to trademarks,
service marks, trade dress or other intellectual property rights at
any time in force in the Territory.
17.3 No Assertion of Right. Abbott shall not have, assert or acquire any
right, title or interest in or to the Sepracor Marks, the Trademark
or any part of any label, trade name, trade dress, service mark or
device applied by Sepracor.
40
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CONFIDENTIAL
Article 18. FORCE MAJEURE. Failure of either party to perform its obligations
under this Agreement (except the failure to make any payment when due) shall not
subject such party to any liability to the other if such failure is caused or
occasioned by act of god, or the public enemy, fire, explosion, flood, drought,
war, riot, sabotage, embargo, strikes, or other labor trouble, failure in whole
or in part, of Sepracor's suppliers to deliver on schedule materials, equipment
or machinery to Sepracor, interruption of or delay in transportation, compliance
with any order, regulation or request of any government of competent
jurisdiction or any officer, department, agency or committee thereof, including
requisition or allocation or establishment of priority, or by compliance with a
request authorized by such governmental authority of any manufacturer for
material to be used by it, which event is beyond the reasonable control of the
Party so failing. The Party suffering an event of force majeure shall
immediately notify the other party and shall use all reasonable efforts to
minimize the damages suffered by both parties. Both Parties shall cooperate in
good faith in order to minimize such damages and, subject to the provisions of
Article 19, reach an agreement as to how to proceed.
Article 19. ALTERNATIVE DISPUTE RESOLUTION. Any controversy or claim arising out
of or relating to this agreement, or the breach thereof, shall first be
submitted to the president of the Ross Products Division of Abbott (or designee)
and the president (or designee) of Sepracor for resolution. If resolution of the
matter is not reached by such individuals, then such dispute shall be resolved
through the alternative dispute resolution described in Schedule 9; provided,
however, each party shall have the right during or before any ADR to seek and
obtain from an appropriate court, remedies to avoid irreparable harm, maintain
the status quo, or preserve the subject matter of the ADR.
Article 20. GENERAL.
20.1 Property Interest. Sepracor shall retain all property interests in
the Product until the point of sale, and in all Samples and Sepracor
Promotional Materials until their distribution by Abbott, or its
representatives or agents. Sepracor shall not assign or transfer any
right or interest in relation to the Product in any manner which
could affect Abbott's ability to exploit its rights under this
Agreement.
20.2 Assignment. Neither Party may assign or transfer any right or
interest under this Agreement without the prior written consent of
the other Party; provided, however, that in the event a Party merges
with a Third Party or sells all or substantially all of its business
unit to which this Agreement relates, that Party may assign this
Agreement to any successor by merger or sale of all or substantially
all of its business unit to which the Agreement relates without the
consent of the other Party; further, provided, however, that in the
event Sepracor sells all or substantially all of its business to
which this Agreement relates to a Third Party in a transaction in
which this Agreement is not transferred to such Third Party by
operation of law, then as part of such transaction the Third Party
shall assume this agreement from Sepracor either (a) with the
condition that it remain in effect for one (1) year following
Sepracor's written notice to Abbott regarding such transaction (the
"Transfer Period"), and upon termination of the Transfer Period, the
Agreement will terminate and the Residual Commission set
41
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CONFIDENTIAL
forth in Section 13.5 shall apply; or (b) without the condition set
forth in (a) above.
20.3 Headings. All headings and titles are for reference purposes only
and shall not in any way affect the meaning or interpretation of
this Agreement.
20.4 Notices.
20.4.1 Methods: All notices or other communications required or
permitted to be given shall be in writing, shall be signed
by an authorized officer of the relevant Party, and given to
the recipient Party by hand delivery; pre-paid mail sent to
that Party, or by facsimile, to the address, as set forth
below, with written proof of receipt. All notices, consents,
approvals, orders, acceptances and requests shall be in
writing addressed to the Parties at the following addresses,
respectively.
20.4.2 Addresses:
If to Sepracor: President
Sepracor Inc.
111 Locke Drive, Suite 2
Marlborough, Massachusetts 01752
Facsimile: 508-357-7492
If to Abbott: President
Ross Products Division
Abbott Laboratories
625 Cleveland Avenue
Columbus, Ohio 43215
Facsimile: 614-624-7030
With a copy to: Senior Division Counsel
Domestic Legal Operations
Abbott Laboratories
625 Cleveland Avenue
Columbus, Ohio 43215
Facsimile: 614-624-3704
20.4.3 Change of Address. A Party may change its address set forth
above by giving a notice in writing, at least five (5)
business days prior to the effective date, to all other
Parties, stating the new address and the effective date of
the change.
20.4.4 Deemed Date of Receipt. Documents sent by prepaid mail shall
be deemed to have been received by the addressee on the
second business day after posting. Facsimile messages shall
be deemed to have been received by the addressee on the date
of transmission, provided that if the transmission is not on
a business day or not before 4:00 p.m. at the
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CONFIDENTIAL
location of the recipient's address set forth in Section
20.4.2, then it shall be deemed to have been received by the
addressee on the next succeeding business day after
transmission.
20.5 Waiver. No failure on the part of either Party to exercise, and no
delay in exercising, any right or remedy shall operate as a waiver
of such right or remedy, nor shall any single or partial exercise of
any right or remedy preclude any further or other exercise of such
right or remedy. All rights and remedies under this Agreement are
cumulative and shall not be deemed exclusive of any other rights or
remedies provided by law except as otherwise provided herein.
20.6 Severability. If any Section or portion(s) thereof contained in this
Agreement is declared invalid by any court of competent jurisdiction
or a government agency having jurisdiction, the remainder of this
Agreement, and the application of such provision to persons or
circumstances other than those to which it is held invalid by such
court, shall not be affected thereby, and the Agreement shall remain
in full force and effect. To the extent possible, the Parties shall
reform such invalidated Section or portion(s) thereof in a manner
that will render such provision valid without impairing the Parties'
original intent.
20.7 Governing Law. The laws of the State of Delaware shall govern the
interpretation, performance and enforcement of this Agreement,
without respect to the conflict of laws provisions.
20.8 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original and all of which, when
taken together, shall constitute the Agreement.
20.9 Entire Agreement. This Agreement contains the entire understanding
between the Parties hereto with respect to the subject matter
hereof. This Agreement cannot be amended, except by a writing signed
by all Parties.
IN WITNESS WHEREOF, each of the Parties has by its duly authorized
representative signed and entered into this Agreement as of the day and year
first above written.
ABBOTT LABORATORIES INC. SEPRACOR INC.
By: /s/ Joy Amundson By: /s/ William James O'Shea
-------------------------------------- ---------------------------
Joy Amundson William James O'Shea
President, Ross Products Division President & Chief Operating Officer
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CONFIDENTIAL
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
SCHEDULE 1.32
Sample Pediatric Sales Calculation
(For Illustration Purposes Only)
[**]
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CONFIDENTIAL
SCHEDULE 10.4.6
Other Agreements Regarding Product
Sales Force Services Agreement between Innovex Inc. and Sepracor Inc.,
effective August 1, 1999.
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SCHEDULE 10.4.7
Notices From The FDA
1) Untitled letter from the FDA's Division of Drug Marketing, Advertising and
Communications ("DDMAC") dated March 26, 1999.
2) Untitled letter from DDMAC dated May 21, 1999.
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CONFIDENTIAL
SCHEDULE 19
ALTERNATIVE DISPUTE RESOLUTION
The Parties recognize that a bona fide dispute as to certain matters may
arise from time to time during the Term which relates to either Party's rights
and/or obligations under the Agreement. To have such a dispute resolved by ADR,
a Party first must send written notice of the dispute to the other Party for
attempted resolution by good faith negotiations between their respective
representatives identified in Article 19 of the Agreement within twenty-eight
(28) calendar days ("Days") after such notice is received (hereinafter "Initial
Period").
If the matter has not been resolved during the Initial Period, or if the
Parties fail to meet within such Initial Period, either Party may initiate an
ADR proceeding as set forth Paragraphs 1.1 to 1.10 below. Each Party, at its
sole cost and expense, shall have the right to be represented by counsel in such
a proceeding.
1.1 To begin an ADR proceeding, a Party shall provide written notice to
the other Party of the issues to be resolved by ADR (the "ADR
Notice") within fourteen (14) Days of expiration of the Initial
Period. Within fourteen (14) Days after its receipt of such ADR
Notice, the other Party may, by written notice to the Party
initiating the ADR, add additional issues to be resolved within the
same ADR.
1.2 Within twenty-one (21) Days following receipt of the original ADR
Notice (the "Selection Period"), the Parties shall select a mutually
acceptable neutral individual ("Neutral Party") to preside in the
resolution of any disputes in this ADR proceeding. If the Parties
are unable to agree on a mutually acceptable Neutral Party within
the Selection Period, the Parties shall request the President of the
Center for Public Resources ("CPR"), 366 Madison Avenue, New York,
New York 10017, to select a Neutral Party pursuant to the following
procedures:
1.2.1 The CPR shall submit to the Parties a list of not less than
five (5) candidates within fourteen (14) Days after receipt of
the request from the Parties, along with a curriculum vitae
for each candidate. No candidate shall be an employee,
director, or shareholder of either Party or any of the
subsidiaries or Affiliates of any Party.
1.2.2 Such list shall include a statement of disclosure by each
candidate of any circumstances likely to affect his or her
impartiality.
1.2.3 Each Party shall number the candidates in order of preference
(with the number one (1) signifying the greatest preference)
and shall deliver the list to the CPR within seven (7) Days
following receipt of the list of candidates. If a Party
believes a conflict of interest exists regarding any of the
candidates, that Party shall provide a written explanation of
the conflict to the CPR along with its list showing its order
of preference for the candidates. Any Party failing to return
a list of preferences on time shall be deemed to have no order
of preference.
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CONFIDENTIAL
1.2.4 If the Parties collectively have identified fewer than three
(3) candidates deemed to have conflicts, the CPR immediately
shall designate the Neutral Party as the candidate for whom
the Parties collectively have indicated the greatest
preference. If a tie should result between two candidates, the
CPR, in its sole discretion, may designate either candidate.
If the Parties collectively have identified three (3) or more
candidates deemed to have conflicts, the CPR shall review the
explanations regarding conflicts and, in its sole discretion,
may either:
1.2.4.1 Immediately designate as the Neutral Party the
candidate for whom the Parties collectively have
indicated the greatest preference, or
1.2.4.2 Issue a new list of not less than five (5) candidates,
in which case the procedures set forth in
Subparagraphs 1.2.1 to 1.2.4 above shall be repeated.
1.3 No earlier than twenty-eight (28) Days and no later than fifty-six
(56) Days after selection of the Neutral Party, the Neutral Party
shall hold a hearing to resolve each of the issues identified by the
Parties. The ADR hearing shall take place at a location agreed upon
by the Parties. If the Parties cannot agree, the Neutral Party shall
designate a location other than the principal place of business of
either Party or any of their subsidiaries or Affiliates.
1.4 At least seven (7) Days prior to the ADR hearing, each Party shall
submit the following to the other Party and the Neutral Party:
1.4.1 A copy of all exhibits on which such Party intends to rely in
any oral or written presentation to the Neutral Party;
1.4.2 A list of any witnesses such Party intends to call at the ADR
hearing, and a short summary of the anticipated testimony of
each witness;
1.4.3 A proposed ruling on each issue to be resolved, together with
a request for a specific damage award or other remedy for each
issue. The proposed rulings and remedies shall not contain any
recitation of the facts or any legal arguments and shall not
exceed one (1) page per issue.
1.4.4 A brief in support of such Party's proposed rulings and
remedies, provided that the brief shall not exceed twenty (20)
pages. This page limitation shall apply regardless of the
number of issues raised in the ADR.
1.4.5 Except as expressly set forth in Subparagraphs 1.4.1 through
1.4.4 above, no discovery shall be required or permitted by
any means, including depositions, interrogatories, requests
for admissions, or production of documents.
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CONFIDENTIAL
1.5 The ADR hearing shall be conducted on two (2) consecutive Days and shall
be governed by the following rules:
1.5.1 Each Party shall be entitled to five (5) hours of hearing time to
present its case. The Neutral Party shall be the sole and absolute
judge of whether each Party has had the five (5) hours to which it
is entitled.
1.5.2 Each Party shall be entitled, but not required, to make an opening
statement, to present regular and rebuttal testimony, documents or
other evidence, to cross-examine witnesses, and to make a closing
argument. Cross-examination of witnesses shall occur immediately
after their direct testimony, and cross-examination time shall be
charged against the Party conducting the cross-examination.
1.5.3 The Party initiating the ADR shall begin the hearing and, if it
chooses to make an opening statement, shall address not only issues
it has raised but also any issues raised by the responding Party.
The responding Party, if it chooses to make an opening statement,
also may address all issues raised in the ADR. Thereafter, the
presentation of regular and rebuttal testimony and documents, other
evidence, and closing arguments shall proceed in the same sequence.
1.5.4 Except for their own direct testimony, witnesses shall be excluded
from all hearings until closing arguments.
1.5.5 Neither affidavits nor settlement negotiations shall be admissible
under any circumstances. As to all other matters, the Neutral Party
shall have sole discretion regarding the admissibility of any
evidence.
1.6 Within seven (7) Days following completion of the ADR hearing, each Party
may submit to the other Party and the Neutral Party a post-hearing brief
in support of its proposed rulings and remedies, provided that such brief
shall not contain or discuss any evidence not introduced during the
hearings and shall not exceed ten (10) pages. This page limitation shall
apply regardless of the number of issues raised in the ADR proceeding.
1.7 The Neutral Party shall rule on each disputed issue within fourteen (14)
Days following completion of the ADR hearing. Such ruling may adopt in its
entirety the proposed ruling and remedy of one of the Parties on each
disputed issue, or may adopt one Party's proposed rulings and remedies on
some issues and the other Party's proposed rulings and remedies on other
issues. The Neutral Party shall not issue any written opinion or otherwise
explain the basis of the ruling.
1.8 The Neutral Party shall be paid a reasonable fee plus expenses. The
Neutral Party's fees and expenses , along with the fees and expenses of a
court reporter, and any expenses for a hearing room, shall be split and
paid fifty/fifty (50/50) by the Parties. All other costs and expenses
associated with the ADR shall be borne solely and exclusively by the Party
incurring such costs and expenses.
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CONFIDENTIAL
1.9 The rulings of the Neutral Party shall be binding, non-reviewable, and
non-appealable, and may be entered as a final judgment in any court having
jurisdiction.
1.10 Except as provided in Paragraph 1.9 above or as required by law, the
existence of the dispute, any settlement negotiations, the ADR hearing,
any submissions (including exhibits, testimony, proposed rulings, and
briefs), and the rulings shall be deemed Confidential Information. The
Neutral Party shall have the authority to impose sanctions for
unauthorized disclosure of Confidential Information.
4
<PAGE>
Exhibit 10.35
SUMMARY OF PLAN
REGARDING "PARACHUTE PAYMENTS" AND SECTION 280G GROSS-UP PAYMENTS
1. NATURE OF PLAN. The plan is not an employment contract or
employment contracts and does not specify any terms or conditions of
employment. The Plan provides for certain benefits to officers or employees
of Sepracor Inc. in the event of a "Change in Ownership or Control" of
Sepracor (as further defined below).
2. TERM. The Plan takes effect upon approval of the Board of
Directors and expires on December 31, 2004; provided that (i) it is subject
to automatic one-year extensions unless notice of prior to termination of the
original plan or any extension is given by Sepracor, and (ii) each officer or
employee is entitled to the benefits provided therein if a Change in
Ownership or Control occurs during the term of the Plan.
3. BENEFITS: TAX TREATMENT
a. TAX TREATMENT. The Internal Revenue Code imposes certain tax
penalties on both Sepracor and the officer or employee if the amount of
severance payments to the officer of employee following a Change in Ownership
or Control exceeds certain limits (generally three times the average of the
employee's compensation over the previous five years).
If a Contingent Compensation Payment (as defined below) is made or is
made available to an officer or employee, then Sepracor or its successors
agree to make a Gross-Up Payment (as defined below) to the officer or
employee.
b. NO MITIGATION. The benefits payable to the officer or
employee are not reduced by payments received by the officer or employee from
a subsequent employer.
c. For purposes of this Section 3, the following terms shall
have the following respective meanings:
"Change in Ownership or Control" shall mean a change in the ownership or
effective control of the Company or in the ownership of a substantial portion
of the assets of the Company determined in accordance with Section 280G(b)(2)
of the Code.
"Contingent Compensation Payment" shall mean any payment (or benefit) in the
nature of compensation that is made or made available (under any agreement or
plan) to a "disqualified individual" (as defined in Section 280G(c) of the
Code) and that is contingent (within the meaning of Section 280G(b)(2)(A)(i)
of the Code) on a Change in Ownership or Control of the Company.
"Gross-Up Payment" shall mean an amount equal to the sum of (i) the amount of
the excise tax payable with respect to a Contingent Compensation Payment and
(ii) the amount necessary to pay all additional taxes imposed on (or
economically borne by) the officer or employee (including the excise taxes,
state and federal income taxes and all applicable withholding taxes)
attributable to the receipt of such Gross-Up Payment. For purposes of the
preceding sentence, all taxes attributable to the receipt of the Gross-Up
Payment shall be computed assuming the application of the maximum tax rates
provided by law.
4. SUCCESSOR TO COMPANY. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business or assets of the Company
expressly to assume and agree to perform the Plan to the same extent that the
Company would be required to perform it if no such succession had taken
place. As used in the Plan, "Company" shall mean the Company as defined above
and any successor to its business or assets as aforesaid which assumes and
agrees to perform this Agreement, by operation of law or otherwise.
5. EXPENSES. Sepracor must pay, as incurred, all expenses which the
employee reasonably incurs as a result of any dispute relating to the Plan
(regardless of the outcome of such dispute).
6. AGREEMENTS. Sepracor may enter into agreements with one or more
officers or employees to reflect the provisions of the Plan but the Plan is
binding on Sepracor and its successors on and as of the date of approval or
the Board of Directors and whether or not Sepracor enters into agreements
with its officers or employees.
<PAGE>
SEPRACOR INC. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1999 1998 1997 1996 1995
- ----------------------------------------------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Product sales................................ $ 16,383 $ 155 $ 117 $ 482 $ 2,143
License fees and royalties................... 3,886 5,293 2,078 333 900
Collaborative research and development....... 2,390 4,761 -- 25 1,036
--------- -------- -------- -------- --------
Total revenues................................. 22,659 10,209 2,195 840 4,079
Costs and expenses:
Cost of revenue.............................. 4,919 575 541 521 2,259
Research and development..................... 122,400 61,797 41,230 33,540 18,988
Selling, general, administrative and patent
costs...................................... 65,336 30,123 12,609 11,079 12,174
--------- -------- -------- -------- --------
Total costs and expenses....................... 192,655 92,495 54,380 45,140 33,421
--------- -------- -------- -------- --------
Loss from operations........................... (169,996) (82,286) (52,185) (44,300) (29,342)
Other income (expense):
Equity in investee losses (1)................ (3,246) (7,482) (2,755) (17,539) (808)
Interest income.............................. 21,896 13,191 5,639 6,564 2,923
Interest expense............................. (33,078) (16,969) (5,976) (6,140) (2,077)
Gain on sale of ChiRex Inc................... -- -- 30,069 -- --
Other........................................ 272 (60) 331 (3) (802)
--------- -------- -------- -------- --------
Net loss before minority interests............. (184,152) (93,606) (24,877) (61,418) (30,106)
Minority interests in subsidiary............... 1,438 534 428 1,030 3,071
--------- -------- -------- -------- --------
Net loss from continuing operations............ (182,714) (93,072) (24,449) (60,388) (27,035)
Discontinued Operations: Income (loss) from
discontinued operations (net of minority
interests)(2)................................ (345) (211) (1,674) 278 (6,377)
--------- -------- -------- -------- --------
Net loss....................................... $(183,059) $(93,283) $(26,123) $(60,110) $(33,412)
--------- -------- -------- -------- --------
Net loss applicable to common shares (3)....... $(183,059) $(93,433) $(26,723) $(60,710) $(33,412)
--------- -------- -------- -------- --------
Basic and diluted net loss per common share
from Continuing operations................... $ (2.77) $ (1.61) $ (0.44) $ (1.12) $ (.62)
Basic and diluted net loss per common share
from Discontinued operations................. $ (0.00) $ (0.01) $ (0.04) $ 0.00 $ (.15)
Basic and diluted net loss per common share.... $ (2.77) $ (1.62) $ (0.48) $ (1.12) $ (.77)
Shares used in computing basic and diluted net
loss per Common share:
Basic and diluted............................ 66,049 57,826 55,198 54,065 43,275
BALANCE SHEET DATA:
Cash and marketable securities................. $ 335,823 $499,597 $ 92,560 $103,650 $143,250
Total assets................................... 406,635 549,260 126,388 139,831 193,743
Long-term debt................................. 490,611 491,910 83,736 84,371 84,510
Stockholders' equity (deficit)................. (155,705) 4,428 12,368 30,278 88,984
</TABLE>
- ------------------------
(1) Includes a write-off of a guarantee of a HemaSure line of credit in 1998 and
one-time charges from ChiRex's initial public offering and HemaSure's loss
from discontinued operations in 1996. See Footnote C--Notes to Consolidated
Financial Statements.
(2) Discontinued Operations relate to BioSphere Medical, Inc. See Footnote
I--Notes to Consolidated Financial Statements.
(3) Includes $150,000, $600,000 and $600,000 in preferred stock dividends in
1998, 1997, and 1996, respectively. See Footnote B--Notes to Consolidated
Financial Statements.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
Sepracor is a specialty pharmaceutical company focused on the cost-effective
development of safer, purer and more effective drugs that are improved
versions of widely-prescribed pharmaceutical compounds. The Company develops
and markets these drugs by leveraging its expertise in chiral chemistry and
pharmacology, and experience in conducting clinical trials and seeking
regulatory approvals for new drugs. Sepracor's Improved Chemical Entities
("ICEs") pharmaceutical development program has yielded an extensive
portfolio of drug candidates intended to treat a broad range of indications
in respiratory care, urology, gastroenterology, psychiatry and neurology. The
Company is also broadening its development focus to include discovery and
development of new chemical entities.
In May 1999, Sepracor introduced Xopenex, a single-isomer form of the leading
bronchodilator, albuterol. Xopenex is the first pharmaceutical product developed
and commercialized by Sepracor.
The consolidated financial statements include the accounts of Sepracor Inc.
("Sepracor" or the "Company") and its majority and wholly-owned subsidiaries,
including BioSphere Medical Inc. ("BioSphere", formerly "BioSepra") and Sepracor
Canada Limited. The consolidated financial statements also include Sepracor's
affiliates, HemaSure Inc. ("HemaSure") and Versicor Inc. ("Versicor") (a
subsidiary from 1995 to December 1997).
BioSphere is an endovascular medical device company, pioneering the use of
patented and proprietary bioengineered microspheres as a new class of
embolotherapy devices. Sepracor owned approximately 64% of BioSphere at
December 31, 1999. On February 4, 2000, BioSphere announced that it had
completed a $5,900,000 private placement of common stock and warrants. As a
result of this transaction, Sepracor's ownership of BioSphere decreased to
approximately 59%.
At December 31, 1999, the Company owned approximately 27% of the outstanding
shares of common stock of HemaSure, a company applying its proprietary
filtration technology to develop products to increase the safety of blood
collection and transfusion. The Company accounts for its investment in HemaSure
using the equity method of accounting. In February 1999, the Company entered
into an agreement with HemaSure pursuant to which Sepracor invested $2,000,000
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. In October 1999,
HemaSure completed a private placement financing which resulted in Sepracor
recording a gain through additional paid-in-capital of $820,000. The Company
also has a $5,000,000 liability at December 31, 1999 relating to a guarantee of
a line of credit for HemaSure. On March 3, 2000, HemaSure announced that it had
completed a $28,000,000 private placement of common stock. As a result of this
transaction, Sepracor's ownership of HemaSure decreased to approximately 22%.
Versicor develops novel drug candidates principally for the treatment of
infectious diseases. On December 10, 1997, Versicor completed a private equity
financing for approximately $22,000,000 and issued Series C Preferred Stock. As
part of the transaction, Sepracor recognized a gain of approximately $5,688,000,
which was recorded as an increase to additional paid-in capital. From
December 10, 1997 through April 1999, Versicor results were recorded based on
the equity method of accounting. As a result of various Versicor private equity
offerings in 1999, Sepracor recorded a gain through additional paid-in-capital
of $1,077,000 in April 1999 and began accounting for its investment under the
cost method of accounting. In 1999 Sepracor paid $1,000,000 to Versicor under a
promissory note agreement which was ultimately converted into Versicor preferred
stock. As of December 31, 1999, Sepracor's ownership in Versicor was
approximately 10% and was recorded at approximately $3,058,000.
In 1996, ChiRex Inc. ("ChiRex"), a corporation that was a combination of
Sterling Organics Limited and the chiral chemistry business of Sepracor,
completed an initial public offering of common stock. In March 1997, 3,489,301
shares of ChiRex common stock held by Sepracor were sold. As a result of this
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transaction, Sepracor received $31,125,000 and recognized a gain of $30,069,000,
which was recorded as other income.
On January 20, 2000, the Company announced that its Board of Directors approved
a two-for-one stock split which was paid in the form of a 100% stock dividend on
February 25, 2000 to stockholders of record on February 1, 2000. As a result,
all references to share and per share data have been adjusted.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
Product sales were $16,383,000, $155,000 and $117,000, in 1999, 1998 and 1997,
respectively. Sales of Xopenex, which Sepracor commercially introduced in
May 1999, accounted for approximately 86% of 1999 product sales. The increase in
product revenue in 1999 from 1998 is primarily due to the launch of Xopenex and
also from an increase in medical device sales at BioSphere. Product revenue in
1998 and 1997 remained relatively consistent.
Collaborative research and development revenues were $2,390,000, $4,761,000, and
$0 in 1999, 1998 and 1997, respectively. The decrease in 1999 from 1998 is due
to less revenue recognized under the collaboration and license agreement dated
as of January 1998 (the "Norastemizole Agreement"), with Janssen Pharmaceutica
N.V. ("Janssen") for the development of norastemizole. The increase in 1998 from
1997 was due to revenue recognized from the Norastemizole Agreement.
License fees and royalties were $3,886,000, $5,293,000, and $2,078,000 in 1999,
1998 and 1997, respectively. The decrease in 1999 from 1998 resulted from the
recording in 1998 of license revenue of $5,000,000 from Schering-Plough
Corporation ("Schering"), under a license agreement dated December 1997 (the
"DCL Agreement") for descarboethoxyloratadine ("DCL"), offset by the recording,
in 1999, of $3,621,000 of license and royalty revenues from Hoechst Marion
Roussel Inc. (now Aventis) ("HMRI") relating to Sepracor's license agreement
with HMRI (the "HMRI Agreement") for terfenadine carboxylate, marketed by HMRI
as Allegra. The increase in 1998 from 1997 related to the $5,000,000 of revenue
recognized in 1998 under the DCL Agreement, versus 1997 license revenue relating
to a milestone payment of $1,875,000 from HMRI.
In December 1997, under the DCL Agreement, Sepracor licensed to Schering
exclusive worldwide rights to Sepracor's patents covering DCL, an active
metabolite of loratadine which is used as an antihistamine. In 1998, Schering
paid Sepracor an initial license fee of $5,000,000. Under the terms of the DCL
Agreement, Sepracor is entitled to receive royalties on DCL sales, if any,
beginning at product launch. Royalties paid to Sepracor will escalate over time
and upon the achievement of sales volume and other milestones.
Effective January 1998, Sepracor and Janssen Pharmaceutica, N.V., a wholly-owned
subsidiary of Johnson & Johnson ("Janssen"), entered into the Norastemizole
Agreement, relating to the development and marketing of norastemizole, a third
generation nonsedating antihistamine. Under the terms of the Norastemizole
Agreement, the companies were to jointly fund the development of norastemizole,
and Janssen had an option to acquire certain rights regarding the product in the
U.S. and abroad. In May 1999, Sepracor announced that Johnson & Johnson elected
not to exercise its option to co-promote norastemizole under the Norastemizole
Agreement. 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 Norastemizole Agreement, Sepracor has worldwide rights to all Johnson &
Johnson intellectual property covering norastemizole, including the right in
exchange for royalty payments on sales of norastemizole to reference data from
Johnson & Johnson's astemizole NDA, for manufacture, development, and marketing
of prescription norastemizole products. Sepracor anticipates selling this
compound, if approved, through an expanded respiratory sales force.
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In July 1998, Sepracor entered into a second license agreement with Janssen (the
"Norcisapride Agreement") giving Janssen exclusive worldwide rights to
Sepracor's patents covering (+)-norcisapride, an isomer of the active metabolite
of Propulsid. Under the terms of the Norcisapride Agreement, Sepracor has
exclusively licensed to Janssen rights to develop and market the norcisapride
product worldwide. Under the Norcisapride Agreement, Janssen would pay Sepracor
royalties on norcisapride sales, if any, beginning at product launch. The
royalty rate to be paid to Sepracor will escalate upon the achievement of sales
volume milestones.
In December 1998, Sepracor entered into a license agreement (the "Lilly
Agreement") with Eli Lilly and Company ("Lilly") under which Sepracor granted to
Lilly exclusive worldwide rights to Sepracor's patents covering (R)-fluoxetine.
(R)-fluoxetine is a modified form of an active ingredient found in Prozac,
marketed by Lilly. Under the terms of the Lilly Agreement, and subject to
clearance 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 and up to $70,000,000 in additional milestone
payments, based on the progression of (R)-fluoxetine through development. In
addition, Sepracor will receive royalties on (R)-fluoxetine worldwide sales, if
any, beginning upon first commercial sale. Effectiveness of the Lilly Agreement
is subject to the HSR Act. See "Risk Factors" and "Legal Proceedings" for
information concerning the Federal Trade Commission's ("FTC") review of the
Lilly Agreement.
In June 1999, Sepracor announced a licensing agreement with UCB Farchim SA, an
affiliate of UCB ("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.
In September 1999, HMRI and Sepracor amended the HMRI Agreement to settle all
patent issues with respect to fexofenadine, marketed by HMRI as Allegra. Under
the terms of a U.S. agreement, Sepracor and HMRI settled an ongoing arbitrated
patent interference involving their U.S. patent properties, and HMRI now owns
the Sepracor patent properties with respect to fexofenadine. HMRI also obtained
an exclusive license to various other Sepracor U.S. patent applications related
to fexofenadine. Sepracor will receive royalties on fexofenadine sales, if any,
in the U.S. upon expiration of HMRI's composition of matter patent in
mid-February 2001. Under the terms of a separate ex-U.S. agreement, HMRI
obtained an exclusive license to Sepracor's patents that had been subject of
litigation in Europe, as well as various other patent oppositions between the
two companies outside the U.S. Sepracor is entitled to royalties on fexofenadine
product sales effective March 1, 1999 in countries where Sepracor has patents
related to fexofenadine.
In October 1999, Sepracor entered into an agreement (the "Zopiclone Agreement")
with Rhone-Poulenc Rorer SA (now Aventis) ("RPR"), under which Sepracor has
exclusively licensed RPR's pre-clinical, clinical and post-marketing
surveillance data package relating to zopiclone, its isomers and metabolites, to
develop, make, use and sell (+)-zopiclone in the U.S. RPR will assign all U.S.
patent applications relating to (+)-zopiclone to Sepracor. Pursuant to the
agreement, RPR retained the right under the licensed data package to manufacture
(+)-zopiclone in the U.S. for non-U.S. markets. In addition, Sepracor has paid a
$5,000,000 license fee to RPR and will pay a royalty to RPR on (+)-zopiclone
product sales, if any, in the U.S. Sepracor may also be required to pay RPR
milestone payments.
In 1999, the Company's significant component of cost of revenue was cost of
products sold. As a percentage of product sales, overall product cost was 29% in
1999. Sepracor's product cost as a percentage of its product sales was 24% and
BioSphere's product costs represented 62% of its product sales. In 1998 and 1997
product sales and costs were not material. In 1998 and 1997 cost of license fees
and royalties was the Company's largest component of cost of revenue and
represented 9% and 23% of license fee and royalty revenue in 1998 and 1997,
respectively.
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Research and development expenses were $122,400,000, $61,797,000 and $41,230,000
in 1999, 1998 and 1997, respectively. The increase in 1999 from 1998 is
primarily due to increased spending on preclinical and clinical trials in
Sepracor's pharmaceutical programs, including a major phase IIb/III study for
(S)-oxybutynin; several major trials for Norastemizole, including a pivotal
chronic safety study and two Phase III seasonal allergic rhinitis studies; a
Phase II study for (R,R)-formoterol; several trials for Levalbuterol, including
a Phase III pediatric study for the nebulizer formulation of Xopenex, two Phase
II studies for the metered dose inhaler formulation of Levalbuterol as well as
accelerated spending on formulation development for the metered dose inhaler. In
1999, preclinical and clinical development programs were accelerated for several
other pharmaceutical products candidates. As a result, in 1999 Sepracor filed
NDAs for (+)-desmethylsibutrimine, (S)-doxazosin and (+)-zopiclone. In addition
to the preclinical activities, two Phase I studies were initiated for
(+)-zopiclone. Sepracor also incurred costs in 1999 for the initial payment to
RPR in consideration for the exclusive U.S. license granted under the Zopiclone
Agreement. The increase in 1998 from 1997 was primarily due to an increase in
spending on preclinical and clinical trials in Sepracor's pharmaceutical
programs, including two major Phase III norastemizole trials, a fall seasonal
allergic rhinitis study and a controlled allergen challenge study; a Phase II
pediatric study for the syrup formulation of Xopenex(TM); a Phase II study for
(R,R)-formoterol; and a Phase I clinical trial for (R)-fluoxetine. These
increases were partially offset by the fact that Sepracor no longer consolidated
Versicor results in 1998, while 1997 results included approximately $5,073,000
of research and development costs attributable to Versicor.
Selling, general and administrative and patent expenses were $65,336,000,
$30,123,000 and $12,609,000 in 1999, 1998 and 1997, respectively. The increase
in 1999 from 1998 was principally due to commercial introduction and marketing
of Xopenex, including increased marketing and promotional expenses, costs
resulting from contracting with two third-party contract sales organizations,
sales commissions and product samples. The increase in 1998 from 1997 is
primarily the result of Sepracor's development of its infrastructure, including
operations and a specialty sales force, to support Xopenex.
Equity in loss of investees was $3,246,000, $7,482,000 and $2,755,000, for 1999,
1998 and 1997, respectively. The equity in loss of investees consists of the
Company's portion of the net loss of HemaSure, ChiRex (through March 31, 1997)
and Versicor (December 10, 1997 through April 1999). The decrease in loss from
1999 to 1998 relates to recognizing a $5,000,000 loan guarantee for HemaSure in
1998, offset by an increase of $2,737,000 in HemaSure's loss in 1999 over 1998
loss. Also contributing to the decrease in 1999 loss was a reduction in the loss
relating to Versicor, as the Company began recording the Versicor investment on
a cost basis in April 1999. The increase in loss in 1998 from 1997 was primarily
due to a $5,000,000 accrual of a HemaSure loan guarantee and the recording of
Versicor losses for a full year in 1998.
Interest income was $21,896,000, $13,191,000, and $5,639,000 for 1999, 1998 and
1997, respectively. The increase in 1999 from 1998 and in 1998 from 1997 is due
to the larger average cash balance available for investment.
Interest expense was $33,078,000, $16,969,000 and $5,976,000 in 1999, 1998 and
1997, respectively. The increase in 1999 from 1998 was due primarily to interest
payments at a rate of 7% on the December 1998 convertible subordinated debenture
financing of $300,000,000. The increase in 1998 from 1997 was due primarily to
interest payments at a rate of 6 1/4% on the February 1998 convertible
subordinated debenture financing of $189,475,000.
Net other income (expense) was $272,000, ($60,000), and $331,000 for 1999, 1998
and 1997, respectively. Income in 1999 and 1997 related primarily to the receipt
of Canadian tax refunds.
Minority interests in subsidiaries (net of discontinued operations) resulted in
a reduction of consolidated net loss of $1,438,000, $534,000 and $428,000 for
1999, 1998 and 1997, respectively. The increases in each year are due to
increased losses of BioSphere.
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Discontinued operations represent BioSphere's sale of a substantial amount of
its business and assets in May 1999. Accordingly, the operating results of the
discontinued business for the years ended December 31, 1999, 1998 and 1997 have
been segregated from continuing operations and reported as a separate line item
on the consolidated statements of operations.
OTHER
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133 "Accounting for Derivative Instruments and Hedging Activities." This
statement establishes accounting and reporting standards for derivative
instruments embedded in other contracts (collectively referred to as
"derivatives"), and for hedging activities. The statement requires companies to
recognize all derivatives as either assets or liabilities, with the instruments
measured at fair value. The accounting for changes in fair value, gains or
losses, depends on the intended use of the derivative and its resulting
designation. In June 1999, the FASB issued SFAS No. 137, which defers the
effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000.
The Company expects no immediate impact from SFAS No. 133 as it currently has no
derivatives.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"),
which is effective no later than the quarter ending March 31, 2000. SAB 101
summarizes certain of the staff's views in applying generally accepted
accounting principles to revenue recognition in financial statements. The
Company will adopt SAB 101 in the first quarter of 2000 and is presently
evaluating the impact of the adoption of this new standard; however, it is not
expected to have a material impact on the Company's financial position and
results of operations.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents plus marketable securities of Sepracor and its
consolidated subsidiaries totaled $335,823,000 at December 31, 1999, compared to
$499,597,000 at December 31, 1998.
The net cash used in operating activities for the year ended December 31, 1999
was $163,539,000. The net cash used in operating activities includes a net loss
from continuing operations of $182,714,000 adjusted by non-cash charges of
$11,358,000. These charges were offset by the minority interest in subsidiary
portion of the net loss of $1,438,000. The accounts payable and accrued expense
amounts increased a total of $21,630,000, primarily due to increased research
and development and interest accruals. The launch of Xopenex led to increases in
accounts receivable of $3,883,000 and inventories of $4,061,000.
Sepracor used $90,177,000 in investing activities for the year ended
December 31, 1999. Investing activities include net purchases of marketable
securities of $72,061,000; the payment of $10,000,000 and the issuance of
200,000 shares of Sepracor Common Stock for the purchase of license; and royalty
rights and the payment of $6,968,000 for property and equipment purchases.
Sepracor expects purchases of property and equipment to be approximately
$12,000,000 to $20,000,000 in 2000 and expects depreciation for 2000 of
approximately $5,000,000 to $7,000,000.
Net cash of $8,644,000 was provided by financing activities for the year ended
December 31, 1999. The cash resulted primarily from the net proceeds of issuance
of stock, offset by repayments of debt and capital leases.
Sepracor, BioSphere and HemaSure together have available an equipment leasing
facility that provides for a total of up to $2,000,000 of financing for the
purpose of financing capital equipment in the U.S. All outstanding amounts are
collateralized by the assets so financed and are guaranteed by Sepracor. At
December 31, 1999, there was $20,000 outstanding under this credit facility.
Sepracor's wholly owned subsidiary, Sepracor Canada Limited, has two credit
agreements with two Canadian provincial and federal business development
agencies for approximately $2,960,000 in term debt,
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of which $2,590,000 is at an annual interest rate of 9.25% and $370,000 is
interest free. As of December 31, 1999, Sepracor Canada Limited had received
approximately $2,960,000 of such term debt, of which $225,000 was outstanding.
In December 1999, Sepracor amended its revolving credit agreement (the
"Revolving Credit Agreement") with a commercial bank to provide for borrowing of
up to an aggregate of $25,000,000, pursuant to which BioSphere may borrow up to
$2,000,000. All borrowings are collateralized by certain assets of the
companies. The Revolving Credit Agreement contains covenants relating to minimum
tangible capital base, minimum cash or cash equivalents, minimum liquidity ratio
and maximum leverage. Sepracor is a guarantor of any outstanding borrowings. At
December 31, 1999, the Company had nothing outstanding under this agreement.
In 1997, Sepracor entered into a put agreement with a commercial bank pursuant
to which Sepracor agreed to purchase $2,000,000 of indebtedness of Versicor, in
the event of a default by Versicor under its loan agreement with the bank. In
the event that the put right is exercised by the bank, the bank will assign its
security interest in the fixed assets of Versicor to Sepracor. As of
December 31, 1999, the put agreement remained outstanding.
In February 1998, Sepracor issued $189,475,000 of 6 1/4% Convertible
Subordinated Debentures due 2005 (the "6 1/4% Debentures"). The 6 1/4%
Debentures are convertible into Sepracor Common Stock, at the option of the
holder, at a price of $23.685 per share and bear interest at 6 1/4% payable
semi-annually, commencing on August 15, 1998. The 6 1/4% Debentures are not
redeemable by the Company prior to February 18, 2001. The Company may be
required to repurchase the 6 1/4% Debentures at the option of the holders in
certain circumstances. As part of the sale of the 6 1/4% Debentures, Sepracor
incurred approximately $6,105,000 of offering costs, which were recorded as
other assets and are being amortized over seven years, the term of the 6 1/4%
Debentures. The net proceeds to the Company after offering costs were
$183,370,000. In February 2000, $96,424,000 in aggregate principal amount of the
6 1/4% Convertible Subordinated Debentures Due 2005 were converted. Costs
related to the conversion of the Debentures, including pre-paid interest,
premiums and other costs, were approximately $7,497,000. Upon completion of this
transaction, $93,048,000 in aggregate principal amount of the 6 1/4% Debentures
remained outstanding as debt.
In 1998, Sepracor and Beckman Instruments, Inc. ("Beckman") terminated their
Stock Purchase Agreement under which Beckman had acquired 625,000 shares of
Sepracor Series B Redeemable Exchangeable Preferred Stock. Sepracor paid Beckman
the original purchase price of the stock plus accrued dividends, totaling
$6,850,000.
In 1998, Sepracor converted the entire principal amount of 7% Convertible
Subordinated Debentures due 2002, aggregating $80,880,000 of Common Stock at a
conversion price of $9.84 per share. As a result of the conversion, Sepracor
wrote off $1,582,000 of deferred financing costs against stockholders' equity.
In December 1998, Sepracor issued $300,000,000 of 7% Convertible Subordinated
Debentures due 2005 (the "7% Debentures due 2005"). The 7% Debentures due 2005
are convertible into Sepracor Common Stock, at the option of the holder, at a
price of $62.438 per share and bear interest at 7% payable semi-annually,
commencing on June 15, 1999. The 7% Debentures due 2005 are not redeemable by
the Company prior to December 20, 2001. The Company may be required to
repurchase the 7% Debentures due 2005 at the option of the holders in certain
circumstances. As part of the sale of the 7% Debentures due 2005, Sepracor
incurred approximately $9,919,000 of offering costs, which were recorded as
other assets and are being amortized over seven years, which is the term of the
7% Debentures due 2005. The net proceeds to the Company after offering costs
were $290,081,000.
On February 14, 2000, Sepracor issued $400,000,000 in principal amount of 5%
Convertible Subordinated Debentures due 2007 (the "5% Debentures"). The 5%
Debentures have an annual interest of 5% and are convertible into Sepracor
Common Stock at $92.38 per share. On March 9, 2000, Sepracor issued an
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additional $60,000,000 in principal amount of 5% Debentures pursuant to an
option granted to the initial purchaser of the 5% Debentures. Sepracor intends
to use the proceeds from the sale of the 5% Debentures for its ongoing
preclinical and clinical trials, expansion of sales and marketing capabilities,
funding of other research and development programs, working capital and other
general corporate purposes.
The Company believes that existing cash, including the proceeds from the sale of
the 5% Debentures, its investment securities, and the anticipated cash flow from
its current strategic alliances and operations will be sufficient to support its
existing operations for the near term. Sepracor's actual future cash
requirements, however, will depend on many factors, including the progress of
its preclinical, clinical, and research programs, the number and breadth of
these programs, achievement of milestones under strategic alliance arrangements,
acquisitions, its ability to establish and maintain additional strategic
alliance and licensing arrangements, and the progress of the Company's
development efforts and the development efforts of its strategic partners.
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
1999 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 1999 market equity prices
of the 6 1/4% Debentures due 2005 and 7% Debentures due 2005 would result in an
increase of approximately $73,000,000 on the net fair value of the Company's
subordinated convertible debentures.
LEGAL PROCEEDINGS
On February 12, 1999, the FTC issued a request for additional information or
documentary materials relating to the Company's exclusive license agreement with
Lilly relating to (R)-fluoxetine. 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 or 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.
An interference declared on June 30, 1999 between Sepracor and RPR relating to
(+)-zopiclone was terminated by Sepracor's agreement with RPR on October 7,
1999, under which RPR's involved patent application was assigned to Sepracor.
All legal proceedings between Sepracor and HMRI relating to fexofenadine,
including foreign litigation and the interference between Sepracor and HMRI,
have been settled by Sepracor's agreement with HMRI of September 1, 1999.
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HemaSure is a defendant in a lawsuit brought by Pall Corporation ("Pall")
regarding its LeukoNet System, which is no longer made or sold by HemaSure. In a
complaint filed in November 1996, Pall alleged that HemaSure's manufacture, use
and/or sale of the LeukoNet System infringed upon two patents held by Pall. Pall
dropped its allegations concerning infringement of one of the patents and
alleges only that HemaSure's LeukoNet System infringed U.S. Patent
No. 4,952,572 (the "'572 Patent").
With respect to the allegations concerning the '572 Patent, HemaSure has
answered the complaint stating that it does not infringe any claim of the
asserted patent. 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. 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 filed 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. The court has not acted on the
summary judgment motions.
On April 5, 1999, HemaSure and Gambro BCT, Inc. ("Gambro BCT") filed a
complaint for declaratory relief against Pall in the U.S. District Court of
Colorado. HemaSure and Gambro BCT seek declaratory relief that the '572
Patent and Pall's U.S. Patent No's. 5,451,321, 5,229,012, 5,344,561,
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 or
transfer to the Eastern District of New York or, in the alternative, to stay
this action. HemaSure and Gambro opposed Pall's motion. On July 16, 1999, the
United States District Court of Colorado denied Pall's motion to transfer or,
in the alternative, to stay the action, and the action is proceeding. On
September 30, 1999, the Court denied Pall's motion to dismiss the action and
the case is proceeding. On October 20, 1999, Pall submitted a counterclaim
alleging that the HemaSure's r/LS System infringes its '572 patent and that
HemaSure and Gambro BCT tortiously interfered and unfairly competed with
Pall's business. On March 22, 2000, Pall filed its second amended answer and
counterclaims alleging infringement of all the patents-in-suit. Pall also
added counterclaims against Gambro A.B.
On April 23, 1999, Pall filed a complaint against HemaSure and Gambro BCT in the
U.S. District Court of the Eastern District of New York alleging that HemaSure's
r\LS filter infringes Pall's '572 Patent, and tortiously interfered and unfairly
competed with Pall's business. On May 19, 1999, Pall filed an amended complaint
adding Sepracor, Gambro, Inc. and Gambro, A.B., a Swedish company, of which
Gambro Inc. is a business unit, as defendants. Sepracor, HemaSure and Gambro BCT
have moved to dismiss, transfer, or stay the action, and Pall has opposed the
motion. There has been no decision on the motion.
A prior lawsuit brought by Pall in February 1996 has concluded. In June 1999,
the U.S. Court of Appeals for the Federal Circuit determined that the LeukoNet
System did not infringe claim 39 of U.S. Patent No. 5,451,321 and Pall has not
appealed that decision.
HemaSure has engaged patent counsel to investigate the pending litigations.
HemaSure believes, based upon its review of these matters, that a properly
informed court should conclude that the manufacture, use and/or sale by HemaSure
or its customers of the LeukoNet System and the r\LS System does 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, including
the possibility of significant damages in the litigations and an injunction
against the sale of the r/LS System if HemaSure does not prevail in the
litigations.
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.
In January 1997, HemaSure entered into a Restructuring Agreement of the debt
related to the HemaSure's acquisition of Novo Nordisk A/S's plasma products
unit. In January 1998, HemaSure elected to convert all indebtedness under the
approximately $11,700,000 promissory note which was issued to Novo Nordisk
A/S in connection with the Restructuring Agreement into common stock at a
conversion price of $10.50 per share, or 827,375 shares. HemaSure also
elected to treat as forgiven $3,000,000 in principal amount of the note,
pursuant to the terms of the note. Novo Nordisk A/S has contested the
conversion of the note, including the forgiveness of the $3,000,000 amount.
This dispute, with or without merit, could be time-consuming and expensive to
litigate or settle if brought into a court of law, and could divert
management attention from administering HemaSure's core business. If Novo
Nordisk A/S succeeds on its dispute and HemaSure is deemed to have
wrongfully converted the original note, then the 827,375 shares of common
stock issued to Novo Nordisk A/S may no longer be outstanding and HemaSure
may be obligated to repay certain indebtedness under the original note.
FACTORS AFFECTING FUTURE OPERATING RESULTS
Certain of the information contained in this Annual Report, including
information with respect to the safety, efficacy and potential benefits of the
Company's ICEs under development and the scope of patent protection with respect
to these products and information with respect to the other plans and strategy
for the Company's business and the business of the subsidiaries and certain
affiliates of the Company, consists
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of forward-looking statements. Important factors that could cause actual results
to differ materially from the forward-looking statements include the following:
WE HAVE NEVER BEEN PROFITABLE AND WE MAY NOT BE ABLE TO GENERATE REVENUES
SUFFICIENT TO ACHIEVE PROFITABILITY: We have not been profitable since
inception, and it is possible that we will not achieve profitability. We
incurred net losses applicable to common shares on a consolidated basis of
approximately $183.1 million for the year ended December 31, 1999 and
$93.4 million for the year ended December 31, 1998. We expect to continue to
incur operating and capital expenditures. As a result, we will need to generate
significant revenues to achieve and maintain profitability. We cannot assure you
that we will achieve significant revenues or that we will ever achieve
profitability. Even if we do achieve profitability, we cannot assure you that we
can sustain or increase profitability on a quarterly or annual basis in the
future. If revenues grow more slowly than we anticipate or if operating expenses
exceed our expectations or cannot be adjusted accordingly, our business, results
of operations and financial conditions will be materially and adversely
affected. Our ability to generate profitability will depend in large part on
successful commercialization of our initial products and successful development
and commercialization of principal products under development. Failure to
successfully commercialize these products may have a material adverse effect on
our business.
WE WILL BE REQUIRED TO EXPEND SIGNIFICANT RESOURCES FOR RESEARCH, DEVELOPMENT,
TESTING AND REGULATORY APPROVAL OF OUR DRUGS UNDER DEVELOPMENT AND THESE DRUGS
MAY NOT BE DEVELOPED SUCCESSFULLY: We are focused on the development of improved
versions of widely prescribed pharmaceutical compounds which we refer to as
improved chemical entities, or ICEs. Most of our ICEs are still undergoing
clinical trials or are in the early stages of development. Our drugs may not
provide greater benefits or fewer side effects than the original versions of
these drugs and our research efforts may not lead to the discovery of new drugs
with improved characteristics. All of our 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. Our 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 WE FAIL TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS OR FACE A
CLAIM OF INTELLECTUAL PROPERTY INFRINGEMENT BY A THIRD PARTY, THEN WE COULD LOSE
VALUABLE INTELLECTUAL PROPERTY RIGHTS, BE LIABLE FOR SIGNIFICANT DAMAGES OR BE
PREVENTED FROM COMMERCIALIZING OUR PRODUCTS: Our success depends in part on our
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 our
business by independently developing and marketing substantially equivalent
products and technology and preventing us from marketing our products. It is
also possible that we could incur substantial costs in litigation if we are
required to defend ourselves in patent suits brought by third parties, or if we
are required to initiate litigation against others to protect our intellectual
property rights.
We have 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, we may not be issued patents in respect of
the patent applications already filed or that we 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 ("PTO"), or the courts regarding the breadth of claims allowed
or the
10
<PAGE>
degree of protection afforded under patents and other proprietary rights. Any
patents we have obtained, or obtain in the future, may be challenged,
invalidated or circumvented. Moreover, the PTO may commence interference
proceedings involving our patents or patent applications. Any challenge to, or
invalidation or circumvention of, our patents or patent applications could have
a material adverse effect on our business.
Our ability to commercialize successfully any ICE will largely depend upon our
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 we have use patents or
patent applications. In each of these cases, unless we have or obtain a license
agreement, we generally may not commercialize the ICE until the expiration of
these third-party patents. Licenses may not be available to us on acceptable
terms, if at all. In addition, it would be costly for us to contest the validity
of a third-party patent or defend any claim that we infringe a third-party
patent. Moreover, litigation involving third-party patents may not be resolved
in our favor.
IF OUR PRODUCTS DO NOT RECEIVE GOVERNMENT APPROVAL, THEN WE WILL NOT BE ABLE TO
COMMERCIALIZE THEM: The United States Food and Drug Administration ("FDA") and
similar foreign agencies must approve the marketing and sale of pharmaceutical
products developed by us or our development partners. These agencies impose
substantial requirements on the manufacture and marketing of drugs. Our failure
to obtain regulatory approval on a timely basis and any unanticipated
significant expenditures on preclinical and clinical studies could adversely
affect the funds we will require to advance our products to commercialization
and the timing of the commercial introduction of, or our ability to, market and
sell our 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 preclinical 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.
Even if the FDA or similar foreign agencies grant us 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 we fail to comply with applicable
regulatory requirements, we may be subject to fines, suspension or withdrawal of
regulatory approvals, product recalls, seizure of products, operating
restrictions and criminal prosecution.
THE DEVELOPMENT AND COMMERCIALIZATION OF OUR PRODUCTS COULD BE DELAYED OR
TERMINATED IF OUR COLLABORATIVE PARTNERS TERMINATE, OR FAIL TO PERFORM THEIR
OBLIGATIONS UNDER, THEIR AGREEMENTS WITH US OR IF ANY OF OUR COLLABORATION
AGREEMENTS IS SUBJECT TO LENGTHY GOVERNMENT REVIEW: We have entered into
collaboration arrangements with pharmaceutical companies. Our revenues under
these collaboration arrangements will consist primarily of milestone payments
and royalties on sales of products. Any such payments and royalties will depend
in large part on the efforts of our collaboration partners. If any of our
collaboration partners does not devote sufficient time and resources to its
collaboration arrangement with us, the potential commercial benefits of the
arrangement may not be realized by us, and our results of operations may be
adversely affected. In addition, if any of our collaboration partners were to
breach or terminate their agreements with us or fail to perform their
obligations to us 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 our financial condition and
results of operations because we may be required to expend additional funds to
bring our 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 us to perform some of our obligations
under a collaboration agreement could reduce or extinguish the benefits to which
we are otherwise entitled under the agreement.
11
<PAGE>
We have exclusively licensed our (R)-fluoxetine rights to Lilly, and, in
addition to up-front license and development milestone payments, are entitled to
receive royalties on product sales beginning upon the first commercial sale. The
(R)-fluoxetine agreement with Lilly will be effective on the next business day
following the expiration or earlier termination of the notice and waiting period
under the HSR Act.
We are required to file a notice under the HSR Act for certain agreements
containing exclusive license grants and to delay the effectiveness of any such
exclusive license until the expiration or earlier termination of the notice and
waiting period under the HSR Act. If the expiration or termination of the notice
and waiting period under the HSR Act is delayed because of lengthy government
review, or if the FTC or Department of Justice successfully challenges such a
license, development and commercialization could be delayed or precluded and our
business could be adversely affected. Under the HSR Act, we have received a
request from the FTC for additional information in connection with the
R-fluoxetine agreement. We are responding to the request. There can be no
assurance that the FTC will not initiate proceedings seeking to modify or enjoin
the (R)-fluoxetine agreement with Lilly. If that agreement is modified or
enjoined, development and commercialization of (R)-fluoxetine would be delayed
or precluded.
Development and commercialization of some of our product candidates may depend
on our ability to enter into additional collaboration agreements with
pharmaceutical companies to fund all or part of the costs of development and
commercialization of such product candidates. There can be no assurance that we
will be able to enter into collaboration agreements for ICEs in the future or
that the terms of the collaboration agreements, if any, will be favorable to us.
The inability to enter into collaboration agreements in the future could delay
or preclude the development, manufacture and/or marketing of some of our drugs
and could have a material adverse effect on our financial condition and results
of operations because:
- we may be required to expend additional funds to advance the drugs to
commercialization;
- revenue from product sales could be delayed; or
- we may elect not to commercialize the drugs.
WE HAVE LIMITED SALES AND MARKETING EXPERIENCE AND EXPECT TO INCUR SIGNIFICANT
EXPENSES IN DEVELOPING A SALES FORCE. IN ADDITION, OUR LIMITED SALES AND
MARKETING EXPERIENCE MAY RESTRICT OUR SUCCESS IN COMMERCIALIZING OUR PRODUCTS:
We currently have very limited sales and marketing experience. If we
successfully develop and obtain regulatory approval for the products we are
currently developing, we expect to license some of them to large pharmaceutical
companies and market and sell others through our direct specialty sales forces
or through other arrangements, including co-promotion arrangements. We have
established a direct sales force to market Xopenex, our single isomer form of
albuterol. As we begin to enter into co-promotion arrangements or market and
sell additional products directly, we will need to significantly expand our
sales force. We expect to incur significant expense in expanding our direct
sales force. Our limited experience in developing, maintaining and expanding a
direct specialty sales force may restrict our success in commercializing our
products.
Our ability to realize significant revenues from direct marketing and sales
activities depends on our ability to attract and retain qualified sales
personnel in the pharmaceutical industry and competition for these persons is
intense. If we are unable to attract and retain qualified sales personnel, we
will not be able to successfully expand our marketing and direct sales force on
a timely or cost effective basis. In addition, we may need to enter into
co-promotion arrangements with third parties where our own direct sales force is
neither well situated nor large enough to achieve maximum penetration in the
market. We may not be successful in entering into any co-promotion arrangements,
and the terms of any co-promotion arrangements may not be favorable to us.
IF WE DO NOT MAINTAIN CURRENT GOOD MANUFACTURING PRACTICES, THEN THE FDA COULD
REFUSE TO APPROVE MARKETING APPLICATIONS. WE DO 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 our products be
manufactured according to their Good
12
<PAGE>
Manufacturing Practices standards. Our failure to maintain current Good
Manufacturing Practices compliance and/or scale up our 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.
Failure to increase our manufacturing capabilities may mean that even if we
develop promising new products, we may not be able to produce them. We currently
operate a manufacturing plant that is compliant with current Good Manufacturing
Practices that we believe can produce commercial quantities of Xopenex and
support the production of our other possible products in amounts needed for our
clinical trials. However, we will not have the capability to manufacture in
sufficient quantities all of the products which may be approved for sale.
Accordingly, we will be required to spend money to expand our current
manufacturing facility, build an additional manufacturing facility or contract
the production of these drugs to third-party manufacturers.
We currently have a supply contract with ChiRex Inc. that commits us to purchase
through December 31, 2001 all of our annual requirements of those drugs that we
will market directly through our 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 we market through our
specialty sales force could be adversely affected. Under this supply agreement,
however, we retain the right to manufacture commercial quantities of our drugs
in our Nova Scotia manufacturing plant.
IF WE OR OUR COLLABORATIVE PARTNERS FAIL TO OBTAIN AN ADEQUATE LEVEL OF
REIMBURSEMENT FOR OUR FUTURE PRODUCTS OR SERVICES BY THIRD PARTY PAYORS, THERE
MAY BE NO COMMERCIALLY VIABLE MARKETS FOR OUR PRODUCTS OR SERVICES: The
availability and levels of reimbursement by governmental and other third party
payors affects the market for any pharmaceutical product or service. These third
party payors continually attempt to contain or reduce the costs of healthcare by
challenging the prices charged for medical products and services. In certain
foreign countries, particularly the countries of the European Union ("EU"), the
pricing of prescription pharmaceuticals is subject to governmental control. We
may not be able to sell our products profitably if reimbursement is unavailable
or limited in scope or amount.
In both the United States and certain foreign jurisdictions, there have been a
number of legislative and regulatory proposals to change the healthcare system.
Further proposals are likely. The potential for adoption of these proposals
affects or will affect our ability to raise capital, obtain additional
collaborative partners and market our products.
We expect to experience pricing pressure for our existing products and any
future products for which marketing approval is obtained due to the trend toward
managed healthcare, the increasing influence of health maintenance organizations
and additional legislative proposals.
WE COULD BE EXPOSED TO SIGNIFICANT LIABILITY CLAIMS IF WE ARE UNABLE TO OBTAIN
INSURANCE AT ACCEPTABLE COSTS OR OTHERWISE PROTECT AGAINST POTENTIAL LIABILITY
CLAIMS: We 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 us to significant liabilities that could prevent or
interfere with our product commercialization efforts. Product liability claims
could require us to spend significant time and money in litigation or to pay
significant damages. Although we maintain product liability insurance coverage
for both the clinical trials and commercialization of our products, it is
possible that we will not be able to obtain further product liability insurance
on acceptable terms, if at all, and that our insurance coverage may not provide
adequate coverage against all potential claims.
WE HAVE SIGNIFICANT LONG-TERM DEBT AND WE MAY NOT BE ABLE TO MAKE INTEREST OR
PRINCIPAL PAYMENTS WHEN DUE: As of December 31, 1999, our total long-term debt
was approximately $490.6 million and our stockholders' equity (deficit) was
$(155.7) million. Neither the 6 1/4% Convertible Subordinated Debentures due
2005 issued by the Company in February 1998 nor the 7% Convertible Subordinated
Debentures due 2005
13
<PAGE>
issued by the Company in December 1998 restrict our ability or our subsidiaries'
ability to incur additional Indebtedness (as defined), including debt that ranks
senior to the 6 1/4% Convertible Subordinated Debentures due 2005 and the 7%
Convertible Subordinated Debentures due 2005. Additional Indebtedness that we
incur may rank senior to or on parity with these debentures in certain
circumstances. See "Description of Debentures." Our ability to satisfy our
obligations will depend upon our future performance, which is subject to many
factors, including factors beyond our control. It is possible that we will be
unable to meet our debt service requirements on any of our outstanding
debentures. Moreover, we may be unable to repay any of our outstanding
debentures at maturity or otherwise in accordance with the debt instruments.
IF SUFFICIENT FUNDS TO FINANCE OUR BUSINESS ARE NOT AVAILABLE TO US WHEN NEEDED
OR ON ACCEPTABLE TERMS, THEN WE MAY BE REQUIRED TO DELAY, SCALE BACK, ELIMINATE
OR ALTER OUR STRATEGY FOR OUR PROGRAMS: We may require additional funds for our
research and product development programs, operating expenses, the pursuit of
regulatory approvals and the expansion of our production, sales and marketing
capabilities. Historically we have satisfied our funding needs through
collaborative arrangements with corporate partners, equity or debt financing. We
cannot assure you that these funding sources will be available to us when needed
in the future, or, if available, will be on terms acceptable to us. Insufficient
funds could require us to delay, scale back or eliminate certain of our research
and product development programs or to license third parties to commercialize
products or technologies that we would otherwise develop or commercialize
ourself. Our 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;
- our capital requirements; and
- selling and marketing expenses in connection with commercialization of
products.
WE EXPECT TO FACE INTENSE COMPETITION AND OUR COMPETITORS HAVE GREATER RESOURCES
AND CAPABILITIES THAN WE HAVE. DEVELOPMENTS BY OTHERS MAY RENDER OUR PRODUCTS OR
TECHNOLOGIES OBSOLETE OR NONCOMPETITIVE: We expect to encounter intense
competition in the sale of our future products. If we are unable to compete
effectively, our financial condition and results of operations could be
materially adversely affected because we may use our financial resources to seek
to differentiate ourselves from our competition and because we may not achieve
our product revenue objectives. Many of our 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 we have. The fields in which we compete are
subject to rapid and substantial technological change. Our 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 we can. As a result, any products and/or technologies
that we develop may become obsolete or noncompetitive before we 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 OUR SUBSIDIARIES WILL
CAUSE FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS, WHICH COULD CAUSE
VOLATILITY IN OUR STOCK PRICE: Our 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 our pharmaceutical development
candidates and development costs for those pharmaceuticals;
14
<PAGE>
- the timing of receipt of upfront, milestone or royalty payments under
collaborative agreements;
- the timing of product sales and market penetration;
- the timing of operating expenses, including selling and marketing expenses
and the costs of expanding and maintaining a direct sales force; and
- the losses of HemaSure Inc., a 27%-owned subsidiary of Sepracor as of
December 31, 1999.
FAILURE BY US TO IDENTIFY AND REMEDIATE ALL YEAR 2000 RISKS COULD CAUSE A
DISRUPTION IN OUR BUSINESS: 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 our 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. We have attempted to assess,
and we must continue to audit year 2000 issues with our internal systems,
including communications, hardware and software. If our systems do not operate
properly with respect to date calculations involving the year 2000 and
subsequent dates, we could incur unanticipated expenses to remedy any problems
and our business could be seriously harmed. Although we believe that our
internal systems are currently year 2000 compliant, our systems nevertheless
could be impaired or cease to operate due to year 2000 problems.
We rely on third-party suppliers and service providers. If these or other
parties experience year 2000 failures or malfunctions there could be an adverse
impact on our ability to conduct operations, including conducting continued
pharmaceutical development efforts and manufacturing pharmaceutical products. At
this time, we do not anticipate this worst case scenario to occur, nor do we
anticipate any major interruptions in our ability to provide products and
services to our customers. In the event that we experience disruptions as a
result of the year 2000 problem, our business could be seriously harmed.
YEAR 2000 ISSUE: In prior periods and years, we discussed the progress of our
plans to prepare for any system or processing failures which could result from
computer programs recognizing dates represented as "00" as the year 1900 rather
than the year 2000. As a result of the Company's planning and efforts, there
were no significant disruptions in critical information technology and
non-information technology systems and the Company believes those systems
successfully responded to the Year 2000 date change. Costs relating to this Year
2000 issue have not been material. The Company is not aware of any material
problems resulting from Year 2000 issues, either with our internal systems, or
with the products and services of third parties. The Company will continue to
monitor its mission critical computer applications and those of vendors and
suppliers throughout the year 2000 to ensure that the Company promptly addresses
any issues that may arise.
SUPPLEMENTAL STOCKHOLDER INFORMATION
PRICE RANGE OF COMMON STOCK
The Sepracor Common Stock is traded on the Nasdaq National Market under the
symbol SEPR. On March 15, 2000, the closing price of the Company's Common Stock,
as reported on the Nasdaq National Market, was $94.75 per share. The following
table sets forth for the periods indicated the high and low sales prices per
share of the Common Stock as reported by the Nasdaq National Market. The share
prices
15
<PAGE>
set forth below have been adjusted to reflect the two-for-one stock split of the
Company's Common Stock distributed on February 25, 2000 to stockholders of
record on February 1, 2000.
<TABLE>
<CAPTION>
HIGH LOW
------------ ------------
<S> <C> <C>
2000
First Quarter (through March 24, 2000)...................... 126 13/16 45 1/16
</TABLE>
<TABLE>
<CAPTION>
HIGH LOW
----------- ------------
<S> <C> <C>
1999
First Quarter............................................... 70 7/16 44 1/16
Second Quarter.............................................. 61 7/8 27 1/2
Third Quarter............................................... 47 7/8 32 3/8
Fourth Quarter.............................................. 53 5/8 33 27/32
</TABLE>
<TABLE>
<CAPTION>
HIGH LOW
------------ -----------
<S> <C> <C>
1998
First Quarter............................................... 22 16 1/2
Second Quarter.............................................. 23 15/16 18 1/8
Third Quarter............................................... 36 3/8 20 9/16
Fourth Quarter.............................................. 47 5/8 23 5/8
</TABLE>
On March 15, 2000, Sepracor had approximately 553 stockholders of record.
DIVIDEND POLICY
Sepracor has never paid cash dividends on its Common Stock. The Company
currently intends to reinvest its future earnings, if any, for use in the
business and does not expect to pay cash dividends in the foreseeable future.
FORM 10-K
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1999 IS AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO:
INVESTOR RELATIONS
SEPRACOR INC.
111 LOCKE DRIVE
MARLBOROUGH, MA 01752
16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Sepracor Inc.:
In our opinion, based upon our audits and the report of other auditors, the
accompanying consolidated balance sheets and the related consolidated statements
of operations, stockholders' equity (deficit) and comprehensive income, and cash
flows present fairly, in all material respects, the financial position of
Sepracor Inc. and its subsidiaries (the "Company") at December 31, 1999 and
1998, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We did not
audit the financial statements of BioSphere Medical Inc., a majority-owned
subsidiary, which statements reflect total assets of 2% and 2% of total
consolidated assets at December 31, 1999 and 1998, respectively, and 10%, 2% and
7% of total consolidated revenues for each of the three years in the period
ended December 31, 1999. Those statements were audited by other auditors whose
report thereon has been furnished to us, and our opinion expressed herein,
insofar as it relates to the amounts included for BioSphere Medical Inc., is
based solely on the report of the other auditors. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits and the report of other auditors provide a reasonable basis for the
opinion expressed above.
/s/ PricewaterhouseCoopers LLP
- ---------------------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 27, 2000, except as to the information in
Note V for which the date is March 9, 2000
17
<PAGE>
SEPRACOR INC. CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, (IN THOUSANDS, EXCEPT PAR VALUE AMOUNTS) 1999 1998
- ---------------------------------------------------------------- -------- --------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents (Notes B and D)..................... $ 59,488 $295,323
Marketable securities (Notes B and D)......................... 276,335 204,274
Accounts receivable, net of allowances of $165 at December 31,
1999 (Notes B and F)........................................ 4,485 --
Inventories (Notes B and G)................................... 4,455 --
Other assets.................................................. 5,277 3,386
-------- --------
Total current assets.......................................... 350,040 502,983
-------- --------
Property and equipment, net (Notes B and H)................... 19,003 16,508
Investment in affiliates (Note C)............................. 3,141 1,490
Net assets from discontinued operations (Note I)............. -- 10,325
Patents, intangible assets and other assets, net (Notes B
and O)..................................................... 34,451 17,954
-------- --------
Total assets.................................................. $406,635 $549,260
-------- --------
Liabilities and Stockholders' Equity (deficit)
Current liabilities:
Accounts payable.............................................. $ 20,196 $ 9,290
Accrued expenses (Note J)..................................... 42,575 31,275
Loan guarantee of affiliate (Notes C and M).................. 5,000 --
Notes payable and current portion of capital lease obligation
and long-term debt (Notes K and M).......................... 120 2,410
Other current liabilities..................................... 2,078 2,502
-------- --------
Total current liabilities..................................... 69,969 45,477
-------- --------
Loan guarantee of affiliate (Notes C and M).................. -- 5,000
Long-term debt and capital lease obligation (Notes K and M)... 1,136 2,435
Convertible subordinated debentures (Notes E and L)........... 489,475 489,475
Other long-term liabilities................................... 826 --
-------- --------
Total liabilities............................................. 561,406 542,387
-------- --------
Minority interest (Note C).................................... 934 2,445
Commitments and contingencies (Notes M and N)
Stockholders' equity (deficit) (Notes L, O and P)
Preferred stock, $1.00 par value, 1,000 shares authorized, none
outstanding at December 31, 1999 and 1998................... -- --
Common stock, $.10 par value, 140,000 and 80,000 shares
authorized; 67,481 and 65,313 shares issued and outstanding,
at December 31, 1999 and 1998, respectively................. 6,748 6,531
Additional paid-in capital.................................... 327,591 304,403
Unearned compensation, net (Note O)........................... (217) (144)
Accumulated deficit........................................... (489,370) (306,311)
Accumulated other comprehensive income (loss)................. (457) (51)
-------- --------
Total stockholders' equity (deficit).......................... (155,705) 4,428
-------- --------
Total liabilities and stockholders' equity (deficit).......... $406,635 $549,260
-------- --------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
18
<PAGE>
SEPRACOR INC. CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
(IN THOUSANDS, EXCEPT LOSS PER COMMON SHARE AMOUNTS) 1999 1998 1997
- ------------------------------------------------------------ --------- -------- --------
<S> <C> <C> <C>
Revenues:
Product sales............................................. $ 16,383 $ 155 $ 117
License fees and royalties (Note R)....................... 3,886 5,293 2,078
Collaborative research and development (Note R)........... 2,390 4,761 --
--------- -------- --------
Total revenues.............................................. 22,659 10,209 2,195
--------- -------- --------
Costs and expenses:
Cost of products sold..................................... 4,811 95 72
Cost of license fees and royalties........................ 108 480 469
Research and development.................................. 122,400 61,797 41,230
Selling, general and administrative and patent costs...... 65,336 30,123 12,609
--------- -------- --------
Total costs and expenses.................................... 192,655 92,495 54,380
--------- -------- --------
Loss from operations........................................ (169,996) (82,286) (52,185)
--------- -------- --------
Other income (expense):
Equity in investee losses (Note C)........................ (3,246) (7,482) (2,755)
Interest income........................................... 21,896 13,191 5,639
Interest expense.......................................... (33,078) (16,969) (5,976)
Gain on sale of ChiRex Inc. (Note C)...................... -- -- 30,069
Other income (expense).................................... 272 (60) 331
--------- -------- --------
Net loss before minority interests.......................... (184,152) (93,606) (24,877)
Minority interests in subsidiaries (Note C)................. 1,438 534 428
--------- -------- --------
Net loss from continuing operations......................... (182,714) (93,072) (24,449)
Discontinued Operations:
Loss from discontinued operations (net of minority
interests) (Note I)..................................... (345) (211) (1,674)
--------- -------- --------
Net loss.................................................... $(183,059) $(93,283) $(26,123)
--------- -------- --------
Net loss applicable to common shares (Note B)............... $(183,059) $(93,433) $(26,723)
Basic and diluted net loss per common share from continuing
operations (Note B)....................................... $ (2.77) $ (1.61) $ (0.44)
Basic and diluted net loss per common share from
discontinued operations (Note B).......................... $ (0.00) $ (0.01) $ (0.04)
Basic and diluted net loss per common share................. $ (2.77) $ (1.62) $ (0.48)
Shares used in computing basic and diluted net loss per
common shares:
Basic and diluted......................................... 66,049 57,826 55,198
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
19
<PAGE>
SEPRACOR INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) AND
COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
ACCUMULATED TOTAL
YEAR ENDED DECEMBER 31, 1999, 1998 COMMON STOCK ADDITIONAL OTHER STOCKHOLDERS'
AND 1997 ------------------- PAID-IN UNEARNED ACCUMULATED COMPREHENSIVE EQUITY
(IN THOUSANDS) SHARES AMOUNT CAPITAL COMPENSATION DEFICIT INCOME (LOSS) (DEFICIT)
- ---------------------------------- -------- -------- ---------- ------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996... 54,542 $5,454 $211,672 $(234) $(186,905) $ 292 $ 30,279
------ ------ -------- ----- --------- ----- ---------
Comprehensive income (loss):
Net loss........... (26,123) (26,123)
Foreign currency translation... (91) (91)
---------
Total comprehensive income
(loss)......... (26,214)
---------
Issuance of common stock to
employees under stock plans... 1,165 117 2,958 3,075
Accrued dividends from preferred
stock............ (600) (600)
Unearned compensation, net... 140 140
Gain on issuance of subsidiary's
stock............ 5,688 5,688
------ ------ -------- ----- --------- ----- ---------
Balance at December 31, 1997... 55,707 5,571 219,718 (94) (213,028) 201 12,368
------ ------ -------- ----- --------- ----- ---------
Comprehensive income (loss):
Net loss........... (93,283) (93,283)
Foreign currency translation... (252) (252)
---------
Total comprehensive income
(loss)......... (93,535)
---------
Issuance of common stock to
employees under stock plans... 1,277 127 5,963 6,090
Issuance of common stock from
conversion of warrants... 110 11 396 407
Unearned compensation, net... (50) (50)
Accrued dividends from preferred
stock............ (150) (150)
Issuance of common stock from
conversion of subordinated
convertible notes... 8,219 822 80,058 80,880
Deferred finance costs from the
conversion of subordinated
convertible notes... (1,582) (1,582)
------ ------ -------- ----- --------- ----- ---------
Balance at December 31, 1998... 65,313 6,531 304,403 (144) (306,311) (51) 4,428
------ ------ -------- ----- --------- ----- ---------
Comprehensive income (loss):
Net loss........... (183,059) (183,059)
Foreign currency translation... (406) (406)
---------
Total comprehensive income
(loss)......... (183,465)
---------
Issuance of common stock to
employees under stock plans... 1,968 197 12,813 13,010
Unearned compensation, net... 129 (73) 56
Compensation expense... 419 419
Issuance of common stock for
purchase of intangible
technology....... 200 20 7,930 7,950
Gain on issuance of subsidiary's
stock............ 1,897 1,897
------ ------ -------- ----- --------- ----- ---------
Balance at December 31, 1999... 67,481 $6,748 $327,591 $(217) $(489,370) $(457) $(155,705)
====== ====== ======== ===== ========= ===== =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
20
<PAGE>
SEPRACOR INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, (IN THOUSANDS) 1999 1998 1997
- -------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(183,059) $ (93,283) $ (26,123)
Less: Net loss from discontinued operations (net of
minority interests)..................................... (345) (211) (1,674)
--------- --------- ---------
Net loss from continuing operations....................... (182,714) (93,072) (24,449)
--------- --------- ---------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 7,522 4,218 3,061
Minority interests in subsidiaries...................... (1,438) (534) (428)
Provision for bad debt.................................. 165 -- --
Equity in investee losses............................... 3,246 7,482 2,755
Stock compensation...................................... 419 -- --
Loss on disposal of property and equipment.............. 6 510 21
Gain on sale of equity investee......................... -- -- (30,069)
Changes in operating assets and liabilities:
Accounts receivable..................................... (3,883) -- --
Inventories............................................. (4,061) -- --
Other current assets.................................... (4,007) (761) 110
Other current liabilities............................... (424) 1,154 --
Accounts payable........................................ 10,535 6,091 (20)
Accrued expenses........................................ 11,095 14,839 5,213
--------- --------- ---------
Net cash used in operating activities....................... (163,539) (60,073) (43,806)
--------- --------- ---------
Cash flows from investing activities:
Purchases of marketable securities........................ (478,517) (366,953) (60,961)
Sales and maturities of marketable securities............. 406,456 172,660 71,285
Purchase of intangible assets............................. (10,000) -- --
Additions to property and equipment....................... (6,968) (6,920) (2,253)
Proceeds from sale of equipment........................... -- 14 --
Investment in affiliate................................... (3,000) 75 (4,046)
Cash acquired in acquisition of BioSphere SA.............. 283 -- --
Net proceeds from sale of equity investee................. -- -- 30,625
Proceeds from affiliate's repayment of long-term note..... -- -- 6,034
Other assets.............................................. 1,569 531 478
--------- --------- ---------
Net cash provided by (used in) investing activities......... (90,177) (200,593) 41,162
--------- --------- ---------
Cash flows from financing activities:
Net proceeds from issuance of common stock................ 13,010 5,955 3,203
Proceeds from sale of convertible subordinated
debentures.............................................. -- 489,475 --
Costs associated with sale of convertible subordinated
debentures.............................................. (276) (15,615) --
Repurchase of redeemable preferred stock.................. -- (6,850) --
Repayments of long-term debt capital leases and line of
credit agreements....................................... (4,090) (919) (433)
Borrowings of long-term debt, capital leases and line of
credit agreements....................................... -- 2,074 174
--------- --------- ---------
Net cash provided by financing activities................... 8,644 474,120 2,944
--------- --------- ---------
Effect of exchange rate changes on cash and cash
equivalents............................................... (406) (491) --
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents........ (245,478) 212,963 300
Net cash provided by discontinued operations................ 9,643 (219) (1,065)
Cash and cash equivalents at beginning of year.............. 295,323 82,579 83,344
--------- --------- ---------
Cash and cash equivalents at end of year.................... $ 59,488 $ 295,323 $ 82,579
--------- --------- ---------
Supplemental schedule of cash flow information:
Cash paid during the year for interest.................... $ 33,014 $ 12,070 $ 5,980
Non cash activities:
Common stock issued for intangible asset.................. $ (7,950) $ -- $ --
Capital lease obligations incurred........................ $ -- $ 270 $ --
Conversion of convertible subordinated debt (Note L)...... $ -- $ 79,298 $ --
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.
21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A--NATURE OF THE BUSINESS
Sepracor Inc. was incorporated in 1984 to research, develop and commercialize
products for the synthesis, separation and purification of pharmaceutical and
biopharmaceutical compounds. Specifically, Sepracor is developing improved
versions of top-selling drugs called ICE-TM- (Improved Chemical Entities)
Pharmaceuticals. Sepracor is focusing on advancing its pharmaceutical programs
and strengthening its patent positions for these ICE pharmaceuticals. Sepracor's
100% owned subsidiary, Sepracor Canada Ltd., supplies clinical material to
Sepracor through its manufacturing facility in Windsor, Nova Scotia. Sepracor's
64% owned subsidiary, BioSphere Medical Inc., with operations in France and the
U.S., is committed to pioneering the use of patented and proprietary
bioengineered microspheres as a new class of embolotherapy medical devices.
Sepracor's 27% owned subsidiary, HemaSure Inc., is dedicated to making blood
safer through blood filtration devices. Sepracor also owns approximately 10% of
Versicor Inc., which was formed to develop novel drug candidates principally for
the treatment of infectious diseases.
Sepracor and its subsidiaries are subject to risks common to companies in the
industry including, but not limited to, the safety, efficacy and successful
development of product candidates, fluctuations in operating results, protection
of proprietary technology, limited sales and marketing experience, limited
manufacturing capacity, risk of product liability, compliance with government
regulations and dependence on key personnel and collaborative partners.
B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: Consolidated financial statements include the
accounts of Sepracor and all of its wholly and majority owned subsidiaries. All
material intercompany transactions have been eliminated. Investments in
affiliated companies which are 50% owned or less, and where Sepracor does not
exercise control, are accounted for using the equity method. Versicor had been a
consolidated entity until December 10, 1997, an equity subsidiary from
December 1997 to April 1999, and as of May 1999 was accounted for under the cost
method.
The Company accounts for the sale of subsidiary stock in different manners,
depending on the life cycle of the entity. The Company offsets any gains or
losses against additional paid-in capital for early development stage
subsidiaries. For later stage subsidiaries, the Company records gains and losses
as other income or expense.
Use of Estimates and Assumptions in the preparation of Financial Statements: The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the following: (1) the reported amounts of assets and liabilities,
(2) the disclosure of contingent assets and liabilities at the dates of the
financial statements and (3) the reported amounts of the revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
Reclassifications in the preparation of Financial Statements: All references to
share and per-share data for all periods presented have been adjusted to give
effect for the two-for-one stock split announced on January 20, 2000 and
distributed on February 25, 2000 to stockholders of record on February 1, 2000.
Certain prior amounts have been reclassified to conform with current year
presentation.
Translation of Foreign Currencies: The assets and liabilities of Sepracor's
international subsidiaries are translated into U.S. dollars using current
exchange rates. Statement of operations amounts are translated at average
exchange rates prevailing during the period. The resulting translation
adjustment is recorded in accumulated other comprehensive income (loss). Foreign
exchange transaction gains and losses are included in other income (expense).
22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and Cash Equivalents: All highly liquid debt instruments purchased with an
initial purchase maturity of three months or less are classified as cash
equivalents.
Marketable Securities: Marketable securities are classified as "available for
sale". Marketable securities include government securities and corporate
commercial paper, maturing in primarily less than a year, which can be readily
purchased or sold using established markets. Marketable securities are stated at
fair value. Net realized gains and losses on security transactions are
determined on the specific identification cost basis. The market value of
Sepracor's marketable securities at December 31, 1999 and 1998, was not
materially different from cost.
Concentration of Credit Risk: The Company has no significant off balance sheet
concentration of credit risk such as foreign exchange contracts, option
contracts or other foreign hedging arrangements. The Company maintains the
majority of its cash balances with financial institutions. Financial instruments
that potentially subject the Company to concentrations of credit risk primarily
consist of the cash and cash equivalents, marketable securities and trade
accounts receivable. The Company places its cash, cash equivalents and
marketable securities with high credit quality financial institutions.
Revenues from significant customers are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31: 1999 1998 1997
- ----------------------- -------- -------- --------
<S> <C> <C> <C>
Customer A.................................................. 15% -- --
Customer B.................................................. 11% -- --
Customer C.................................................. 16% -- 85%
Customer D.................................................. 11% -- --
Customer E.................................................. -- 47% --
Customer F.................................................. -- 49% --
</TABLE>
Inventories: Inventories are stated at the lower of cost (first-in, first-out)
or market.
Property and Equipment: Property and equipment are stated at cost. Costs of
major additions and betterments are capitalized; maintenance and repairs which
do not improve or extend the life of the respective assets are charged to
operations. On disposal, the related cost and accumulated depreciation or
amortization are removed from the accounts and any resulting gain or loss is
included in the results of operations. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets. All
laboratory, manufacturing and office equipment have estimated useful lives of
three to ten years. The building has an estimated useful life of thirty years.
Leasehold improvements are amortized over the shorter of the estimated useful
lives of the improvements or the remaining term of the lease.
Intangible and Other Assets: The excess of investment over net assets acquired
is amortized using the straight-line method over 20 years. Sepracor capitalizes
all significant costs associated with the successful filing of a patent
application. Patent costs are amortized over their estimated useful lives, not
to exceed 17 years. Deferred finance costs relating to expenses incurred to
complete convertible subordinated debenture offerings are amortized over seven
years. Capitalized license fees are amortized over the expected life of the
licenses. Accumulated amortization was $3,056,000 and $1,355,000 at
December 31, 1999 and 1998, respectively. Long-lived assets are reviewed for
impairment by comparing the fair value of the assets with their carrying amount.
Any write-downs are treated as permanent reductions in the carrying amount of
the assets. Accordingly, the Company evaluates the possible impairment of
goodwill and other
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
long-lived assets at each reporting period based on the undiscounted projected
cash flows of the related asset.
Revenue Recognition: Revenues from product sales are recognized when goods are
shipped and are recorded net of applicable allowances for returns, rebates, and
other applicable discounts and allowances. The reserve for product returns is
currently derived by utilizing reports obtained from external, independent
sources, which provide prescription data, wholesaler stocking levels and
wholesaler sales to retail pharmacies. From this data the level of inventory
remaining in the pipeline is estimated, and a reserve is applied. Non-refundable
license fees, milestone payments and contract revenues are recognized when
contract obligations are met. Deferred revenues represent progress payments
received from customers pursuant to contract revenues not yet recorded.
Income Taxes: The Company recognizes deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax liabilities
and assets are determined based on the difference between the financial
statement and tax basis of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse.
Basic and Fully 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 the assumed exercises of outstanding stock options, the
proceeds of which are then assumed to have been used to repurchase outstanding
stock options using the treasury stock method. For the years ended December 31,
1999, 1998 and 1997, basic and diluted net loss per common share is computed
based on the weighted-average number of common shares outstanding during the
period, because the effect of common stock equivalents would be anti-dilutive.
Included in the years ended December 31, 1999, 1998 and 1997, basic net loss
applicable to common shares is $0, $150,000 and $600,000 respectively, of
dividends relating to series B redeemable exchangeable preferred stock. Certain
securities were not included in the computation of diluted earnings per share
for the years ended December 31, 1999, 1998 and 1997 because they would have an
anti-dilutive effect due to net losses for such periods. These securities
include (i) options to purchase 10,940,000, 9,870,000 and 6,970,000 shares, of
common stock with a purchase price of $0.75 to $59.13 per share, $0.75 to $42.38
per share, and $0.75 to $20.50 per share for the years ended December 31, 1999,
1998 and 1997 respectively; (ii) 12,805,000, 12,805,000 and 8,220,000 shares of
common stock for issuance upon conversion of 6 1/4% subordinated convertible
debentures due 2005 and 7% subordinated convertible debentures due 2005 for the
years ended December 31, 1999 and 1998, and 7% subordinated convertible
debentures due 2002 for the year ended December 31, 1997, and (iii) 625,000
shares of common stock for conversion of series B redeemable exchangeable
preferred stock for the year ended December 31, 1997.
Other: In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments embedded in other contracts
(collectively referred to as "derivatives"), and for hedging activities. The
statement requires companies to recognize all derivatives as either assets or
liabilities, with the instruments measured at fair value. The accounting for
changes in fair value, gains or losses, depends on the intended use of the
derivative and its resulting designation. In June 1999, the FASB issued SFAS
No. 137, which
24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
defers the effective date of SFAS No. 133 to fiscal years beginning after
June 15, 2000. The Company expects no immediate impact from SFAS No. 133 as it
currently has no derivatives.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"),
which is effective no later than the quarter ending March 31, 2000. SAB 101
summarizes certain of the staff's views in applying generally accepted
accounting principles to revenue recognition in financial statements. The
Company will adopt SAB 101 in the first quarter of 2000 and is presently
evaluating the impact of the adoption of this new standard; however, it is not
expected to have a material impact on the Company's financial position and
results of operations.
C--SEPRACOR SUBSIDIARIES AND AFFILIATES
SUBSIDIARY
BioSphere has been a consolidated subsidiary of Sepracor since 1994 and as of
December 31, 1999 Sepracor's ownership in BioSphere was 64%.
In May 1999, BioSphere sold a substantial portion of its business and assets to
complete a transition from a chromatography and media company to a medical
device company. (See Note I)
AFFILIATES
Versicor, established as a subsidiary of Sepracor in 1995, received private
equity financing of approximately $22,000,000 in 1997. Sepracor exercised its
conversion option on a loan agreement with Versicor which had an outstanding
amount of $9,530,000. Versicor repaid the remaining $6,034,000 under the loans
to Sepracor by the end of 1997. Sepracor recognized a gain of approximately
$5,688,000 on the transaction which was recorded as an increase to additional
paid-in-capital and began recording its investment in Versicor on the equity
method of accounting.
In April 1999, Versicor completed various private equity transactions resulting
in the issuance of preferred stock, and thereby reduced Sepracor's ownership in
Versicor to approximately 18%. As a result of the transaction Sepracor recorded
a gain of $1,077,000 which was recorded through additional paid-in-capital and
began accounting for its investment in Versicor under the cost method. In
October 1999, Versicor completed a private placement financing for approximately
$40,000,000. Sepracor paid $1,000,000 to Versicor for Versicor preferred stock.
As a result of this transaction, Sepracor's ownership of Versicor was
approximately 10% at December 31, 1999.
HemaSure has been an equity investment of Sepracor since 1995. In 1998, Sepracor
guaranteed a line of credit for HemaSure for $5,000,000. In February 1999, the
Company entered into an agreement with HemaSure pursuant to which Sepracor
invested $2,000,000 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. In October 1999, HemaSure completed a private placement financing which
resulted in Sepracor recording a gain of $820,000 which was recorded through
additional paid-in-capital. As a result of this transaction, Sepracor's
ownership of HemaSure was reduced to approximately 27%.
In March 1997, ChiRex Inc., a corporation that was a combination of Sterling
Organics Limited and the chiral chemistry business of Sepracor, sold shares of
common stock held by Sepracor. Sepracor received net proceeds of approximately
$31,125,000 and recognized a gain of $30,069,000, which was recorded as other
income.
25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
D--CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES
Cash, cash equivalents and marketable securities consist of the following at
December 31:
<TABLE>
<CAPTION>
1999 1998
(IN THOUSANDS) -------- --------
<S> <C> <C>
Cash & Cash Equivalents:
Cash & money market funds................................. $ 20,123 $ 14,279
Corporate & Government commercial paper................... 39,365 281,044
-------- --------
Total cash & cash equivalents............................... $ 59,488 $295,323
Marketable Securities:
U.S. Government securities
Due within 1 year....................................... $ 47,897 $108,239
Due within 1 to 2 years................................. -- --
Corporate commercial paper
Due within 1 year....................................... 220,960 86,035
Due within 1 to 2 years................................. 7,478 10,000
-------- --------
Total marketable securities................................. $276,335 $204,274
</TABLE>
There were no gross realized gains or losses on the sale of marketable
securities for the years ended December 1999, 1998 and 1997.
26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
E--FINANCIAL INSTRUMENTS
Financial instruments consist of the following at December 31:
<TABLE>
<CAPTION>
1999 1998
---------------------------- ----------------------------
CARRYING AMOUNT FAIR VALUE CARRYING AMOUNT FAIR VALUE
(IN THOUSANDS) --------------- ---------- --------------- ----------
<S> <C> <C> <C> <C>
6 1/4% Convertible Subordinated
Debentures--due 2005..... $189,475 $411,047 $189,475 $368,766
7% Convertible Subordinated
Debentures--due 2005..... $300,000 $319,125 $300,000 $300,000
</TABLE>
The fair value of the 6 1/4% Debentures due 2005 is from a quoted market source
in 1999 and 1998.
The fair value of the 7% Debentures due 2005 is from a quoted market source in
1999 and approximated its carrying amount at December 31, 1998.
F--ACCOUNTS RECEIVABLE
Sepracor's trade receivables in 1999 primarily represent amounts due to the
Company from wholesalers, distributors and retailers of its pharmaceutical
product. Sepracor performs ongoing credit evaluations of its customers and
generally does not require collateral. The allowance for doubtful accounts
related to accounts receivable was $165,000 at December 31, 1999.
Customers with amounts due to the Company that represent greater than 10% of the
accounts receivable balance are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31: 1999 1998 1997
- ----------------------- -------- -------- --------
<S> <C> <C> <C>
Customer A................................................. 20% -- --
Customer B................................................. 13% -- --
</TABLE>
G--INVENTORIES
Inventories consist of the following at December 31:
<TABLE>
<CAPTION>
1999 1998
(IN THOUSANDS) -------- --------
<S> <C> <C>
Raw materials............................................... $1,785 --
Work in progress............................................ 765 --
Finished goods.............................................. 1,905 --
------ ----
$4,455 $ 0
------ ----
</TABLE>
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
H--PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31:
<TABLE>
<CAPTION>
1999 1998
(IN THOUSANDS) -------- --------
<S> <C> <C>
Land..................................................... $ 85 $ 71
Building................................................. 2,918 2,528
Laboratory and manufacturing equipment................... 12,020 9,145
Office equipment......................................... 10,950 6,647
Leasehold improvements................................... 4,969 4,854
-------- -------
30,942 23,245
-------- -------
Accumulated depreciation and amortization................ (11,949) (7,537)
-------- -------
18,993 15,708
Construction in progress................................. 10 800
-------- -------
$ 19,003 $16,508
</TABLE>
Depreciation expense was $4,487,000, $2,952,000 and $2,446,000 for the years
ended December 31, 1999, 1998 and 1997, respectively.
I--DISCONTINUED OPERATIONS
On May 17, 1999, BioSphere sold substantially all of its assets and business,
other than such assets and business relating to intracorporeal and "on-line"
extracorporeal therapies or any autologous treatment, for approximately
$11,000,000 in cash, and the assumption of certain liabilities. Upon the
consummation of the sale, BioSepra Inc. changed its name to BioSphere
Medical, Inc. BioSphere utilized a portion of the proceeds to pay
approximately $880,000 of transaction costs, to repay approximately
$2,000,000 of outstanding bank debt, and to repay approximately $143,000 due
to Sepracor.
The net assets included in the sale had a net book value of approximately
$10,500,000 on May 17, 1999, which was included in calculating a net loss for
the sale of approximately $70,000. The operations, assets and liabilities of
the business have been presented in accordance with Accounting Principles
Board (APB) Opinion No. 30, REPORTING THE RESULTS OF OPERATIONS--REPORTING
THE EFFECTS OF DISPOSAL OF A SEGMENT OF A BUSINESS, AND EXTRAORDINARY,
UNUSUAL AND INFREQUENTLY OCCURRING EVENTS AND TRANSACTIONS in the
accompanying financial statements. Accordingly, the operating results of the
discontinued business for the year ended December 31, 1999, 1998 and 1997
have been segregated from the continuing operations and reported as a
separate line item on the consolidated statements of operations. The
consolidated balance sheets for December 31, 1998 and the consolidated
statements of cash flows for December 31, 1998, and 1997 have also been
restated to reflect the net assets of the sold business.
J--ACCRUED EXPENSES
Included in accrued expenses is $23,336,000 and $16,588,000 of accrued research
and development expenses, $5,310,000 and $5,336,000 of accrued interest and
$6,020,000 and $4,015,000 of accrued compensation as of December 1999 and 1998,
respectively.
28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
K--NOTES PAYABLE TO BANK AND LONG-TERM DEBT
Notes payable and long-term debt consist of the following at December 31:
<TABLE>
<CAPTION>
1999 1998
(IN THOUSANDS) -------- --------
<S> <C> <C>
Bank Line of Credit bearing interest at LIBOR plus 1.75% in
1998...................................................... $ -- $ 2,000
Loan from Nova Scotia Business Development Corporation
("NSBDC") bearing interest at 9.25% until May 31, 2000 and
thereafter at 9.5%, repayable in 120 consecutive monthly
payments of $21 principal plus interest with a final
payment of $20 in June 2005............................... -- 1,477
Loan from Atlantic Canada Opportunities Agency, non-interest
bearing, repayable in 60 equal installments commencing
March 15, 1998............................................ 225 277
Government grant from Nova Scotia Department of Economic
Development............................................... 854 812
Obligations under Capital Leases (See Note M)............... 177 279
------ -------
1,256 4,845
Less current portion........................................ (120) (2,410)
------ -------
Total....................................................... $1,136 $ 2,435
</TABLE>
In December 1999, Sepracor amended its revolving credit agreement (the
"Revolving Credit Agreement") with a commercial bank to provide for borrowing of
up to an aggregate of $25,000,000, pursuant to which BioSphere may borrow up to
$2,000,000. Interest is payable monthly in arrears at prime (8.5% at
December 31, 1999) or the LIBOR rate (6.5% at December 31, 1999) plus 0.75%. All
borrowings are collateralized by certain assets of the companies. The Revolving
Credit Agreement contains covenants relating to minimum tangible capital base,
minimum cash or cash equivalents, minimum liquidity ratio and maximum leverage.
Sepracor is a guarantor of any outstanding borrowings. Prior to this amendment,
the agreement provided for borrowing of up to an aggregate of $10,000,000
pursuant to which BioSphere could borrow up to $3,000,000. At December 31, 1999
and 1998, there was $0 and $2,000,000, respectively, outstanding under this
agreement.
In December 1997, Versicor entered into two term loans with a commercial bank.
Sepracor entered into a put agreement with the commercial bank pursuant to which
Sepracor agreed to purchase $2,000,000 of indebtedness of Versicor in the event
of a default by Versicor under its loan agreement with the commercial bank. In
the event that the put right is exercised by the bank, the bank will assign its
security interest in the fixed assets of Versicor to Sepracor.
Sepracor guarantees the loan from NSBDC. The government grant received by
Sepracor Canada Limited may be repayable if Sepracor Canada Limited fails to
meet certain conditions of the agreement. The government assistance is recorded
as debt and is amortized on the same basis as the depreciation of the related
capital assets.
Minimum annual principal repayment of long-term debt, excluding capital leases,
in each of the next five years are as follows: 2000--$69,000, 2001--$69,000,
2002--$69,000, 2003--$18,000, and 2004--$0.
29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
L--CONVERTIBLE SUBORDINATED DEBENTURES
In 1995, Sepracor issued $80,880,000 of Convertible Subordinated Debentures due
2002 (the "1995 Debentures"). The 1995 Debentures bore interest at 7% payable
semi-annually and were due on December 1, 2002. The 1995 Debentures were
convertible into shares of Common Stock of the Company at $9.84 per share and
were redeemable by the Company on December 1, 1998. As part of the sale of the
1995 Debentures, Sepracor incurred approximately $2,788,000 of offering costs.
These costs were classified in other assets and were being amortized over the
life of the 1995 Debentures, which was seven years.
On October 30, 1998, Sepracor called for the redemption of its 1995 Debentures
aggregating $80,880,000 in principal amount. On December 1, 1998, immediately
prior to the redemption, all $80,880,000 of the 1995 Debentures were converted
into 8,219,512 shares of Sepracor Common Stock. As a result of the conversion,
Sepracor wrote off $1,582,000 of deferred financing costs against stockholders'
equity (additional paid-in capital).
In February 1998, Sepracor issued $189,475,000 of 6 1/4% Convertible
Subordinated Debentures due 2005 (the "6 1/4% Debentures"). The 6 1/4%
Debentures are convertible into Sepracor Common Stock, at the option of the
holder, at a price of $23.685 per share. The 6 1/4% Debentures bear interest at
6 1/4% payable semi-annually, commencing on August 15, 1998. The 6 1/4%
Debentures are redeemable by the Company on February 18, 2001. The Company may
be required to repurchase the 6 1/4% Debentures at the option of the holders in
certain circumstances. As part of the sale of the 6 1/4% Debentures, Sepracor
incurred approximately $6,105,000 of offering costs which were recorded as other
assets and are being amortized over seven years, the term of the 6 1/4%
Debentures. The net proceeds to the Company after offering costs were
$183,370,000.
On December 10, 1998, Sepracor issued $300,000,000 in aggregate principal amount
of 7% Convertible Subordinated Debentures due 2005 (the "7% Debentures"). The 7%
Debentures are convertible into Sepracor Common Stock, at the option of the
holder, at a price of $62.438 per share. The 7% Debentures bear interest at 7%
payable semi-annually, commencing on June 15, 1999. The 7% Debentures are
redeemable by the Company on December 20, 2001. The Company may be required to
repurchase the 7% Debentures at the option of the holders in certain
circumstances. As part of the sale of the 7% Debentures, Sepracor recorded
approximately $9,919,000 of offering costs, which were recorded as other assets
and are being amortized over seven years, the term of the 7% Debentures. The net
proceeds to the Company after offering costs were $290,081,000.
M--COMMITMENTS AND CONTINGENCIES
Sepracor, BioSphere and HemaSure together have available an equipment leasing
arrangement that provides for a total of up to $2,000,000 to Sepracor and its
subsidiaries for the purpose of financing capital equipment in the United
States. All outstanding amounts are collateralized by the assets so financed and
are guaranteed by Sepracor. There was $0 and $127,000 outstanding under this
agreement at December 31, 1999 and 1998, respectively. Sepracor was also the
guarantor of $20,000 and $193,000 of HemaSure amounts outstanding at
December 31, 1999 and 1998, respectively.
30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
M--COMMITMENTS AND CONTINGENCIES (CONTINUED)
Future minimum lease payments under all noncancelable leases in effect at
December 31, 1999, are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR OPERATING LEASES CAPITAL LEASES
- ---- ---------------- --------------
<S> <C> <C>
2000............................................ $1,176 $ 54
2001............................................ 891 54
2002............................................ 922 54
2003............................................ 967 50
2004............................................ 970 --
Thereafter...................................... 2,021 --
------ ------
Total minimum lease payments.................... $6,947 212
Less amount representing interest............... (35)
------
Present value of minimum lease payments......... $ 177
</TABLE>
Future minimum lease payments under operating leases relate primarily to
Sepracor's and BioSphere's principal office, laboratory and production
facilities. The lease terms provide options to extend the leases. The leases
require Sepracor to pay its allocated share of taxes and operating costs in
addition to the annual base rent payments. Rental expense under these and other
leases amounted to $1,683,000, $1,444,000 and $1,687,000 for the years ended
December 31, 1999, 1998 and 1997, respectively.
At December 31, 1999, Sepracor has an accrual relating to the guarantee of a
$5,000,000 HemaSure line of credit. The initial principal payment on this line
of credit is due in August 2000. Interest on the line of credit accrues at 1/2%
above the prime lending rate. Sepracor would be obligated to make payment of
$5,000,000 plus accrued interest in the event that HemaSure defaulted on the
line of credit. At December 31, 1999, HemaSure was not in default of the line of
credit.
N--LITIGATION
On February 12, 1999, the Federal Trade Commission (the "FTC") issued a request
for additional information or documentary materials relating to the Company's
exclusive license agreement with Lilly relating to (R)-fluoxetine. 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 or 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.
An interference declared on June 30, 1999 between Sepracor and RPR relating to
(+)-zopiclone was dissolved by Sepracor's agreement with RPR on October 7, 1999,
under which RPR's involved patent application was assigned to Sepracor.
All legal proceedings between Sepracor and HMRI relating to fexofenadine,
including foreign litigation and the interference between Sepracor and HMRI,
have been settled by Sepracor's agreement with HMRI of September 1, 1999. (See
Note R)
HemaSure is a defendant in a lawsuit brought by Pall Corporation ("Pall")
regarding its LeukoNet System, which is no longer made or sold by HemaSure. In a
complaint filed in November 1996, Pall alleged that HemaSure's manufacture, use
and/or sale of the LeukoNet System infringed upon two patents held by Pall. Pall
dropped its allegations concerning infringement of one of the patents and
alleges only that HemaSure's LeukoNet System infringed U.S. Patent
No. 4,952,572 (the "'572 Patent").
With respect to the allegations concerning the '572 Patent, HemaSure has
answered the complaint stating that it does not infringe any claim of the
asserted patent. 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. 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 filed 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. The court has not acted on the
summary judgment motions.
On April 5, 1999, HemaSure and Gambro BCT, Inc. ("Gambro BCT") filed a
complaint for declaratory relief against Pall in the U.S. District Court of
Colorado. HemaSure and Gambro BCT seek declaratory relief that the '572
Patent and Pall's U.S. Patent No's. 5,451,321, 5,229,012, 5,344,561,
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 or
transfer to the Eastern District of New York or, in the alternative, to stay
this action. HemaSure and Gambro opposed Pall's motion. On July 16, 1999, the
United States District Court of Colorado denied Pall's motion to transfer or,
in the alternative, to stay the action, and the action is proceeding. On
September 30, 1999, the Court denied Pall's motion to dismiss the action and
the case is proceeding. On October 20, 1999, Pall submitted a counterclaim
alleging that HemaSure's r/LS System infringes its '572 patent and that
HemaSure and Gambro BCT tortiously interfered and unfairly competed with
Pall's business.
On April 23, 1999, Pall filed a complaint against HemaSure and Gambro BCT in the
U.S. District Court of the Eastern District of New York alleging that HemaSure's
r\LS filter infringes Pall's '572 Patent, and tortiously interfered and unfairly
competed with Pall's business. On May 19, 1999, Pall filed an amended complaint
adding Sepracor, Gambro, Inc. and Gambro, A.B., a Swedish company, of which
Gambro Inc. is a business unit, as defendants. Sepracor, HemaSure and Gambro BCT
have moved to dismiss, transfer, or stay the action, and Pall has opposed the
motion. There has been no decision on the motion.
A prior lawsuit brought by Pall in February 1996 has concluded. In June 1999,
the U.S. Court of Appeals for the Federal Circuit determined that the LeukoNet
System did not infringe claim 39 of U.S. Patent No. 5,451,321 and Pall has not
appealed that decision.
HemaSure has engaged patent counsel to investigate the pending litigations.
HemaSure believes, based upon its review of these matters, that a properly
informed court should conclude that the manufacture, use and/or sale by
HemaSure or its customers of the LeukoNet System and the r\LS System does 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,
including the possibility of significant damages in the litigations and an
injunction against the sale of the r/LS System if HemaSure does not prevail
in the litigations.
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.
In January 1997, HemaSure entered into a Restructuring Agreement of the debt
related to HemaSure's acquisition of Novo Nordisk A/S's plasma products unit.
In January 1998, HemaSure elected to convert all indebtedness under the
approximately $11,700,000 promissory note which was issued to Novo Nordisk
A/S in connection with the Restructuring Agreement into common stock at a
conversion price of $10.50 per share, or 827,375 shares. HemaSure also
elected to treat as forgiven $3,000,000 in principal amount of the note,
pursuant to the terms of the note. Novo Nordisk A/S has contested the
conversion of the note, including the forgiveness of the $3,000,000 amount.
This dispute, with or without merit, could be time-consuming and expensive to
litigate or settle if brought into a court of law, and could divert
management attention from administering HemaSure's core business. If Novo
Nordisk A/S succeeds on its dispute and HemaSure is deemed to have wrongfully
converted the original note, then the 827,375 shares of common stock issued
to Novo Nordisk A/S may no longer be outstanding and HemaSure may be
obligated to repay certain indebtedness under the original note.
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
O--STOCKHOLDERS' EQUITY (DEFICIT)
On January 20, 2000, the Company announced that its Board of Directors approved
a two-for-one stock split. The stock split was paid as a 100% stock dividend on
February 25, 2000 to stockholders of record on February 1, 2000. All share data
and stock prices have been adjusted to reflect the stock split for all periods
presented.
32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
O--STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
In May 1999, the stockholders of Sepracor approved an amendment to Sepracor's
Restated Certificate of Incorporation increasing from 80,000,000 to 140,000,000
the number of authorized shares of common stock.
In August 1999, Sepracor paid Georgetown University $10,000,000 in cash and
issued 200,000 shares of Sepracor Common Stock to obtain all rights, title and
interest held by Georgetown relating to terfenadine carboxylate, norastemizole,
intraconazole enantiomers and ketoconazole enantiomers. The intellectual
property rights purchased from Georgetown are being amortized over a ten year
period.
In 1998, Sepracor and Beckman terminated their stock purchase agreement under
which Beckman acquired 625,000 shares of Sepracor Series B Redeemable
Exchangeable Preferred Stock. Sepracor paid Beckman the original purchase price
of the stock plus accrued dividends totalling $6,850,000.
Sepracor has recorded unearned compensation expense related to stock options
granted to certain consultants. The table below summarizes the unearned
compensation activity for the years ended December 31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
UNEARNED COMPENSATION:
- ---------------------------------------------------------
Balance at January 1,.................................... $(144) $ (94) $(234)
Stock option grants...................................... (129) (172) --
Stock option adjustments................................. -- 94 107
Amortization expense..................................... 56 28 33
---- ---- ----
Balance at December 31,.................................. $(217) $(144) $ (94)
---- ---- ----
</TABLE>
P--STOCK PLANS AND WARRANTS
Stock Plans: The Company has stock-based compensation plans, which are described
below. The Company records the issuance of stock options using APB Opinion 25
and related interpretations in accounting for its plans. However, had
compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates, the Company's net loss
and basic and diluted loss per share for the years ended December 31, 1999,
1998, and 1997 would have been increased to the pro forma amounts indicated in
the following table:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------ ------------------------ -----------------------
BASIC AND BASIC AND BASIC AND
NET DILUTED LOSS NET DILUTED LOSS NET DILUTED LOSS
(IN THOUSANDS, EXCEPT LOSS PER SHARE LOSS (1) PER SHARE LOSS (1) PER SHARE LOSS (1) PER SHARE
AMOUNTS) --------- ------------ --------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
As reported.................... $(183,059) $(2.77) $ (93,433) $(1.62) $(26,723) $(0.48)
Pro forma...................... $(213,279) $(3.23) $(105,229) $(1.82) $(30,745) $(0.56)
</TABLE>
- ------------------------
(1) Net loss represents net loss applicable to common shares.
The effects of applying the fair value of stock based compensation in this pro
forma disclosure are not indicative of future amounts, since the valuation of
stock options granted was initiated in 1995 and additional awards in future
years are not anticipated.
33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
P--STOCK PLANS AND WARRANTS (CONTINUED)
The fair value of each stock option is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions: an expected life of 6 years, expected volatility of 55%, a
risk-free interest rate of 4.6% to 5.7% and no dividends in 1999, and an
expected life of 6 years, expected volatility of 50%, a risk-free interest rate
of 4.5% to 5.7% and no dividends in 1998, and an expected life of 7 years,
expected volatility of 60%, a risk-free interest rate of 5.0% to 7.8% and no
dividends in 1997.
The 1991 Restated Stock Option Plan (the "1991 Plan") provides for the granting
of Incentive Stock Options ("ISOs") to officers and key employees of Sepracor
and nonstatutory stock options ("NSOs") to officers, key employees, consultants
and directors of Sepracor. ISOs and NSOs granted under the Plan have a maximum
term of ten years from the date of grant and have an exercise price not less
than the fair value of the stock on the date of grant and vest over five years.
In 1998, the stockholders approved an amendment to the 1991 Plan increasing the
number of shares of common stock which may be granted to 15,000,000. In 1999,
the stockholders approved an amendment to the 1991 Plan increasing the number of
shares of common stock which may be granted to 18,000,000.
The 1991 Directors Stock Option Plan (the "1991 Directors Plan") provides for
the granting of NSOs to directors of Sepracor who are not officers or employees
of Sepracor. The options granted under the 1991 Directors Plan have a maximum
term of ten years from date of grant and have an exercise price of not less than
the fair market value of the stock on the date of grant and vest over five
years. In May 1998, the stockholders approved an amendment to the 1991 Directors
Plan increasing the number of shares of common stock which may be granted to
1,000,000.
In 1997, the stockholders approved the Company's 1997 Stock Option Plan (the
"1997 Plan"). The 1997 Plan permits the Company to grant ISOs and NSOs to
purchase up to 1,000,000 shares of Common Stock to employees and consultants of
the Company. Executive officers are not entitled to receive stock options under
the 1997 Plan. ISOs and NSOs granted under the 1997 Plan have a maximum term of
ten years from the date of grant and vest over five years. ISOs may not be
granted at an exercise price less than fair market value.
In May 1999, the stockholders approved the 1999 Director Stock Option Plan (the
"1999 Director Plan"). The 1999 Directors Plan permits the Company to grant NSOs
to purchase 1,800,000 shares of Common Stock to non-employee directors of the
Company. Options granted under the 1999 Director Plan have a maximum term of ten
years from the date of grant and have an exercise price not less than the fair
value of the stock on the date of grant and vest over a period of one to five
years.
34
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
P--STOCK PLANS AND WARRANTS (CONTINUED)
The following tables summarize information about stock options outstanding at
December 31, 1999: (in thousands, except for per share amounts and contractual
life)
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
- -------------------------------------------------------------------------- OPTIONS EXERCISABLE
WEIGHTED-AVERAGE ------------------------------
RANGE OF EXERCISE PRICE NUMBER REMAINING WEIGHTED-AVERAGE NUMBER WEIGHTED-AVERAGE
PER SHARE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- ----------------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$0.75- 3.00 435 4.6 $ 2.79 278 $ 2.73
3.18- 7.07 589 5.3 5.17 247 4.32
7.31-12.07 1,717 6.2 8.02 1,158 7.85
12.12-12.38 1,005 7.5 12.14 132 12.14
18.00-24.32 3,059 8.4 19.67 310 22.10
31.13-31.13 291 8.7 31.13 43 31.13
35.43-42.38 2,078 9.4 38.13 105 42.38
46.33-46.33 394 9.9 46.33 -- --
50.50-50.50 92 9.3 50.50 -- --
59.13-59.13 1,280 9.1 59.13 2 59.13
------ ---- ------ ----- ------
$0.75-59.13 10,940 8.0 $25.37 2,275 $11.04
------ ---- ------ ----- ------
</TABLE>
<TABLE>
<CAPTION>
1999 1998 1997
------------------------ ------------------------ ------------------------
AVERAGE PRICE AVERAGE PRICE AVERAGE PRICE
NUMBER PER SHARE NUMBER PER SHARE NUMBER PER SHARE
-------- ------------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1................... 9,870 $14.65 6,970 $ 6.58 6,554 $ 4.78
Granted................................ 3,251 47.16 4,305 24.48 1,514 12.05
Exercised.............................. (1,920) 6.11 (1,243) 3.99 (866) 3.00
Cancelled.............................. (261) 33.99 (162) 11.30 (232) 4.92
------ ------ ------ ------ ----- ------
Balance at December 31................. 10,940 $25.37 9,870 $14.65 6,970 $ 6.58
------ ------ ------ ------ ----- ------
Options exercisable at December 31..... 2,275 2,386 2,480
Weighted-average fair value of options
granted during the year.............. $28.86 $13.33 $7.94
</TABLE>
There were 3,646,000 options available for future grant as of December 31, 1999.
In 1996, the stockholders approved the 1996 Employee Stock Purchase Plan (the
"1996 ESPP"). Under the 1996 ESPP, an aggregate of 240,000 shares of Common
Stock may be purchased by employees at 85% of market value on the first or last
day of each six month offering period, whichever is lower, through accumulation
of payroll deductions ranging from 1% to 10% of compensation as defined, subject
to certain limitations. Employees purchased 48,000, 34,000, and 63,000 shares
for a total of $1,284,000, $583,000 and $556,000, during the years ended
December 31, 1999, 1998 and 1997, respectively. At December 31, 1999, there were
92,000 shares of authorized but unissued Common Stock reserved for future
issuance under the 1996 ESPP.
In 1998, the stockholders approved the 1998 Employee Stock Purchase Plan (the
"1998 ESPP"). Under the 1998 ESPP, an aggregate of 600,000 shares of Common
Stock may be purchased by employees at 85% of market value on the first or last
day of each six month offering period, whichever is lower, through accumulation
of payroll deductions ranging from 1% to 10% of compensation as defined, subject
to certain
35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
P--STOCK PLANS AND WARRANTS (CONTINUED)
limitations. At December 31, 1999, no shares had been issued and there were
600,000 shares of authorized but unissued Common Stock reserved for future
issuance under the 1998 ESPP.
Stock Warrants: Sepracor received $407,000 from the exercise of warrants to
purchase 110,418 shares of Common Stock in 1998. At December 31, 1999 there were
no outstanding warrants.
Q--INCOME TAXES
Sepracor's statutory and effective tax rates were 34% and 0%, respectively, for
the years 1999, 1998 and 1997. The effective tax rate was 0% due to net
operating losses ("NOL") and nonrecognition of any deferred tax asset.
Deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to tax benefit carryforwards and to differences
between the financial statement amounts of assets and liabilities and their
respective tax basis. Deferred tax assets and liabilities are measured using
enacted tax rates. A valuation reserve is established if it is more likely than
not that all or a portion of the deferred tax asset will not be realized.
Accordingly, a valuation reserve has been established for the full amount of the
deferred tax asset. Of the total valuation allowance in 1999, approximately
$3,700,000 relates to stock option compensation deductions. The tax benefit
associated with the stock option compensation deductions will be credited to
equity when realized.
At December 31, 1999, Sepracor had federal and state tax NOL carryforwards of
approximately $281,000,000 and $182,000,000, which both begin to expire in 2000.
Approximately, $300,000 of federal NOLs expired in 1999. Approximately
$8,000,000 and $15,000,000 of state NOLs expired in 1999 and 1998, respectively.
Based upon the Internal Revenue Code and changes in company ownership,
utilization of the NOL will be subject to an annual limitation. Sepracor also
has a NOL from its operation in Canada of approximately $3,800,000, which may be
carried forward indefinitely. At December 31, 1999, Sepracor had federal and
state research and experimentation credit carryforwards of approximately
$10,000,000 and $10,000,000, respectively, which begin to expire in 2000 and in
2006. Approximately, $3,000 of federal research and experimentation credit
carryforwards expired in 1999. Sepracor also had Canadian research and
experimentation credits of $1,500,000 which begin to expire in 2004. At
December 31, 1999, Sepracor had state investment tax credit carryforwards of
approximately $320,000, which begin to expire in 2000. Approximately, $30,000 of
state investment tax credit carryforwards expired in 1999.
36
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Q--INCOME TAXES (CONTINUED)
The components of Sepracor's net deferred taxes were as follows at December 31:
<TABLE>
<CAPTION>
1999 1998
(IN THOUSANDS) -------- ---------
<S> <C> <C>
Assets
NOL carryforwards.................................... $116,253 $ 70,066
Reserves............................................. 986 135
Tax credit carryforward.............................. 23,159 12,243
Patent............................................... 808 547
Accrued expenses..................................... 11,425 8,756
Research and development capitalization.............. 58,607 20,730
Equity in loss of investees.......................... 8,436 10,596
Property and equipment............................... 675 296
Other................................................ 719 773
Liabilities
Basis difference of subsidiaries..................... (13,628) (13,628)
Valuation allowance.................................... (207,440) (110,514)
-------- ---------
Net deferred taxes..................................... $ -- $ --
-------- ---------
</TABLE>
37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
R--AGREEMENTS
In 1993, Sepracor licensed to Marion Merrell Dow, which became Hoechst Marion
Roussel Inc. and is now Aventis (referred to herein as "HMRI"), its U.S. patent
application covering the use of terfenadine carboxylate (also known as
fexofenadine), a metabolite of terfenadine, marketed by HMRI as
Seldane-Registered Trademark- (the "HMRI Agreement"). The HMRI Agreement called
for future license fees of up to $3,750,000 subject to certain other milestones,
and royalties on sales, if and when they occur. In 1997, Sepracor received and
recognized as revenue the first milestone payment of $1,875,000 and recorded
$469,000 in sub-license expense payable to a third party for the year ended
December 31, 1997. In March 1998, Sepracor received $1,875,000 from HMRI as the
final milestone payment. As a result of the patent interference issue raised by
the PTO, Sepracor deferred recognition of these revenues, pending the outcome of
the patent interference.
In December 1997, Sepracor signed a license agreement with Schering-Plough
Corporation ("Schering") giving Schering exclusive worldwide rights to
Sepracor's patents covering descarboethoxyloratadine, an active metabolite of
loratadine that in preclinical studies has shown the potential for greater
potency. Under the agreement, Schering paid Sepracor an initial license fee of
$5,000,000 in January 1998. The agreement includes royalties on DCL sales, if
any, beginning at product launch. The royalty rate paid to Sepracor will
escalate over time and upon the achievement of sales volume and other
milestones.
In February 1998, Sepracor signed a collaboration and license agreement with
Janssen Pharmaceutica, N.V., a wholly-owned subsidiary of Johnson & Johnson
("Janssen"), relating to the development and marketing of norastemizole, a third
generation nonsedating antihistamine (the "Norastemizole Agreement"). Under the
terms of the Norastemizole Agreement, the companies were to jointly fund the
development of norastemizole, and Janssen had an option to acquire certain
rights regarding the product in the U.S. and abroad. On May 14, 1999, Sepracor
announced that Janssen elected not to exercise its option to co-promote
norastemizole under the Norastemizole Agreement. 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 Norastemizole Agreement, Sepracor has
worldwide rights to all Johnson & Johnson intellectual property covering
norastemizole, including the right to reference data from the astemizole New
Drug Application, for manufacture, development, and marketing of prescription
norastemizole products. In exchange, Johnson & Johnson will receive a royalty on
Sepracor's product sales, if any.
In July 1998, Sepracor signed a second license agreement with Janssen (the
"Janssen Norcisapride Agreement") giving Janssen exclusive worldwide rights to
Sepracor's patents covering norcisapride, an isomer of the active metabolite of
Propulsid-Registered Trademark-. Under the terms of the Janssen Norcisapride
Agreement, Sepracor has exclusively licensed its norcisapride rights to Janssen,
which expects to develop and market the norcisapride product worldwide. Under
the Janssen Norcisapride Agreement, Janssen would pay Sepracor royalties on
norcisapride sales, if any, beginning at first product launch. Royalty rates
paid to Sepracor will escalate upon the achievement of sales volume milestones.
In December 1998, Sepracor signed a license agreement (the "Lilly Agreement")
with Eli Lilly and Company giving Lilly exclusive worldwide rights to Sepracor's
patents covering (R)-fluoxetine, which is a modified form of an active
ingredient found in Prozac-Registered Trademark-. Under the terms of the Lilly
Agreement, and subject to approval under the HSR Act, Sepracor will receive an
initial milestone payment and license fee of $20,000,000 which will be recorded
as revenues 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
38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
R--AGREEMENTS (CONTINUED)
Federal Trade Commission for additional information in connection with the Lilly
Agreement and is in the process of responding to the request. (See Note N)
On June 1, 1999, Sepracor announced a licensing agreement with UCB Farchim SA,
an affiliate of UCB ("UCB"), relating to levocetirizine, an isomer of ZYRTEC
(racemic cetirizine). Under the 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.
On September 1, 1999, HMRI, and Sepracor amended the HMRI Agreement that was
entered into in June 1993, to settle all patent issues with respect to
fexofenadine, marketed by HMRI as Allegra. Under the terms of a U.S. agreement,
Sepracor and HMRI have settled an ongoing arbitrated patent interference
involving their U.S. patent properties, and HMRI now owns the Sepracor patent
properties with respect to fexofenadine. HMRI also obtained an exclusive license
to various other Sepracor U.S. patent applications related to fexofenadine.
Sepracor will receive royalties on fexofenadine sales, if any, in the U.S. upon
expiration of HMRI's composition of matter patent in mid-February 2001. Under
the terms of a separate ex-U.S. agreement, HMRI obtained an exclusive license to
Sepracor's patents that had been subject of litigation in Europe, as well as
various other patent oppositions between the two companies outside the U.S.
Sepracor is entitled to royalties on fexofenadine product sales effective
March 1, 1999 in countries where Sepracor has patents, related to fexofenodine.
For the year ended December 31, 1999, the Company received approximately
$1,746,000 in royalty payments. In October 1999, upon effectiveness of the
amended HMRI Agreement, Sepracor also recognized the $1,875,000 milestone
payment that had previously been deferred.
On October 7, 1999, Sepracor announced that it had entered into an agreement
with Rhone-Poulenc Rorer SA (now Aventis) ("RPR"), under which Sepracor has
exclusively licensed RPR's preclinical, clinical and post-marketing surveillance
data package relating to zopiclone, its isomers and metabolites, to develop,
make, use and sell (+)-zopiclone in the U.S. RPR will assign all U.S. patent
applications relating to (+)-zopiclone to Sepracor. Pursuant to the agreement,
RPR retained the right under the licensed data package to manufacture
(+)-zopiclone in the U.S. for non-U.S. markets. In addition, Sepracor has paid a
$5,000,000 license fee to RPR and will pay a royalty to RPR on (+)-zopiclone
product sales, if any, in the U.S. Sepracor may also be required to pay RPR
milestone payments.
S--EMPLOYEES' SAVINGS PLAN
Sepracor has a 401K savings plan (the "401K Plan") for all domestic employees.
Under the provisions of the 401K Plan, employees may voluntarily contribute up
to 15% of their compensation up to the statutory limit. In addition, Sepracor
can make a matching contribution at its discretion. Sepracor matched 50% of the
first $3,000 contributed by employees up to $1,500 maximum per employee during
1999, 1998 and 1997. Sepracor incurred expenses of $337,000, $177,000 and
$119,000 in 1999, 1998 and 1997, respectively, as its matching contribution.
T--BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION
For "Disclosures about Segments of an Enterprise and Related Information"
segments represent the Company's internal organization as used by management for
making operating decisions and assessing performance as the source of business
segments.
39
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
T--BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION (CONTINUED)
Sepracor previously considered and reported BioSphere and equity investments in
HemaSure, Versicor and ChiRex as its business segments. However, in 1999,
BioSphere revenues were approximately 10% of the consolidated revenues and
BioSphere assets were under 2% of consolidated assets. As a result of
BioSphere's revenues and assets representing an immaterial amount of Sepracor's
total assets and revenues and as a results of the reduction in equity
investments, Sepracor senior management does not make operating decisions or
review operating results based on the segments reported in the prior year.
Sepracor now operates as a single segment and has therefore not provided prior
year disclosures. Financial information by geographic area is presented below.
<TABLE>
<CAPTION>
GEOGRAPHIC AREA DATA:
(IN THOUSANDS) 1999 1998 1997
- -------------- -------- -------- --------
<S> <C> <C> <C>
Revenues
United States:
Unaffiliated customers...................................... $20,393 $10,209 $ 2,195
Europe:
Unaffiliated customers...................................... $ 2,266 -- --
------- ------- -------
Total revenues.............................................. $22,659 $10,209 $ 2,195
======= ======= =======
Long-lived assets:
United States............................................... $49,439 $29,379 $15,960
Europe...................................................... 251 -- --
Canada...................................................... 6,905 6,655 6,138
------- ------- -------
Total long-lived assets..................................... $56,595 $36,034 $22,098
======= ======= =======
</TABLE>
Sepracor had no export sales to the Far East for the years ended December 31,
1999, 1998 and 1997. Revenues are attributed to geographic locations based on
the selling location.
U--QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED
----------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1999 1999 1999 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA) --------- --------- ------------- ------------
<S> <C> <C> <C> <C>
Net revenues.............................. $ 2,724 (2) $ 5,014 $ 2,483 $ 12,438
Gross profit.............................. 2,558 (2) 3,859 1,577 9,746
Net loss applicable to common shares...... (30,324) (36,603) (55,749) (60,384)
Loss per share: basic and fully diluted
(1)..................................... (.46) (.56) (.84) (.90)
</TABLE>
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED
----------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1998 1998 1998 1998
--------- --------- ------------- ------------
<S> <C> <C> <C> <C>
Net revenues.............................. $ 6,889 (3) $ 595 (4) $ 1,471 (5) $ 1,254 (6)
Gross profit.............................. 6,439 (3) 554 (4) 1,430 (5) 1,211 (6)
Net loss applicable to common shares...... (11,868) (17,584) (29,628) (34,353)
Loss per share: basic and fully diluted
(1)..................................... (.21) (.31) (.52) (.55)
</TABLE>
40
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
U--QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED) (CONTINUED)
- ------------------------
(1) All per share amounts have been adjusted for the two-for-one stock split of
the Company's Common Stock distributed on February 25, 2000 to stockholders
of record on February 1, 2000.
(2) Net revenues were $5,082 and gross profit was $3,899 prior to restatement
for BioSphere discontinued operations.
(3) Net revenues were $8,879 and gross profit was $7,497 prior to restatement
for BioSphere discontinued operations.
(4) Net revenues were $2,238 and gross profit was $1,209 prior to restatement
for BioSphere discontinued operations.
(5) Net revenues were $2,656 and gross profit was $1,694 prior to restatement
for BioSphere discontinued operations.
(6) Net revenues were $3,633 and gross profit was $2,402 prior to restatement
for BioSphere discontinued operations.
V--SUBSEQUENT EVENTS
On January 20, 2000, the Company announced that its Board of Directors approved
a two-for-one stock split. On February 25, 2000, stockholders received one
additional share for every share they owned as of the close of business on the
record date of February 1, 2000.
On February 14, 2000, the Company issued $400,000,000 in principal amount of 5%
Convertible Subordinated Debentures due 2007 (the "5% Debentures"). The 5%
Debentures have an annual interest of 5% and will be convertible 90 days after
issuance into Sepracor Common Stock at $92.38 per share. On March 9, 2000, the
Company issued an additional $60,000,000 of 5% Debentures pursuant to an over-
allotment option granted to the initial purchaser of the 5% Debentures. The
Company intends to use the proceeds from the sale of the 5% Debentures for its
ongoing preclinical and clinical trials, expansion of sales and marketing
capabilities, funding of other research and development programs, working
capital and other general corporate purposes.
In February 2000, the Company converted $96,424,000 of 6 1/4% Convertible
Subordinated Debentures Due 2005. Costs related to the conversion of the 6 1/4%
Debentures, including pre-paid interest, premiums and other costs, was
approximately $7,497,000.
On February 4, 2000, BioSphere announced that it had completed a $5,900,000
private placement of common stock and warrants. Investors purchased 653,887
shares of BioSphere common stock and warrants to purchase 163,468 shares of
common stock. As a result of this transaction, Sepracor's ownership of BioSphere
decreased from 64% to 59% as of December 31, 1999.
On March 3, 2000, HemaSure announced that it had completed a $28,000,000 private
placement of common stock. As a result of this transaction, Sepracor's ownership
of HemaSure decreased from 27% to 22% as of December 31, 1999.
41
<PAGE>
Annual Meeting Information
The Annual Meeting of Shareholders will be held at 9:00 a.m. on May 24, 2000 at
the offices of Hale and Dorr LLP, Sixty State Street, Boston, MA.
Common Stock
The Common Stock of Sepracor Inc. is traded on the Nasdaq Stock Market
under the symbol SEPR.
General Counsel
Hale and Dorr LLP, Boston, MA
Patent Counsel
Pennie & Edmonds, New York, NY
Independent Accountants
PricewaterhouseCoopers LLP, Boston, MA
Corporate Headquarters
Sepracor Inc.
111 Locke Drive
Marlborough, MA 01752
Telephone: (508) 481-6700
Facsimile: (508) 357-7499
Transfer Agent and Registrar
Questions regarding accounts, address changes, stock transfer and lost
certificates should be directed to: BankBoston, N.A. c/o Boston EquiServe, L.P.
P.O. Box 8040 Boston, MA 02266-8040 Phone: (781) 575-3120
Directors
James G. Andress
Former Chairman, Beecham Pharmaceuticals, Former President and COO, Sterling
Drug Inc.
Timothy J. Barberich
Chairman of the Board and Chief Executive Officer, Sepracor Inc.
Digby W. Barrios
Former President and CEO, Boehringer Ingelheim Corporation
Robert J. Cresci
Managing Director, Pecks Management Partners Ltd.
Keith Mansford, Ph.D.
Former Chairman, R&D, SmithKline Beecham plc
James F. Mrazek
Former Vice President and General Manager, Healthcare Division of Johnson &
Johnson Products Inc.
Alan A. Steigrod
Former Executive Vice President, Glaxo Holdings plc
Officers
Timothy J. Barberich
Chairman of the Board and Chief Executive Officer
William J. O'Shea
President and Chief Operating Officer
David P. Southwell
Executive Vice President; Chief Financial Officer and Secretary
<PAGE>
Paul D. Rubin, M.D.
Executive Vice President, Drug Development & ICE Research
James R. Hauske, Ph.D.
Senior Vice President, Discovery
Douglas E. Reedich, Ph.D., J.D.
Senior Vice President, Legal Affairs & Chief Patent Counsel
Robert F. Scumaci
Senior Vice President, Finance & Administration, and Treasurer
Stephen A. Wald
Vice President, Chemical R&D
[PHOTO OF EXECUTIVES WITH CAPTION BELOW]
Sepracor ICE and Xopenex are registered trademarks of Sepracor Inc. HemaSure and
LeukoNet are trademarks of HemaSure Inc. BioSphere and Embosphere are trademarks
of BioSphere. Zyrtec is a registered trademark of UCB, Societe Anonyme.
Ventolin, Zofran and Imitrex are registered trademarks of Glaxo Group Limited.
Proventil and Claritin are registered trademarks of Schering Corporation.
Foradil is a registered trademark of Ciba-Geigy Corporation. Atock is a
trademark of Yamanouchi, Inc. Hismanal is a registered trademark of Janssen
Pharmaceutica N.V. Seldane is a registered trademark of Merrell Dow
Pharmaceuticals, Inc. Ditropan is a registered trademark of Marion Laboratories,
Inc. Allegra is a registered trademark of Merrell Pharmaceuticals. Cardura is a
registered trademark of Pfizer Inc. Prozac is a registered trademark of Eli
Lilly and Company. Propulsid is a registered trademark of Johnson & Johnson.
Prevacid is a registered trademark of TAP Pharmaceuticals Inc. Imovane is a
registered trademark of Rhone-Poulenc Rover S.A. Meridia is a registered
trademark of Knoll Pharmaceutical Company. Zyban is a trademark of Glaxo Group
Limited. Pantozol is a trademark of Byk Gulden Lomberg Chemische Fabrik GMBH.
<PAGE>
Exhibit 21
EXHIBIT 21
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
NAME JURISDICTION OF INCORPORATION
<S> <C>
BioSphere Medical Inc. (64% owned subsidiary of Sepracor) (1) Delaware
HemaSure Inc. (27% owned subsidiary of Sepracor) (2) Delaware
Sepracor Canada Holdings, Inc. Delaware
Sepracor Canada Limited (100% owned subsidiary
of Sepracor Canada Holdings, Inc.) Canada
Sepracor Securities Corporation (100% owned
subsidiary of Sepracor) Massachusetts
Versicor Inc. (10% owned subsidiary of Sepracor) Delaware
Sepracor, N.V. Netherlands Antilles
(1) 59% as of February 4, 2000
(2) 22% as of March 3, 2000
</TABLE>
<PAGE>
Exhibit 23.1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Forms S-8 (File Nos. 33-43460, 33-44808, 33-48428, 333-05217,
333-05219, 333-94774, 333-48719, 333-05221, 333-58557, 333-58559, 333-58563,
33-48429, 33-63710, 33-79724, 333-85003 and 333-84983) and Forms S-3 (File
Nos. 333-460, 333-51879 and 333-75561) of Sepracor Inc. of our reports dated
January 27, 2000, except as to the information in Note V for which the date
is March 9, 2000, relating to the financial statements, which appear in the
Annual Report to Shareholders, and are incorporated by reference from the
1999 Annual Report on Form 10-K. We also consent to the incorporation by
reference of our report dated January 27, 2000, except as to the information
in Note V for which the date is March 9, 2000, relating to the financial
statement schedule, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
March 28, 2000
<PAGE>
Exhibit 23.2
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated February 7, 2000 on the financial statements of BioSphere Medical, Inc.
and subsidiaries as of December 31, 1998 and 1999 and for each of the three
years in the period ended December 31, 1999, included in this Form 10-K.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 24, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 59,488,000
<SECURITIES> 276,335,000
<RECEIVABLES> 4,650,000
<ALLOWANCES> (165,000)
<INVENTORY> 4,455,000
<CURRENT-ASSETS> 350,040,000
<PP&E> 30,952,000
<DEPRECIATION> 11,949,000
<TOTAL-ASSETS> 406,635,000
<CURRENT-LIABILITIES> 69,969,000
<BONDS> 489,475,000
0
0
<COMMON> 6,748,000
<OTHER-SE> (162,453,000)
<TOTAL-LIABILITY-AND-EQUITY> 406,635,000
<SALES> 16,383,000
<TOTAL-REVENUES> 22,659,000
<CGS> 4,811,000
<TOTAL-COSTS> 4,919,000
<OTHER-EXPENSES> 187,736,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,078,000
<INCOME-PRETAX> (183,059,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (182,714,000)
<DISCONTINUED> (345,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (183,059,000)
<EPS-BASIC> (2.77)
<EPS-DILUTED> (2.77)
</TABLE>
<PAGE>
Exhibit 99
EXHIBIT 99
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of BioSphere Medical, Inc. and
subsidiaries:
We have audited the accompanying consolidated balance sheets of BioSphere
Medical, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1998 and 1999, and the related consolidated statement of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BioSphere Medical, Inc. and
subsidiaries as of December 31, 1998 and 1999, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1999 in conformity with generally accepted accounting
principles.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 7, 2000
