<PAGE> 1
SECURTIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended: March 31, 1998
--------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
Commission File Number 0-23678
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BIOSEPRA INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 04-3216867
------------------------------- ----------------------
(State or Other Jurisdiction of (I.R.S. Employer
Organization or Incorporation) Identification Number)
111 LOCKE DRIVE, MARLBOROUGH, MASSACHUSETTS 01752
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(508) 481-6802
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, par value $.01 per share 8,430,581
- -------------------------------------- ---------------------------
Class Outstanding at May 14, 1998
<PAGE> 2
BioSepra Inc.
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Condensed Balance Sheets as of
March 31, 1998 and December 31, 1997 3
Consolidated Condensed Statements of Operations for the
Three Month Periods Ended March 31, 1998 and 1997 4
Consolidated Condensed Statements of Cash Flows for the
Three Month Periods Ended March 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II - OTHER INFORMATION 11
SIGNATURES 12
<PAGE> 3
BioSepra Inc.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1998 1997
-------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,711 $ 2,370
Restricted cash -- 146
Accounts receivable 2,479 2,376
Inventories (Note 2) 3,088 2,722
Prepaid and other current assets 50 57
-------- --------
Total current assets 9,328 7,671
Property and equipment, net (Note 3) 1,501 1,509
Goodwill, net 5,190 5,288
Other assets 467 438
-------- --------
Total assets $ 16,486 $ 14,906
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable, current portion of long-term debt
and capital lease obligations $ 2,506 $ 488
Accounts payable 973 1,307
Related parties payable (Note 4) 228 325
Accrued expenses 1,609 1,534
Accrued restructuring 34 161
Deferred contract revenue 141 21
-------- --------
Total current liabilities 5,491 3,836
Long-term debt and capital lease obligations,
net of current portion 531 690
-------- --------
Total liabilities 6,022 4,526
Stockholders' equity:
Common stock 84 84
Additional paid-in capital 40,546 40,515
Unearned compensation (121) (161)
Accumulated deficit (29,598) (29,722)
Cumulative translation adjustment (447) (336)
-------- --------
Total stockholders' equity 10,464 10,380
-------- --------
Total liabilities and stockholders' equity $ 16,486 $ 14,906
======== ========
</TABLE>
The accompanying notes are an integral part
of the consolidated condensed financial statements.
3
<PAGE> 4
BioSepra Inc.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three month periods
Ended March 31,
-------------------
1998 1997
------ ------
<S> <C> <C>
Revenue:
Product sales $1,890 $3,388
Research and development 110 --
License fees 72 --
------ ------
Total revenue 2,072 3,388
Costs and expenses:
Cost of products sold 964 1,932
Selling, general and administrative 874 1,256
Research and development 336 558
Amortization expense 141 232
Restructuring costs (351) --
------ ------
Total costs and expenses 1,964 3,978
------ ------
Income (loss) from operations 108 (590)
Other income, net 16 121
------ ------
Net income (loss) $ 124 $ (469)
====== ======
Basic and diluted net income (loss) per share $ 0.01 $(0.06)
Basic and diluted weighted average number of common and
common equivalent shares outstanding 8,431 8,416
</TABLE>
The accompanying notes are an integral part
of the consolidated condensed financial statements.
4
<PAGE> 5
BioSepra Inc.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three-month periods
ended March 31,
-------------------
1998 1997
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 124 $ (469)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization 267 408
Issuance of warrants 30 --
Provision for doubtful accounts (13) (98)
Loss on disposition of long-term assets 1 5
Changes in operating assets and liabilities:
Accounts receivable (134) (191)
Inventories (443) 207
Prepaid and other current assets 8 (92)
Accounts payable (310) (110)
Related parties payable (97) 83
Accrued expenses 92 104
Accrued restructuring (127) --
Deferred revenue 122 (43)
------ ------
Net cash used in operating activities (480) (196)
Cash flows from investing activities:
Additions to property and equipment (144) (137)
Proceeds from sales of equipment 3 --
Decrease in marketable securities -- 360
Decrease in cash in escrow 143 --
Increase in other assets (32) (43)
------ ------
Net cash (used in) provided by investing activities (30) 180
Cash flows from financing activities:
Net borrowings under line of credit agreements 2,000 264
Long-term borrowings -- 47
Repayment of long-term borrowings (119) (114)
------ ------
Net cash provided by financing activities 1,881 197
Effect of exchange rate changes on cash
and cash equivalents (30) (85)
------ ------
Net increase in cash and cash equivalents 1,341 96
Cash and cash equivalents at beginning of period 2,370 4,142
------ ------
Cash and cash equivalents at end of period $3,711 $4,238
====== ======
</TABLE>
The accompanying notes are an integral part
of the consolidated condensed financial statements.
5
<PAGE> 6
BioSepra Inc.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying consolidated condensed financial statements are
unaudited and have been prepared on a basis substantially consistent
with BioSepra Inc.'s (the "Company") annual audited financial
statements. The consolidated condensed financial statements include the
accounts of the Company and its wholly owned subsidiaries. All material
intercompany balances and transactions have been eliminated in
consolidation.
Certain information and footnote disclosures normally included in the
Company's annual statements have been condensed or omitted. The
consolidated condensed financial statements, in the opinion of
management, reflect all adjustments (including normal recurring
accruals) necessary for a fair statement of the results for the three
month periods ended March 31, 1998 and 1997.
The results of operations for the periods are not necessarily
indicative of the results of operations to be expected for the fiscal
year. These consolidated condensed financial statements should be read
in conjunction with the audited financial statements included in the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.
2. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
-------- -----------
<S> <C> <C>
Raw material $ 690 $ 600
Work in progress 250 129
Finished goods 2,148 1,993
------ ------
$3,088 $2,722
====== ======
3. Property and Equipment
Property and equipment consists of the following:
<CAPTION>
March 31, December 31,
1998 1997
-------- -----------
<S> <C> <C>
Property and equipment $ 3,931 $ 3,878
Less accumulated depreciation and amortization (2,434) (2,405)
------- -------
1,497 1,473
Construction in progress 4 36
------- -------
$ 1,501 $ 1,509
======= =======
</TABLE>
<PAGE> 7
4. Related party transactions
The payable to related party represents amounts due for certain
services and facilities provided by Sepracor Inc. ("Sepracor"), the
Company's majority stockholder.
In January 1996, the Company entered into a promissory note for
$350,000 with Sepracor. This amount is payable to Sepracor over sixty
monthly installments and does not bear interest. The Company utilized
the funds for leasehold improvements to the Company's facilities. As of
March 31, 1998, $133,000 was outstanding under the promissory note.
5. Net Income (Loss) Per Share
Basic income (loss) per common share is computed by dividing net income
(loss) by the weighted average number of common shares outstanding
during the period. Diluted income (loss) per share is the same as basic
income (loss) per share as the effects of common stock equivalents are
antidilutive. Total antidilutive shares of approximately 615,000 and
352,000 for the three months ended March 31, 1998 and 1997,
respectively have been excluded from the calculation of weighted
average number of potentially diluted common shares outstanding.
6. Statements of Cash Flows
Cash payments for interest for the three months ended March 31,1998 and
1997 were $40,000 and $12,000, respectively.
7. Distribution Agreement
On March 26, 1998, the Company, Sepracor and Beckman entered into an
agreement pursuant to which the Company amended its Distribution
Agreement with Beckman and Sepracor amended its Stock Purchase
Agreement with Beckman. Under the amendment, the Company granted to
Beckman a non-exclusive right to manufacture instruments, is relieved
of its obligation to manufacture the instruments for Beckman and sold
the discontinued instrument product inventory to Beckman for $250,000.
The Company recorded the sale of the inventory as a reduction to the
previously recorded restructuring charge.
Under the original Stock Purchase Agreement, Sepracor issued 312,500
shares of Sepracor's Series B Redeemable Exchangeable Preferred Stock
to Beckman in exchange for $5,000,000. Under the amendment, Sepracor
redeemed the Series B Preferred Shares for the original purchase price
plus accrued dividends totaling $6,850,000.
8. Comprehensive Income
The Company adopted Statement of Financial Account Standards No. 130
("SFAS 130"), "Reporting Comprehensive Income, effective January 1,
1998. SFAS 130 established standards for reporting and display of
comprehensive income and its components in the financial statements.
The Company's only item of other comprehensive income relates to
foreign currency translation adjustments, and is presented separately
on the balance sheet as required. If presented on the statement of
operations for the three months ended March 31, 1998 and 1997,
comprehensive income would be approximately $111,000 and $238,000,
respectively less than reported net income(loss), due to foreign
currency translation adjustments.
9. New Accounting Pronouncements
The FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 specifies new
guidelines for determining a company's operating segments and related
requirements for disclosure. This statement will become effective for
fiscal years beginning after December 15, 1997. The Company believes
that the adoption of this new accounting standard will not have a
material impact on the Company's financial statements.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Overview
BioSepra Inc. and subsidiaries (the "Company") develop, manufacture and sell
chromatographic media for use by biopharmaceutical companies in the purification
and production of biopharmaceuticals. The Company offers a line of
chromatographic products that it believes enables biopharmaceutical companies to
reduce the time and cost required developing and manufacturing
biopharmaceuticals.
On March 26, 1998, the Company, Sepracor and Beckman entered into an agreement
pursuant to which the Company amended its Distribution Agreement with Beckman
and Sepracor amended its Stock Purchase Agreement with Beckman. Under the
amendment, the Company granted to Beckman a non-exclusive right to manufacture
instruments, is relieved of its obligation to manufacture the instruments for
Beckman and sold the discontinued instrument product inventory to Beckman for
$250,000. The Company recorded the sale of the inventory as a reduction to the
previously recorded restructuring charge. Under the original Stock Purchase
Agreement, Sepracor issued 312,500 shares of Sepracor's Series B Redeemable
Exchangeable Preferred Stock to Beckman in exchange for $5,000,000. Under the
amendment, Sepracor redeemed the Series B Preferred Shares for the original
purchase price plus accrued dividends totaling $6,850,000.
Three months ended March 31, 1998 and 1997
Revenue decreased to $2,072,000 for the three months ended March 31, 1998 from
$3,388,000 for the same period in 1997. The decrease in revenue is attributed to
the discontinuation of the instrument product line and to the fluctuation in the
timing of large production-scale orders. This decrease is partially offset by
increased license fees and research and development revenue. The Company expects
fluctuation in the timing of large production-scale orders to continue to occur
in future periods.
Cost of products sold decrease to $964,000 for the quarter ended March 31, 1998
compared to $1,932,000 for the same period in 1997, representing 51% and 57% of
product revenue, respectively. The increase in profit margin on product sales in
1998 compared to 1997 is primarily due to the discontinuation of the low margin
instrument product line and to favorable product mix. The Company expects that
its profit margin will continue to fluctuate in future periods as a result of
changes in product mix.
Selling, general and administrative expenses decreased to $874,000 for the three
months ended March 31, 1998 from $1,256,000 for the three months ended March 31,
1997. The decrease in expenditures is related to a reduction in overall
personnel costs associated with the cost reduction program implemented in
December 1997 and to a lesser extent reduced legal fees.
Research and development expenses decreased to $336,000 for the first quarter of
1998 from $558,000 in the first quarter of 1997. This decrease is attributed to
an overall reduction in personnel costs offset by additional product development
costs.
Amortization expenses decreased to $141,000 for the first quarter of 1998 from
$232,000 in the first quarter of 1997. The decrease in amortization expense is
primarily attributed to the write down, in the fourth quarter of 1997, of
intangible assets to their estimated net realizable.
The Company recorded the sale of the discontinued product line inventory,
approximately $351,000, as a reduction to the previously recorded restructuring
costs.
Other income, net, decreased to $16,000 for the three months ended March 31,
1998 as compared to $120,000 for the comparable period in 1997. This decrease is
attributed to the net effect of foreign currency gains and losses due to changes
in the value of the U.S. dollar and increased levels of borrowings.
8
<PAGE> 9
The Company generated net income of $124,000 for the three months ended
March 31, 1998 compared to a net loss of $469,000 for the three months ended
March 31, 1997. The increase is attributed to the cost reduction program
implemented in December 1997 and to the sale of inventory from the discontinued
instrument product line as described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations to date primarily from net proceeds
provided from the Company's initial public offering, funds provided by Sepracor,
equipment financing leases and product sales. As of March 31, 1998, the Company
had $3,711,000 of cash and cash equivalents and $3,837,000 of working capital.
Cash and cash equivalents for the quarter ended March 31, 1998 increased by
$1,341,000 from $2,370,000 at December 31, 1997. The Company utilized cash for
operations of $510,000 primarily to fund its operations. The Company used
cash from investing activities of $30,000 primarily due to increased patent
costs and purchased of property and equipment, partially offset by the maturity
of cash held in escrow. The Company generated cash from financing activities of
$1,911,000 primarily due to additional borrowings under one of the Company's
line of credit agreements.
The Company has access to a revolving line of credit under which the Company may
borrow up to $3,000,000. This revolving line of credit is guaranteed by
Sepracor. As of March 31, 1998, there was $2,000,000 outstanding under this
agreement. The agreement requires the Company to maintain certain financial
ratios and levels of cash and cash equivalents and tangible capital base. The
Company is in compliance with all requirements under this agreement.
As of March 31, 1998, there was $561,000 outstanding under a French loan, which
is guaranteed by Sepracor. In addition, Sepracor guarantees certain capital
lease obligations of the Company. The outstanding balance of the capital lease
obligation guaranteed by Sepracor was $126,000 as of March 31, 1998.
Based upon the Company's current operating plan, the Company believes that its
current cash balance is sufficient to fund the Company's operations into mid
1999. The Company's cash requirements may vary materially from those now planned
because of factors such as the timing of significant product orders, commercial
acceptance of new products, patent developments, the introduction of competitive
products, acquisitions and the factors discussed below under "Future Operating
Results." Accordingly, the Company may be required to raise additional financing
within the next twelve months, and there can be no assurance that such financing
will be available on favorable terms, if at all.
FUTURE OPERATING RESULTS
Certain of the information contained in this Quarterly Report on Form 10-Q,
including information with respect to the ability of the Company to obtain
additional financing within the next twelve months, the success of the Company's
HyperD media and information with respect to the Company's other plans and
strategy for its business, consist of forward-looking statements. Important
factors that could cause actual results to differ materially from the
forward-looking statements are described in the Company's Annual Report on Form
10-K for the year ended December 31, 1997. Without limiting the foregoing, the
words "believes," "anticipates," "plans," "expects," "intends," and similar
expressions are intended to identify forward-looking statements. There are a
number of factors that could cause the Company's actual results to differ
materially from those indicated by such forward-looking statements. These
factors include, without limitation, the following:
9
<PAGE> 10
The future success of the Company will depend largely on the success of its
HyperD media product line, which was introduced in March 1993. There can be no
assurance that the Company's HyperD media product line will achieve commercial
success and any failure of such products to achieve such success would have a
materially adverse effect on the business and results of operations of the
Company.
The Company could require additional funds in 1998 if, and to the extent, it
fails to achieve its operating plan, which contemplates increases in sales of
HyperD media. As of March 31, 1998, Sepracor had guaranteed $2,687,000 of
outstanding bank borrowings and lease financing obligations of the Company. At
such time, as the Company requires additional financing, there can be no
assurance that such financing will be available on favorable terms, if at all.
If the Company requires additional financing and such capital is not available
on acceptable terms from third parties, Sepracor may, but is not obligated to,
guarantee or provide such financing.
Sales to process customers of chromatographic media products, such as HyperD
media, typically involve long lead times, and customers generally evaluate
several different media products before committing to a volume purchase. Also,
customers are typically reluctant to change media used in the production process
for a pharmaceutical previously approved by the FDA because such a change may
require additional FDA approval. There can be no assurance that the Company will
be able to compete effectively against its existing or future competitors.
In December 1997, the Company implemented a cost reduction program that involved
the discontinuation of its instrument product line and a reduction in the number
of employees. The principal purpose of the program was to enable the Company to
focus on higher margin consumable products for the research and process segments
of the biopharmaceutical and genomics markets. In connection with this program,
the Company recorded restructuring charges totaling $851,000 in the fourth
quarter of 1997. There can be no assurance that this program will not result in
loss of customers or temporary sales or production disruptions that could have a
materially adverse effect on the Company's business, financial condition and
results of operations.
Other factors that may adversely affect the Company's future operating results
include: intense competition from other companies selling or developing
biosepration products, the loss of any significant customer, risks attendant to
the conduct of business in foreign countries, risks relating to the Company's
ability to maintain meaningful patent protection of its proprietary information
and the risk of product liability claims associated with the testing, marketing
and sale of the Company's media products.
The Company is currently working to resolve the potential impact of the year
2000 on the processing of date-sensitive information by the Company's
computerized information systems. The year 2000 problem is the result of
computer programs being written using two digits (rather than four) to define
the applicable year. Any of the Company's programs that have time-sensitive
software may recognized a date using "00" as the year 1900 rather than the year
2000, which could result in miscalculation or system failures. Based on
preliminary information, costs of addressing potential problems are not
currently expected to have a material adverse impact on the Company's financial
position, results of operations or cash flows in future periods. However,
failure of the Company, its customer or vendors to resolve such processing
issues in a timely manner, could have a material adverse effect on the Company's
business, financial condition and results of operations. Accordingly, the
Company plans to devote the necessary resources to resolve all significant year
2000 issues in a timely manner.
Because of the foregoing factors, the Company believes that period-to-period
comparisons of its financial results are not necessarily meaningful and it
expects that its results of operations may continue to fluctuate from period to
period in the future.
10
<PAGE> 11
PART II.
OTHER INFORMATION
Items 1 - 5. None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
10.1 Agreement by and between Beckman Instruments,
BioSepra Inc. and Sepracor Inc.
27.1 Financial Data Schedule
b) Reports on Form 8-K
1. Current Report on Form 8-K filed with the Securities
and Exchange Commission on January 15, 1998.
2. Amendment No. 1 to Current Report on Form 8-K/A
filed with the Securities and Exchange Commission on
January 20, 1998.
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BIOSEPRA INC.
Date: May 14, 1998 /s/ Jean-Marie Vogel
----------------------------------
Jean-Marie Vogel
President, Chief Executive
Officer and Director
(Principal Executive and Financial
Officer)
Date: May 14, 1998 /s/ Kathy M. Simpson
----------------------------------
Kathy M. Simpson
Controller
(Chief Accounting Officer)
12
<PAGE> 1
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
AGREEMENT by and between BECKMAN INSTRUMENTS, INC., a Delaware
corporation having a place of business at 2500 Harbor Boulevard, Fullerton,
California 92834-3100 ("Beckman"), first party, BIOSEPRA INC., a Delaware
corporation, having a place of business at 111 Locke Drive, Marlborough,
Massachusetts 01752 ("BioSepra"), second party, and SEPRACOR INC., a Delaware
corporation having a place of business at 111 Locke Drive, Marlborough,
Massachusetts 01752 ("Sepracor"), third party.
RECITALS
--------
I. Beckman and BioSepra are parties to an agreement dated March 14, 1995
and amendments thereto dated December 31, 1995, March 26, 1996, May 14,
1996, March 31, 1997 and December 15, 1997 for the manufacture by
BioSepra and the purchase by Beckman of certain liquid chromatographic
systems for use in the purification and production of
biopharmaceuticals and chromatographic media and columns for use on
such systems (jointly the "Supply Agreement").
II. BioSepra desires to amend the Supply Agreement, (a) to relieve itself
of the duty to manufacture liquid chromatographic systems for Beckman,
(b) to transfer to Beckman the right to manufacture such liquid
chromatographic systems, and (c) to sell to Beckman BioSepra's
inventory of parts for such liquid chromatographic systems.
III. Sepracor owns approximately sixty-four percent (64%) of the outstanding
shares of BioSepra and recognizes that amendment of the Supply
Agreement as desired by BioSepra is in the best interest of BioSepra
and Sepracor.
<PAGE> 2
IV. Beckman and Sepracor are parties to an agreement dated March 14, 1995
under which Beckman acquired 312,500 shares of Sepracor's Series B
Redeemable Exchangeable Preferred Stock (the "Stock Purchase
Agreement").
V. Beckman desires to terminate the Stock Purchase Agreement and to have
the Series B Preferred Shares redeemed by Sepracor for the original
purchase price plus accrued dividends.
NOW THEREFORE in consideration of the foregoing premises, the mutual
covenants and understandings contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound, agree as follows:
ARTICLE 1.0 AMENDMENTS TO THE SUPPLY AGREEMENT
----------------------------------------------
1.1 Delete Paragraphs 3.3, 3.4 and 3.5 in their entirety and substitute
therefor the following:
3.3 MANUFACTURE OF BIOSYS II AND PROSYS SYSTEMS - BioSepra
hereby grants to Beckman and Beckman accepts a
non-exclusive, world-wide right and license under (a)
all patents owned by BioSepra, (b) the BioSepra
Technology, and (c) all know-how and technology owned
by BioSepra relating to or useful in the manufacture
and quality control of the ProSys System (the "ProSys
Technology") to manufacture, have manufactured, use
and sell the BioSys II and ProSys Systems.
-2-
<PAGE> 3
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
3.4 LICENSE UNDER SYSTEM SOFTWARE - BioSepra hereby
grants to Beckman and Beckman accepts a
non-exclusive, world-wide right and license under the
System Software and the ProSys Software (jointly the
"Software") and any patents and copyrights covering
such Software to copy, modify, enhance and make
derivative works and translations of the Software and
to make, have made, use and sell such Software and
the modified, enhanced or derivative renditions and
translations thereof.
3.5 ROYALTIES TO BIOSEPRA - The licenses of Sections 3.3
and 3.4 hereof are subject to the Royalties of
Section 7.4(b) and (c) for the BioSys II and System
Software and a royalty of *** for each ProSys System
sold with ProSys Software. Such royalties shall be
paid in accordance with Paragraph 7.7 of the Supply
Agreement.
3.6 TECHNOLOGY TRANSFER - BioSepra shall, not later than
_____ business days after the signing of this
Agreement transfer to Beckman in writing the BioSys
Technology, the ProSys Technology, the source code
and object code for the Software and other materials
necessary or helpful in effecting changes to the
Software source code and object code.
1.2 Paragraph 4.1, delete the last two lines.
1.3 Paragraph 4.2, delete the first sentence and substitute therefor the
following:
"Beckman shall until ******** provide service for the ProSys
Systems and ProSys Software."
-3-
<PAGE> 4
1.4 Paragraph 4.2, delete the third sentence in its entirety, which refers
to BioSepra's obligation to provide training.
1.5 Paragraphs 5.1, 5.2, and 5.3, delete in their entirety.
1.6 Paragraph 8.2(a), line 3 after "Technology" insert "and the ProSys
Technology".
1.7 Add the following as Paragraph 8.5:
"8.5 MANUFACTURE OF PROSYS SYSTEMS - Notwithstanding
anything in this Agreement to the contrary, it is
expressly understood and agreed that Beckman is not
obligated to manufacture BioSys II Systems or ProSys
Systems nor to accept purchase orders from BioSepra
or from any third party for the delivery of a
BioSys II or ProSys System."
1.8 In all other respects the Supply Agreement, as amended, shall remain
unchanged and in full force and effect.
ARTICLE 2.0 PURCHASE OF CHROMATOGRAPHIC SYSTEM INVENTORY
Beckman shall, within two (2) business days of the signing of this Agreement,
purchase BioSepra's inventory of ProSys and BioSys II Systems, parts and
components for the ProSys and BioSys II Systems. BioSepra agrees to and shall
sell and deliver such inventory to Beckman, ex-BioSepra stockroom in
Marlborough, Massachusetts, and shall package and ship such inventory at
Beckman's written request. The purchase price shall be BioSepra's cost and will
not exceed Two Hundred Fifty Thousand Dollars ($250,000).
-4-
<PAGE> 5
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
ARTICLE 3.0 PURCHASE OF SERIES B SHARES
---------------------------------------
Beckman agrees to and shall, concurrently with the signing of this Agreement,
sell and deliver to Sepracor and Sepracor agrees to and shall, purchase and take
from Beckman 312,500 shares of Series B Redeemable Exchangeable Preferred Stock
of Sepracor Inc. Beckman shall deliver the certificate evidencing its ownership
of such shares to Sepracor, upon the signing of this Agreement. Sepracor shall,
concurrently with the delivery of such shares, pay to Beckman, by wire transfer
of immediately available funds, the sum of Six Million Eight Hundred Fifty
Thousand Dollars ($6,850,000) by no later than March 27, 1998, and (b) in the
event *********************** as that term is defined ************************
at any time ******************** after the signing of this Agreement,
************* which ************************************ on the effective date
****************.
ARTICLE 4.0 MISCELLANEOUS
-------------------------
4.1 GOVERNING LAW - This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Delaware.
4.2 ENTIRE AGREEMENT AND MODIFICATION - This Agreement constitutes the
entire agreement between the parties with respect to the subject matter
and supersedes all prior agreements between the parties, whether oral
or written, relating to the same subject matter. No modification,
amendments or supplements to, or approvals or consents under this
Agreement shall take effect for any purpose unless set forth in writing
and signed by an officer of the bound party.
4.3 COUNTERPARTS - This Agreement may be executed in three (3)
counterparts, each of which shall be deemed an original but all of such
counterparts together shall constitute but one and the same instrument.
-5-
<PAGE> 6
4.4 SPARE PARTS - BioSepra is relieved of its obligation to supply spare
parts to Beckman under the original agreement and subsequent
amendments.
IN WITNESS WHEREOF, the parties have signed this Agreement by their
duly authorized representatives effective this 26 day of March 1998.
Sepracor Inc. Beckman Instruments, Inc.
by /s/ Timothy J. Barberich by /s/ John P. Wareham
-------------------------- -------------------------
title President & CEO title President & C.O.O.
-------------------------- -------------------------
BioSepra Inc.
by /s/ Jean-Marie Vogel
-------------------------
title President & CEO
-------------------------
-6-
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