<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-K/A
AMENDMENT NO. 1
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended: December 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 No. 0-23678
BioSepra Inc.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 04-3216867
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
111 Locke Drive, Marlborough, Massachusetts 01752
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (508) 357-7500
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
- --------------------------------------------------------------------------------
Title of class
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 this
Form 10-K. [ ]
The aggregate market value of voting Common Stock held by non-affiliates of
the registrant was $2,388,271, based on the last reported sale price of the
Common Stock on the OTC: Bulletin Board on March 5, 1999.
Number of shares outstanding of the registrant's class of Common Stock as
of March 5, 1999: 8,456,059.
DOCUMENTS INCORPORATED BY REFERENCE: None.
<PAGE> 2
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names, ages and positions of the executive
officers and directors of the Company as of December 31, 1998.
Name Age Position
- ---- --- --------
Jean-Marie Vogel 48 President, Chief Executive Officer
and Director
Egisto Boschetti, Ph.D. 53 Senior Vice President and Chief
Scientific Officer
Therese Bourdy 48 Vice President of Media Operations
Philip V. Holberton, CPA 56 Chief Financial Officer, Treasurer
and Secretary
Timothy J. Barberich 51 Director
William M. Cousins, Jr. 74 Director
Alexander M. Klibanov, Ph.D 49 Director
Paul A. Looney 59 Director
Riccardo Pigliucci 52 Director
William E. Rich, Ph.D. 54 Director
David P.Southwell 38 Director
Mr. Vogel has served as President, Chief Executive Officer and a director
of the Company since September 1994. From January 1994 to August 1994, Mr. Vogel
served as Executive Vice President and Chief Operating Officer of the Company.
From 1992 to 1993, Mr. Vogel served as President of the European Operation of
Cuno, Inc., a supplier of filtration processes, equipment and devices used in
the production of biological drugs and food products. From 1977 to 1992, Mr.
Vogel served in various capacities with Millipore Corporation ("Millipore"), a
manufacturer of membrane filtration-based products, in its international
operations with experience in Asia, Latin America, the former Soviet Union, the
Middle East and Australia. Most recently, Mr. Vogel served as Vice President and
General Manager of Millipore's Asian Operations. Mr. Vogel is a French citizen.
Dr. Boschetti has served as Senior Vice President and Chief Scientific
Officer of the Company since January 1997 and served as Vice President and Chief
Scientific Officer from January 1994 to January 1997. From June 1991 to January
1994, Dr. Boschetti served as Vice President of Research and Development and
Technical Operations -- Sepracor Europe. From 1986 until 1991, Dr. Boschetti was
Vice President of R&D and Technical Director of IBF. Dr. Boschetti has been
associated with IBF and its predecessor, Pointet-Girard S.A. for 20 years. Dr.
Boschetti has published over 130 articles in international scientific journals
and is a member of the editorial board of Preparative Chromatography. Dr.
Boschetti is Vice Chairman of the Biotechnology Commission of the French
Ministry of Research and is a French citizen.
Ms. Bourdy has served as Vice President of Media Operations of the Company
since January 1997 and served as General Manager and Director of Operations,
BioSepra S.A. from August 1995 to January 1997. From 1992 to 1995, Ms. Bourdy
served as Quality Assurance, Operations and Marketing manager for Cuno, Inc., a
supplier of filtration processes, equipment and devices used in the production
of biological drugs and food products. From 1991 to 1992, Ms. Bourdy was an
independent consultant. From 1983 to 1991, Ms. Bourdy served in various
operational positions with National Fractionation Center France, a bioprocessing
company focusing on blood products. From 1974 to 1983, Ms. Bourdy served in
various capacities with Millipore, a manufacturer of membrane filtration-based
products, in its pharmaceutical, agrofood and water treatment divisions.
1
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Mr. Holberton has served as Chief Financial Officer, Treasurer and
Secretary of the Company since July 1, 1998 as a contract Chief Financial
Officer. Concurrently and prior thereto, he has served as a contract Chief
Financial Officer and consultant for other companies since 1995. Prior thereto,
he was Chief Financial Officer for Cambridge NeuroScience, Inc., a publicly
traded biotechnology company.
Mr. Barberich has served as a director of the Company since its
organization in 1993. Mr. Barberich was a founder of Sepracor, an emerging
speciality pharmaceutical company, and has served as President, Chief Executive
Office and a director of Sepracor since January 1984. Sepracor owns
approximately 64% of the outstanding Common Stock of the Company. Mr. Barberich
also serves as a director of HemaSure Inc. ("HemaSure"), a publicly traded
company of which Sepracor owns approximately 42% of the outstanding common stock
as of February 25, 1999.
Mr. Cousins has served as a director of the Company since January 1994.
Since 1974, Mr. Cousins has served as the President of William M. Cousins, Jr.,
Inc., a management consulting firm. Mr. Cousins is a member of the Board of
Directors of Alba Waldensian, Inc. and Wellco Enterprises, Inc.
Dr. Klibanov has served as a director of the Company since January 1994.
Since 1979, Dr. Klibanov has been a faculty member of the Massachusetts
Institute of Technology where he is currently Professor of Chemistry and a
member of the Biotechnology Process Engineering Center.
Mr. Looney has served as a director of the Company since January 1994. From
1984 to 1995, Mr. Looney served as President and Chief Executive Officer of
Corning Costar Corporation, a life science products company and a wholly-owned
subsidiary of Corning, Inc.
Mr. Pigliucci has served as a director of the Company since August
1995. Since April 1999, Mr. Pigliucci has served as President and Chief
Executive Officer of Discovery Partners International. From February 1996 to
April 1999, he served as Chief Executive Officer of Life Sciences International
P.L.C. From January 1966 to April 1995, Mr. Pigliucci served in a number of
capacities at Perkin-Elmer Corporation, a global life sciences instrumentation
company, most recently as President and Chief Operating Officer. Mr. Pigliucci
is a member of the Board of Directors of Dionex Corporation.
Dr. Rich has served as a director of the Company since its organization in
December 1993. Since September 1994, Dr. Rich has served as President and Chief
Executive Officer of Ciphergen Giosystems, Inc., a biotechnology company. From
1994 to September 1994, Dr. Rich served as President and Chief Executive Officer
of the Company. From September 1991 to January 1994, Dr. Rich served as Senior
Vice President and General Manager, Bioseparations of Sepracor.
Mr. Southwell has served as a director of the Company since January 1997.
He has served as Executive vice president, Chief Financial Officer of Sepracor
since October 1995 and served as Senior vice President and Chief Financial
Officer of Sepracor from July 1994 to October 1995. From August 1988 until July
1994, Mr. Southwell was associated with Lehman Brothers, a securities firm, in
various positions with the investment banking division, including in the
position of Vice President.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of copies of reports filed by all officers and
directors of the Company who are persons required to file reports ("Reporting
Persons") pursuant to Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or written representations from certain Reporting
Persons, the Company believes that during fiscal 1998 all filings required to be
made by its Reporting Persons were timely made in accordance with the
requirements of the Exchange Act
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<PAGE> 4
with the exception of a report on Form 3 (Initial Statement of Beneficial
Ownership) that was filed late by Philip V. Holberton.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth certain
information with respect to the annual and long-term compensation for the last
three fiscal years of the Company's President and Chief Executive Officer and
the Company's two other most highly-compensated executive officers whose total
annual salary and bonus for 1998 exceeded $100,000 (collectively, the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION> LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
----------------------------------- SECURITIES ALL OTHER
OTHER UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION OPTIONS(#) ($)(1)
- --------------------------- ---- -------- ------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Jean-Marie Vogel .................... 1998 $163,803 $15,000 $0 0 $1,536
President and Chief 1997 163,803 15,000 0 420,000 3,038
Executive Officer 1996 163,803 65,000 0 0 1,251
Egisto Boschetti, Ph.D............... 1998 $132,658 $ 7,288 $0 0 $2,130
Executive Vice President and 1997 131,455 17,443 0 60,000 5,691
Chief Scientific Officer 1996 133,213 21,575 0 10,000 3,992
Therese Bourdy....................... 1998 $114,794 $16,482 $0 20,000 $2,169
Vice President of Media 1997 99,414 16,127 0 0 1,591
Operations 1996 102,022 17,854 0 25,000 1,812
</TABLE>
- ----------
(1) Represents the taxable portion of group life insurance, retirement and
other benefits paid by the Company.
OPTION GRANT TABLE. The following table sets forth certain information
regarding options granted during the year ended December 31, 1998 by the Company
to the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM (1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ----------- ------------- ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Jean-Marie Vogel........... -- --% -- -- -- --
Egisto Boschetti, Ph.D..... -- --% -- -- -- --
Therese Bourdy............. 20,000(2) 9% $2.00 4/29/08 $25,200 $63,600
</TABLE>
- ----------
(1) Amounts represent hypothetical gains that could be achieved for options if
exercised at the end of the option term. These gains are based on assumed
rates of stock price appreciation of 5% and 10% compounded annually from
the date options are granted. Actual gains, if any, on stock option
exercises will depend on the future performance of the Company's Common
Stock on the date on which options were exercised.
(2) The option vests as to 4,000 shares on each of April 29, 1999, April 29,
2000, April 29, 2001, April 29, 2002, and April 29, 2003.
3
<PAGE> 5
YEAR-END OPTION VALUES TABLE. The following table sets forth certain
information regarding stock options held as of December 31, 1998 by the Named
Executive Officers. None of the Named Executive Officers exercised any stock
options during the year ended December 31, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
NUMBER OF OPTIONS AT FISCAL THE-MONEY OPTIONS AT
SHARES YEAR-END(#) FISCAL YEAR-END($)(1)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------ ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Jean-Marie Vogel ............. -- -- 292,300 /388,200 $0/0
Egisto Boschetti, Ph.D. ...... -- -- 68,000 / 67,000 0/0
Therese Bourdy ............... -- -- 20,200 / 41,800 0/0
</TABLE>
- ----------
(1) Value is based on the closing sales price of the Company's Common Stock as
reported by the Nasdaq National Market on December 31, 1998 ($.5938), the
last trading day of the Company's 1998 fiscal year, less the applicable
option exercise price.
SENIOR MANAGEMENT RETENTION AGREEMENTS
Jean-Marie Vogel. In October 1997, the Company and Mr. Vogel entered into a
Senior Management Retention Agreement. The Agreement has an initial term which
ends on December 31, 1997 and is subject to automatic renewal yearly thereafter
unless the Company provides notice of termination to Mr. Vogel no later than
October 30 of the preceding calendar year.
In the event that a change in Control (as defined therein) of the Company
occurs and thereafter Mr. Vogel is terminated due to death or disability, he
will be entitled to benefits as determined under the Company's long-term
disability, retirement, insurance and other compensation programs then in
effect. If a Change in Control occurs and Mr. Vogel is thereafter terminated for
Cause (as defined therein) within 12 months after such Change in Control, he is
entitled to base salary and benefits through the date of termination.
If a Change in Control occurs and Mr. Vogel is thereafter terminated, other
than for Cause, by reason of death or disability or if he resigns from the
Company with Good Reason (as defined therein) within 12 months after such Change
in Control or for any reason or no reason more than 12 months after such Change
in Control, he is entitled to: (i) base salary and benefits through the date of
termination; (ii) a severance payment payable in 36 equal installments, equal to
the sum of (A) 300% of the higher of (x) annual base salary then in effect or
(y) annual base salary in effect at the time of the Change in Control; plus (B)
300% of the aggregate cash bonuses paid to Mr. Vogel in the preceding four (4)
quarters; and (iii) life, disability, dental accident and health insurance
benefits substantially similar to benefits in effect on the date of termination
for a period of 36 months after termination (unless Mr. Vogel receives
equivalent benefits from a third party during that time period); provided the
severance payment described in clause (ii) above shall be reduced to the extent
that the net present value of the severance payments is greater than 1.5% of the
gross proceeds paid by an acquirer of the Company.
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Upon a Potential Change in Control (as defined therein), Mr. Vogel agrees
not to voluntarily resign until the earliest of (A) six (6) months after the
Potential Change in Control or (B) termination of employment by reason of
disability or for Good Reason.
In April 1999, the Company announced that it had signed an agreement to
sell its biopharmaceutical drug purification and research consumable businesses
to Life Technologies, Inc. While there can be no assurance that the sale will be
successfully consummated, if consummated it will constitute a Change of Control
for purposes of Mr. Vogel's Senior Management Retention Agreement.
Egisto Boschetti. In October 1997, the Company and Mr. Boschetti entered
into a Senior Management Retention Agreement. The Agreement has an initial term
which ends on December 31, 1997 and is subject to automatic renewal yearly
thereafter unless the Company provides notice of termination to Mr. Boschetti no
later than October 30 of the preceding calendar year.
In the event that a Change in Control (as defined therein) of the Company
occurs and thereafter Mr. Boschetti is terminated due to death or disability, he
will be entitled to benefits as determined under the Company's long-term
disability, retirement, insurance and other compensation programs then in
effect. If a Change in Control occurs and Mr. Boschetti is thereafter terminated
for Cause (as defined therein), he is entitled to base salary and benefits
through the date of termination.
If a Change in Control occurs and Mr. Boschetti is thereafter terminated
within 24 months, other than for Cause, by reason of death or disability or if
he resigns from the Company with Good Reason (as defined therein) he is entitled
to: (i) base salary and benefits through the date of termination; (ii) a
severance payment payable in 36 equal installments, equal to the sum of (A) 300%
of the higher of (x) annual base salary then in effect or (y) annual base salary
in effect at the time of the Change in Control; plus (B) 300% of the aggregate
cash bonuses paid to Mr. Boschetti in the preceding four (4) quarters; provided
that the severance payment described in clause (ii) above shall be reduced to
the extent that the net present value of the severance payment is greater than
1.0% of the gross proceeds paid by an acquirer of the Company.
Upon a Potential Change in Control (as defined therein), Mr. Boschetti
agrees not to voluntarily resign until the earliest of (A) six (6) months after
the Potential Change in Control or (B) termination of employment by reason of
disability or for Good Reason.
In April 1999, the Company announced that it has signed an agreement to
sell its biopharmaceutical drug purification and research consumable businesses
to Life Technologies, Inc. Mr. Boschetti and the Company have agreed that his
Senior Management Retention Agreement will be terminated contingent upon the
closing of the sale.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Messrs. Cousins and
Pigliucci. Neither member of the Compensation Committee was at any time during
1998, or formerly, an officer or employee of the Company or any subsidiary of
the Company, nor has any member of the Compensation Committee had any
relationship with the Company requiring disclosure under Item 404 of Regulation
S-K under the Exchange Act.
No executive officer of the Company has served as a director or member of
the Compensation Committee (or other committee serving an equivalent function)
of any other entity, one of whose executive officers served as a director of or
member of the Compensation Committee of the Company.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of January 31, 1999
or such later date as is noted, with respect to the beneficial ownership of: (i)
the Company's Common Stock by each person known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock; and (ii)
the Company's Common Stock and the Common Stock of Sepracor Inc. ("Sepracor
Common Stock"), the parent company of BioSepra ("Sepracor"), by (A) each
director and nominee for director; (B) each Named Executive Officer; and (C) all
directors and executive officers of the Company as a group.
The number of shares of the Company's Common Stock and Sepracor Common
Stock beneficially owned by each director or executive officer is determined
under the rules of the Securities and Exchange Commission (the "Commission"),
and the information is not necessarily indicative of beneficial ownership for
any other purpose. Under such rules, beneficial ownership includes any shares as
to which the individual has sole or shared voting or investment power and also
any shares which the individual has the right to acquire within 60 days after
January 31, 1999 through the exercise of any stock option or other right. Unless
otherwise indicated, each person has sole investment and voting power (or shares
such power with his or her spouse) with respect to the shares set forth in the
following table. The inclusion herein of any shares deemed beneficially owned
does not constitute an admission of beneficial ownership of those shares.
Directors and executive officers of BioSepra disclaim beneficial ownership
of the shares of Common Stock of BioSepra owned by Sepracor.
<TABLE>
<CAPTION>
SHARES OF SHARES OF
BIOSEPRA SEPRACOR
COMMON PERCENTAGE OF COMMON
STOCK BIOSEPRA STOCK
BENEFICIALLY COMMON STOCK BENEFICIALLY
NAME AND ADDRESS OWNED OUTSTANDING OWNED(1)
- ---------------- ------------ ------------ ------------
<S> <C> <C> <C>
Sepracor Inc............................. 5,369,788 63.7% N/A
111 Locke Drive
Marlborough, MA 01752
Tudor Investment Corporation ............ 689,000(2) 8.2% N/A
600 Steamboat Road
Greenwich, CT 06830
Timothy J. Barberich..................... 45,000(3) * 864,855(4)
Jean-Marie Vogel......................... 401,458(5) 4.7% 5,000(6)
William E. Rich, Ph.D. .................. 57,080(7) * 0
William M. Cousins, Jr................... 19,000(7) * 400
Alexander M. Klibanov, Ph.D.............. 22,500(7) * 3,600
Riccardo Pigliucci....................... 17,000(7) * 0
Paul A. Looney........................... 19,000(7) * 0
David P. Southwell....................... 5,000 * 141,736(8)
Egisto Boschetti, Ph.D................... 80,801(9) * 0
Therese Bourdy........................... 20,200(7) * 0
</TABLE>
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<TABLE>
<CAPTION>
SHARES OF SHARES OF
BIOSEPRA SEPRACOR
COMMON PERCENTAGE OF COMMON
STOCK BIOSEPRA STOCK
BENEFICIALLY COMMON STOCK BENEFICIALLY
NAME AND ADDRESS OWNED OUTSTANDING OWNED(1)
- ---------------- ------------ ------------ ------------
<S> <C> <C> <C>
All directors and executive
officers as a group (12 persons)........ 703,039(10) 7.4% 1,015,591(11)
</TABLE>
- ----------
* Represents holdings of less than one percent.
(1) As of January 31, 1999, except for Mr. Barberich, no officer or director of
BioSepra beneficially owned more than 1% of the Sepracor Common Stock; Mr.
Barberich beneficially owned 2.7% of the Sepracor Common Stock (see
footnote 4 below).
(2) Based on information furnished to the Company by Tudor Investment
Corporation ("Tudor"). Tudor is the investment adviser of Tudor BVI
Futures, Ltd. ("Tudor BVI") and The Raptor Global Fund Ltd. ("Raptor
Ltd."). The shares of the Company's Common Stock owned by Tudor include
471,450 shares directly beneficially owned by Tudor BVI, 161,348 shares
directly beneficially owned by Raptor Ltd., and 65,202 shares directly
beneficially owned by Tudor Proprietary Trading, LLC, an affiliate of
Tudor. Tudor disclaims beneficial ownership of the shares held by Tudor BVI
and Raptor Ltd. except to the extent of its pecuniary interest in such
shares.
(3) Includes 43,000 shares of the Company's Common Stock which Mr. Barberich
has the right to acquire within 60 days after January 31, 1999 upon
exercise of outstanding stock options.
(4) Includes: (i) 367,472 shares of Sepracor Common Stock which Mr. Barberich
has the right to acquire within 60 days of January 31, 1999 upon exercise
of outstanding stock options; (ii) 30,000 shares of Sepracor Common Stock
held in trust for Mr. Barberich's daughter; (iii) 107 shares of Sepracor
Common Stock held by Mr. Barberich's wife; and (iv) 1,048 shares of
Sepracor Common Stock held by Mr. Barberich's daughter, as to which Mr.
Barberich disclaims beneficial ownership.
(5) Includes 356,300 shares of the Company's Common Stock which Mr. Vogel has
the right to acquire within 60 days after January 31, 1999 upon exercise of
outstanding stock options.
(6) Represents shares of Sepracor Common Stock that Mr. Vogel has the right to
acquire within 60 days after January 31, 1999 upon exercise of outstanding
stock options.
(7) Represents shares of the Company's Common Stock that each such person has
the right to acquire within 60 days after January 31, 1999 upon exercise of
outstanding stock options.
(8) Includes: (i) 141,000 shares of Sepracor Common Stock which Mr. Southwell
has the right to acquire within 60 days of January 31, 1999 upon exercise
of outstanding stock options; and (ii) 13,000 shares of Sepracor Common
Stock as to which Mr. Southwell's ex-wife, pursuant to a divorce decree,
can direct the sale and is entitled to the proceeds.
(9) Includes 80,000 shares of the Company's Common Stock which Mr. Boschetti
has the right to acquire within 60 days of January 31, 1999 upon exercise
of outstanding stock options.
(10) Excludes the 5,369,788 shares of Common Stock beneficially owned by
Sepracor, as to which shares each director and executive officer disclaims
beneficial ownership. Includes an aggregate of 655,080
7
<PAGE> 9
shares of the Company's Common Stock which all executive officers and
directors have the right to acquire within 60 days after January 31, 1999
upon exercise of outstanding stock options.
(11) Includes an aggregate of 513,472 shares of Sepracor Common Stock which all
executive officers and directors have the right to acquire within 60 days
of January 31, 1999 upon exercise of outstanding stock options. As of
January 31, 1999, all directors and executive officers as a group owned
3.1% of the Sepracor Common Stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company was organized in December 1993 as a subsidiary of Sepracor.
Effective January 1, 1994, Sepracor transferred its chromatography business,
including all of the outstanding shares of IBF, a subsidiary of Sepracor, to the
Company in exchange for 4,000,000 shares of Common Stock. In June 1996, Sepracor
converted the outstanding principal and interest of a loan to BioSepra into an
aggregate of 1,369,788 shares of Sepracor's Common Stock. Currently, Sepracor
owns approximately 64% of the Company's Common Stock. Under applicable
provisions of the Delaware General Corporation Law, Sepracor has the ability,
acting alone, to approve any action requiring approval of the holders of a
majority of the outstanding shares of Common Stock. Mr. Barberich and Mr.
Southwell, directors of the Company, are President and Chief Executive Officer
and Executive Vice President and Chief Financial Officer, respectively, of
Sepracor.
Technology Transfer and License Agreement. In January 1994, the Company and
Sepracor entered into a Technology Transfer and License Agreement (the
"Technology Transfer Agreement") pursuant to which Sepracor transferred to the
Company all technology owned or controlled by Sepracor, including trade secrets,
patents and patent applications, that relates to and is used in researching,
developing or manufacturing products in the "Company Field." The Company Field
means generally the separation of biological molecules. The Technology Transfer
Agreement expired on January 1, 1998. The Company has granted to Sepracor a
perpetual, royalty-free, exclusive license to the transferred technology for the
development, manufacture, use or sale of any products within the field of chiral
synthesis, chiral separations and the development, manufacture, use or sale of
chiral drugs and chiral drug intermediates (the "Sepracor Field"), as well as a
non-exclusive license to the transferred technology for the development,
manufacture, use or sale of any products outside the Company Field. In addition,
Sepracor granted a perpetual, royalty-free, exclusive license to the Company for
any improvements to the transferred technology useful in the Company Field which
are developed or otherwise acquired by Sepracor during the term of the
Technology Transfer ("Improvements"). Although the licenses granted by Sepracor
to the Company terminated when the Technology Transfer Agreement expired, it
provided that any licenses granted during the term survived to the extent they
relate to Improvements existing on the date of termination.
Corporate Services Agreement. The Company and Sepracor entered into a
one-year Corporate Services Agreement dated as of January 1, 1994, which
provides for a monthly fee to be paid by the Company for basic services, such as
accounting, human resources support services, data processing and laboratory
support services provided by Sepracor. This fee was determined by estimating
Sepracor's cost of the Company's expected usage of such basic services. The
Company may purchase additional services from Sepracor for a fixed rate based on
the number of hours spent by each Sepracor employee providing such services. For
items with identifiable costs such as insurance coverage, Sepracor charges the
Company based upon costs directly attributable to the Company. Management
believes that the charges under the Corporate Services Agreement are reasonable
and that the terms of the Corporate Services Agreement are at least as favorable
to the Company as the terms that could be obtained from an unaffiliated third
party. This Agreement had an initial term of one year and has been extended by
the Company for three additional one-year terms. The Company and Sepracor
continue to operate under the terms of the original agreement. Sepracor retains
the right to decline to provide any services which cause an unreasonable burden
to Sepracor. The Agreement permits the Company to terminate at any time
following 60 days'
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<PAGE> 10
notice to Sepracor, and automatically terminates six months after Sepracor's
ownership percentage of the Company decreases to less than 50% of the Company's
issued and outstanding shares. The aggregate payments made by the Company to
Sepracor for basic services under this Agreement were $208,000 in 1996, $208,000
in 1997 and $155,000 in 1998.
Sublease Agreements. Sepracor has entered into a Sublease Agreement with
the Company under which Sepracor subleases a portion of its facilities in
Marlborough, Massachusetts to the Company. The amount payable to Sepracor under
the Sublease Agreement is equal to Sepracor's rental costs under its lease
allocable to the portion of the premises subleased to the Company plus a pro
rata allocation of the estimated facility maintenance, utilities and other
operating costs. The rental payment made to Sepracor by the Company under this
Agreement was approximately $72,000 in 1996, $93,000 in 1997 and $81,000 in
1998. Operating costs under this Agreement were approximately $233,000 in 1996,
$277,000 in 1997 and $167,000 in 1998.
Registration Rights. Sepracor has certain registration rights with respect
to its shares in the Company as provided in the Technology Transfer Agreement.
Promissory Note. In January 1996, the Company entered into a Promissory
Note for $350,000, or so much of such sum as shall have been advanced by
Sepracor. This amount is payable to Sepracor over sixty monthly installments and
does not bear interest. As of December 31, 1998, $163,600 was outstanding under
this Promissory Note.
Guaranteed Indebtedness. The Company has indebtedness outstanding of
$402,000 as of December 31, 1999 under a French Franc loan that is guaranteed by
Sepracor. Additionally, the Company's $3,000,000 line of credit with a U.S.
bank, of which $2,000,000 is outstanding as of December 31, 1998, is guaranteed
by Sepracor.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Amendment No. 1 on
Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly
authorized.
BIOSEPRA, INC.
By: /s/ Jean-Marie Vogel
-------------------------------------
Jean-Marie Vogel
President and Chief Executive Officer
Date: April 30, 1999
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