SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
HemaSure Inc.
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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<PAGE>
HEMASURE INC.
140 Locke Drive
Marlborough, Massachusetts 01752
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 15, 1997
The 1997 Annual Meeting of Stockholders of HemaSure Inc. (the
"Company") will be held at The Radisson Hotel, Marlborough, Massachusetts 01752,
on Thursday, May 15, 1997 at 10:00 a.m., local time, to consider and act upon
the following matters:
1. To set the number of directors at five and to elect five directors
to serve until the next Annual Meeting of Stockholders.
2. To approve and adopt certain amendments to the Company's 1995
Employee Stock Option Plan.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on April 16, 1997 are
entitled to notice of, and to vote at, the meeting. The stock transfer books of
the Company will remain open for the purchase and sale of the Company's common
stock, par value $.01 per share.
All stockholders are cordially invited to attend the meeting.
By Order of the Board of Directors
JAMES B. MURPHY, Secretary
Marlborough, Massachusetts
April 21, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY CARD AND PROMPTLY MAIL IT IN THE ENCLOSED ENVELOPE
IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES AT THE MEETING. NO POSTAGE NEED
BE AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES.
<PAGE>
HEMASURE INC.
140 Locke Drive
Marlborough, Massachusetts 01752
Proxy Statement for the 1997 Annual Meeting of Stockholders
To Be Held on May 15, 1997
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of HemaSure Inc. (the "Company") for use at
the 1997 Annual Meeting of Stockholders to be held on May 15, 1997 and at any
adjournment or adjournments of that meeting (the "Annual Meeting"). All proxies
will be voted in accordance with the instructions contained therein, and if no
choice is specified, the proxies will be voted in favor of the matters set forth
in the accompanying Notice of Meeting. Any proxy may be revoked by a stockholder
at any time before it is exercised by delivery of written revocation to the
Secretary of the Company.
The Company's Annual Report for the year ended December 31, 1996, which
includes the Company's Annual Report on Form 10-K for the year ended December
31, 1996, as filed with the Securities and Exchange Commission (the
"Commission"), except for exhibits, is being mailed to stockholders with the
mailing of this Notice and Proxy Statement on or about April 21, 1997.
Voting Securities and Votes Required
On April 16, 1996, the record date for the determination of
stockholders entitled to notice of and to vote at the meeting, there were
outstanding and entitled to vote an aggregate of 8,121,484 shares of common
stock of the Company, par value $.01 per share ("Common Stock"). Each share of
Common Stock is entitled to one vote.
Under the Company's Bylaws, the holders of a majority of the shares of
Common Stock issued, outstanding and entitled to vote on any matter shall
constitute a quorum with respect to that matter at the Annual Meeting.
Stockholders holding shares of Common Stock who are present in person or
represented by proxy (including Stockholders who abstain from voting their
shares or who do not vote with respect to one or more of the matters presented
for stockholder approval) will be counted for purposes of determining whether a
quorum is present.
The affirmative vote of the holders of a plurality of votes cast by the
stockholders entitled to vote at the Annual Meeting is required for the election
of directors. The affirmative vote of the holders of a majority of the shares of
Common Stock voting on the matter is required for the approval of each of the
other matters to be voted upon.
Stockholders who abstain from voting as to a particular matter, and
shares held in "street name" by brokers or nominees who indicate on their
proxies that they do not have discretionary authority to vote such shares as to
a particular matter, will not be counted as votes in favor of such matter, and
will also not be counted as votes cast or shares voting on such matter.
Accordingly, abstentions and "broker non- votes" will have no effect on the
voting on a matter that requires the affirmative vote of a certain percentage of
the votes cast or shares voting on a matter.
<PAGE>
Stock Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information, as of January 31,
1997, with respect to any person (including any "group," as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) who is known to the Company to be the beneficial owner of more
than five percent of any class of the Company's voting securities, and as to
those shares of the Company's equity securities beneficially owned by each of
its directors and nominees for director, the executive officers of the Company
named in the Summary Compensation Table under the heading "Compensation of
Executive Officers" below, and all of its directors and executive officers as a
group. Such information, other than information with respect to the directors
and officers of the Company, is based on a review of statements filed with the
Commission pursuant to Sections 13(d), 13(f), and 13(g) of the Exchange Act with
respect to the Company's Common Stock. As of January 31, 1997, there were
8,106,324 shares of Common Stock outstanding.
The number of shares of Common Stock beneficially owned by each
director or executive officer is determined under the rules of 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 power or investment power and
also any shares which the individual has the right to acquire within 60 days
after January 31, 1997 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.
The address for each person below, unless specified otherwise, is c/o HemaSure
Inc., 140 Locke Drive, Marlborough, Massachusetts 01752.
<TABLE>
<CAPTION>
Shares of Percentage of
Common Stock Common
Beneficially Stock
Name and Address Owned Outstanding
--------------- ------------ -----------
<S> <C> <C>
Sepracor Inc....................................................... 3,000,000 37.01%
111 Locke Drive
Marlborough, MA 01752
Weiss, Peck & Greer, L.L.C......................................... 671,000 8.28
One New York Plaza
New York, NY 10004
Nicholas Madonia, Trustee(1)....................................... 489,000 6.03
Madonia, Pilles & Co., P.A.
30 Outwater Lane
Garfield, NJ 07026
Timothy J. Barberich............................................... 33,500 *
John F. McGuire(2)................................................. 0 *
David S. Barlow(3)................................................. 5,250 *
John T. Kimbell(3)................................................. 5,250 *
Rolf S. Stutz(3)................................................... 8,250 *
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<PAGE>
James B. Murphy(4)................................................. 19,290 *
John E. McCray(5).................................................. 37,100 *
Hans J. Heiniger, D.V.M., Ph.D(6).................................. 35,027 *
Philip M. Hampton.................................................. 5,000 *
Eugene J. Zurlo(7)(8).............................................. 272,982 3.37
107 Deer Grass Lane
Concord, MA 01742
Steven H. Rouhandeh(8)(9).......................................... 182,500 2.25
300 Park Avenue, 17th Floor
New York, NY 10022
Jeffrey B. Davis(8)................................................ 0 *
300 Park Avenue, 17th Floor
New York, NY 10022
Edward W. Kelly(8)................................................. 221 *
10 Half Mile Road
Barrington, RI 02806
All directors and executive officers as a group 604,370 7.46%
(13 persons)(10)...................................................
</TABLE>
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* Represents holdings of less than one percent.
(1) Mr. Madonia is the trustee for three trusts (the "Trusts") which
collectively hold 489,000 shares of Common Stock. In accordance with
the terms of the Trusts' governing documents, Mr. Madonia has the sole
power to vote and sole power to dispose of the shares of Common Stock
held by the trustee. Each of the Trusts is a charitable remainder trust
in accordance with the applicable rules and regulations of the Internal
Revenue Code of 1986, as amended.
(2) Effective April 2, 1997, Mr. McGuire was appointed to serve as Chief
Executive Officer, President and a director of the Company.
(3) Includes 5,250 shares of Common Stock which each of Messrs. Kimbell,
Barlow and Stutz has the right to acquire within 60 days after January
31, 1997 upon exercise of outstanding stock options.
(4) Includes 19,200 shares of Common Stock which Mr. Murphy has the right
to acquire within 60 days after January 31, 1997 upon exercise of
outstanding stock options.
(5) Includes 16,000 shares of Common Stock which Mr. McCray has the right
to acquire within 60 days after January 31, 1997 upon exercise of
outstanding stock options.
(6) Includes 34,000 shares of Common Stock which Dr. Heiniger has the right
to acquire within 60 days after January 31, 1997 upon exercise of
outstanding stock options.
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<PAGE>
(7) Includes 250,500 shares of Common Stock which Mr. Zurlo has the right
to acquire within 60 days after January 31, 1997 upon exercise of
outstanding stock options.
(8) Effective April 2, 1997, each of Messrs. Zurlo, Rouhandeh, Davis, and
Kelly were relieved of their duties as executive officers and employees
of the Company.
(9) Represents shares of Common Stock which Mr. Rouhandeh has the right to
acquire within 60 days after January 31, 1997 upon exercise of
outstanding stock options.
(10) Includes an aggregate of 549,450 shares of Common Stock which all
executive officers and directors have the right to acquire within 60
days after January 31, 1997 upon exercise of outstanding stock options.
ELECTION OF DIRECTORS
The persons named in the enclosed proxy will vote to elect as directors
the five nominees named below, unless the proxy is marked otherwise. If a
stockholder returns a proxy without contrary instructions, the persons named as
proxies will vote to elect as directors the nominees named below, each of whom
is currently a member of the Board of Directors of the Company.
Each director will be elected to hold office until the 1998 Annual
Meeting of Stockholders and until his successor is duly elected and qualified.
All of the nominees have indicated their willingness to serve, if elected;
however, if any nominee should be unable to serve, the shares of Common Stock
represented by proxies may be voted for a substitute nominee designated by the
Board of Directors.
There are no family relationships between or among any officers or
directors of the Company.
Set forth below are the name and age of each member of the Board of
Directors, and the positions and offices held by him, his principal occupation
and business experience during the past five years, the names of other publicly
held companies of which he serves as a director and the year of the commencement
of his term as a director of the Company. Information with respect to the number
of shares of Common Stock beneficially owned by each director, directly or
indirectly, as of January 31, 1997, appears above under the heading "Stock
Ownership of Certain Beneficial Owners and Management."
James L. Tullis, M.D. served as a director of the Company from January
1994 until his death in March 1996. The Board of Directors and management of
HemaSure regret the loss of Dr. Tullis and are deeply grateful for his dedicated
service as a member of the Board of Directors and for his lifelong contributions
to making blood safer.
Nominees For Director
Timothy J. Barberich, age 49, has served as Chairman of the Company
since April 1997, as a director since the Company's organization in 1993 and was
chairman of the Board of Directors from 1993 until March 1996. Mr. Barberich was
a founder of Sepracor Inc. ("Sepracor"), a specialty pharmaceutical company, and
has served as President, Chief Executive Officer and a director of Sepracor
since 1984. Sepracor owns approximately 37% of the outstanding Common Stock of
the Company. Mr. Barberich also serves as Chairman of the board of directors of
BioSepra Inc. ("Biosepra"), a publicly traded subsidiary of Sepracor.
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<PAGE>
David S. Barlow, age 40, has served as a director of the Company since
January 1994. Mr. Barlow has been Executive Vice President and President,
Pharmaceuticals Division of Sepracor since October 1995. From July 1993 to
October 1995, Mr. Barlow held the position of Senior Vice President and General
Manager of the Pharmaceuticals Division of Sepracor. From 1991 to 1993, he was
president of the Business Group, a management consulting firm. Previously, he
was Vice President, Worldwide Marketing and Business Development of Armour
Pharmaceutical Company, a subsidiary of Rhone-Poulenc Rorer, from 1988 to 1991.
Prior to that time, he was associated with Pfizer Inc. and Ares-Serono, Inc. in
various business planning and marketing positions.
John T. Kimbell, age 71, has served as a director of the Company since
January 1994. Mr. Kimbell has been an independent business consultant since
1975. From 1959 to January 1975, he was employed by Baxter Healthcare
Corporation in a series of executive positions. most recently serving as
President and Vice Chairman. Prior to that time, Mr. Kimbell was with Johnson &
Johnson for ten years.
Rolf S. Stutz, age 47, has served as a director of the Company since
January 1994. Mr. Stutz has been Chairman (since June 1996) and Chief Executive
Officer (since 1983) of Zoll Medical Corporation ("Zoll"), a manufacturer of
cardiovascular monitoring and treatment equipment. He served previously as
President of Zoll from 1983 to June 1996. From 1979 to 1983, Mr. Stutz held a
variety of domestic and international management positions with Millipore
Corporation. Mr. Stutz is also a director of Cambridge Heart, Inc., a
corporation engaged in the research, development, and commercialization of
products for non-invasive diagnosis of cardiac disease.
John F. McGuire, age 50, has served as Chief Executive Officer and a
director of the Company since April 1997. Prior to that time, Mr. McGuire served
as Vice President and General Manager of Johnson & Johnson's ("J&J") Ortho
Diagnostic Systems Blood Bank Business Unit since January 1996. From March 1995
to January 1996, Mr. McGuire held the position of Vice President, Sales &
Marketing, North America for J&J. From August 1990 to March 1995, Mr. McGuire
served as Managing Director of Ortho Diagnostic Systems, U.K. and Belgium for
J&J. From September 1988 to August 1990, Mr. McGuire held the position of
Marketing Director for the AIDS and Hepatitis Business Unit of J&J. From 1977 to
1988, Mr. McGuire held various management positions at E.I. DuPont De Nemours &
Company, the last of which was National Sales Manager, AIDS & Hepatitis
Business. Mr. McGuire is a member of the Board of Trustees of the National Blood
Foundation and serves on the boards of directors of multiple community
organizations.
Board and Committee Meetings
The Company has a standing Audit Committee of the Board of Directors,
which provides the opportunity for direct contact between the Company's
independent accountants and the Board of Directors. The Audit Committee has
responsibility for recommending the appointment of the Company's independent
accountants, reviewing the scope and results of audits and reviewing the
Company's internal accounting control policies and procedures. The Audit
Committee did not meet in 1996. In 1996, the members of the Audit Committee were
Mr. Kimbell and Dr. Tullis until March 1996, and Messrs.
Kimbell and Hampton from June 25, 1996 through December 31, 1996.
The Company also has a standing Compensation Committee of the Board of
Directors, which provides recommendations to the Board of Directors regarding
compensation programs of the Company. The Compensation Committee is responsible
for establishing and modifying the compensation of all corporate officers of the
Company, adoption and amendment of all stock option and other employee
-5-
<PAGE>
benefit plans, and the engagement of, terms of any employment agreements and
arrangements with, and termination of, all corporate officers of the Company.
The Compensation Committee did not meet during 1996. In 1996, the members of the
Compensation Committee were Messrs. Kimbell and Stutz. See "Report of the
Compensation Committee" below.
The Company does not have a nominating committee or a committee serving
a similar function. Nominations are made by and through the full Board of
Directors.
The Board of Directors held five meetings during 1996. Each director,
other than Messrs. Hampton and Tullis who are addressed below, attended at least
75% of the total number of meetings (including consents in lieu of meetings) of
the Board of Directors. Messrs. Hampton and Tullis attended at least 75% of the
total number of meetings (including consents in lieu of meetings) of the Board
of Directors which took place during the period of their respective
directorships. Mr. Stutz failed to file timely a Form 4 report as required under
Section 16(a) of the Exchange Act. Mr. Hampton failed to file a Form 3 report
and to file timely a Form 5 report as required under Section 16(a) of the
Exchange Act.
Compensation for Directors
Directors who are neither officers nor employees of the Company or of
any subsidiary of the Company (the "Outside Directors") receive $1,000 for each
meeting of the Board they attend and are entitled to participate in the
Company's 1994 Director Stock Option Plan (the "Director Option Plan"), provided
that Mr. Barberich and Mr. Barlow do not receive compensation for attendance at
meetings of the Board. Directors who are officers or employees of the Company do
not receive any additional compensation for their services as directors. On
January 5, 1994, options to purchase an aggregate of 75,000 shares of Common
Stock at an exercise price of $2.00 per share were granted under the Director
Option Plan to the following directors: Mr. Barberich, 45,000 shares, and Mr.
Barlow, Mr. Kimbell and Mr. Stutz, 7,500 shares each. On May 17, 1995, options
to purchase 1,500 shares of Common Stock at an exercise price of $5.50 per share
were granted under the Director Option Plan to the following directors: Mr.
Barberich, Mr. Barlow, Mr. Kimbell and Mr. Stutz. On February 15, 1996, options
to purchase 18,750 shares of Common Stock at an exercise price of $12.375 per
share were granted under the 1994 Stock Option Plan to Mr. Barberich. On May 16,
1996, options to purchase an aggregate of 39,000 shares of Common Stock at an
exercise price of $16.25 per share were granted under the Director Option Plan
to the following directors: Mr. Barberich, Mr. Barlow, Mr. Kimbell, and Mr.
Stutz, 9,750 shares each.
Compensation of Executive Officers
Summary Compensation Table. The following table sets forth certain
information with respect to the annual and long-term compensation for the last
two fiscal years of the Company's President and Chief Executive Officer and the
Company's other executive officers whose total annual salary and bonus for 1996
exceeded $100,000 (collectively, the "Named Executive Officers").
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<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
-------------------------------------------------------- -----------------
Securities All
Other Annual Underlying Other
Compensation Options/SARs Compensation
Name and Principal Position Year Salary ($) Bonus($) ($)(1) ($) ($)(2)
--------------------------- ---- ---------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Eugene J. Zurlo................. 1996 $215,569 0 0 480,000 $2,673
Chairman (3)(4) 1995 154,308 50,000 0 120,000 2,534
1994 112,500 50,000 0 150,000 900
Steven H. Rouhandeh (3)(5)...... 1996 $194,157 0 0 480,000 $266
President and 1995 144,629 50,000 0 150,000 198
Chief Executive Officer 1994 - - - - -
Jeffrey B. Davis (3)(6)......... 1996 $116,713 0 0 150,000 $255
Senior Vice President 1995 - - - - -
Chief Financial Officer 1994 - - - - -
Edward W. Kelly (3)............. 1996 $106,057 - 0 45,000 $2,036
Senior Vice President 1995 - - - - -
Chief Operating Officer 1994 - - - - -
James B. Murphy................. 1996 $112,926 0 0 30,000 $247
Senior Vice President 1995 93,013 20,000 0 12,000 203
Finance and Administration 1994 58,604 0 0 18,000 162
John E. McCray.................. 1996 $75,806 0 0 15,000 $393
Senior Vice President, 1995 147,758 0 0 24,500 765
Business Development 1994 76,500 0 7,676(7) 40,500 230
Hans J. Heiniger................ 1996 $131,052 0 0 35,000 $2,385
Executive Vice President, 1995 111,900 0 0 35,000 2,036
Chief Scientific Officer 1994 64,000 0 0 30,000 746
</TABLE>
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(1) Other compensation in the form of perquisites and other personal
benefits has been omitted if such perquisites and other personal
benefits constituted less than the lesser of $50,000 or 10% of the
total salary and bonus for the Named Executive Officer.
(2) Represents the taxable portion of group life insurance paid by the
Company.
(3) Effective April 2, 1997, Messrs. Zurlo, Rouhandeh, Davis, and Kelly
were relieved of their duties as executive officers and employees of
the Company, and, in connection therewith, all unvested options
previously granted to such persons, aggregating 499,500, 447,500,
150,000, and 45,000, respectively, expired by their terms.
(4) Effective February 16, 1996, Mr. Zurlo was appointed Chairman of the
Company (see footnote (3)).
(5) Effective December 5, 1996, Mr. Rouhandeh succeeded Mr. Zurlo as
President and Chief Executive Officer of the Company
(see footnote (3)).
(6) Effective June 1996, Mr. Davis was appointed to serve as Senior Vice
President and Chief Financial Officer of the Company
(see footnote (3)).
(7) Represents reimbursed relocation expenses.
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<PAGE>
Option Grant Table. The following table sets forth certain information
regarding options granted during the year ended December 31, 1996 by the Company
to the Named Executive Officers.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST YEAR
Individual Grants
-----------------
Percent of Market
Total Price of
Number of Options/ Securities
Securities SARs Exercise Underlying Potential Realizable Value
Underlying Granted to or Options/ at Assumed Annual Rates of
Options/SARs Employees In Base SARs Stock Price Appreciation
Granted Fiscal Price On Grant Expiration For Option Term(2)
Name (#)(1) Year ($/sh) Date Date 5%($) 10%($)
- ------------------------- ------------- ------------- ------------ -------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
*Eugene J. Zurlo(3)(4)... 6,140 .44 $12.38 $12.38 2/15/06 $ 47,785 $ 121,097
150,000 10.67 12.38 12.38 2/15/06 1,167,386 2,958,384
323,860 23.04 12.38 12.38 2/15/06 2,520,463 6,387,349
*Steven H. Rouhandeh(3)(4) 480,000 34.15 12.38 12.38 2/15/06 3,735,634 9,466,830
*Jeffrey B. Davis(3)(4).. 150,000 10.67 14.38 14.38 6/24/06 1,356,054 3,436,507
Edward W. Kelly(3)....... 45,000 3.20 14.38 14.38 6/24/06 406,816 1,030,952
James B. Murphy.......... 30,000 2.13 12.38 12.38 2/15/06 233,477 591,677
John E. McCray........... 15,000 1.07 12.38 12.38 2/15/06 116,739 295,838
Hans J. Heiniger......... 35,000 2.49 12.38 12.38 2/15/06 272,390 690,290
</TABLE>
- ---------------
(1) Options vest in five equal annual installments beginning on the first
anniversary of the date of grant.
(2) Amounts represent hypothetical gains that could be achieved for options
if exercised and sold 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 Common Stock on the date on which the options are sold.
(3) Effective April 2, 1997, each of Messrs. Zurlo, Rouhandeh, Davis, and
Kelly were relieved of their duties as executive officers and employees
of the Company, and, in connection therewith, all options previously
granted to such persons in 1996 expired by their terms.
(4) 150,000 shares of each of Messrs. Zurlo and Rouhandeh's option grant
and 50,000 shares of the option grant to Mr. Davis are "Special
Options" which had special acceleration provisions (see footnote (3)).
See "Certain Relationships and Related Transactions."
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<PAGE>
Year-End Option Table. The following table sets forth certain
information regarding options held as of December 31, 1996 by the Named
Executive Officers. Other than John E. McCray, no Named Executive Officer
exercised stock options in 1996.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST YEAR AND
YEAR-END OPTION/SAR VALUES
Number of
Securities
Underlying Value of Unexercised
Unexercised In-The-Money
Options/SARs at Options/SARs at
Fiscal Year-End (#) Fiscal Year-End ($)(1)(2)
------------------ -------------------------------
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable(2) Unexercisable
- --------------------------------------- -------------- -------------- ------------------- -------------------------------
<S> <C> <C> <C> <C>
Eugene J. Zurlo(2)..................... 84,000/666,000 $324,000/$658,500
Steven H. Rouhandeh(2)................. 70,000/560,000 $210,000/240,000
Jeffrey B. Davis(2).................... 0/150,000 0/0
John E. McCray......................... 21,100 $246,125 0/58,900 0/103,275
Hans J. Heiniger....................... 19,000/81,000 56,750/99,500
James B. Murphy........................ 9,600/50,400 30,600/45,900
Edward W. Kelly(2)..................... 0/45,000 0/0
</TABLE>
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(1) Value is based on the closing sales price of the Company's Common Stock
on December 31, 1996 ($6.25), the last trading day of the Company's
1996 fiscal year, less the applicable option exercise price.
(2) Effective April 2, 1997, each of Messrs. Zurlo, Rouhandeh, Davis, and
Kelly were relieved of their duties as executive officers and employees
of the Company, and, in connection therewith, all unvested options
previously granted to such persons, aggregating 499,500, 447,500,
150,000, and 45,000, respectively, expired by their terms.
Report of the Compensation Committee
The Compensation Committee of the Board of Directors, which is
currently comprised of two non-employee directors, John T. Kimbell and Rolf S.
Stutz, is responsible for determining the compensation package of each executive
officer and recommending it to the Board of Directors. The Compensation
Committee sets the compensation for executive officers and establishes
compensation policies for the Company's Chief Executive Officer and the other
executive officers of the Company. All decisions by the Compensation Committee
are reviewed by the Board of Directors.
The Company's executive compensation program is designed to promote the
achievement of the Company's business goals, and, thereby, to maximize corporate
performance and stockholder returns. Executive compensation consists of a
combination of base salary and stock-based incentives. The Compensation
Committee considers stock incentives to be a critical component of an
executive's compensation package in order to help align executive interests with
stockholder interests.
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<PAGE>
Compensation Philosophy
The objectives of the executive compensation program are to align
compensation with business objectives and individual performance, and to enable
the Company to attract, retain and reward executive officers who are expected to
contribute to the long-term success of the Company. The Company's executive
compensation philosophy is based on the principles of competitive and fair
compensation and sustained performance.
o Competitive and Fair Compensation
The Company is committed to providing an executive
compensation program that helps attract and retain highly
qualified executives. To ensure that compensation is
competitive, the Company compares its compensation practices
with those of other companies in the industry and sets its
compensation guidelines based on this review. The Company
believes compensation for its executive officers is within the
range of compensation paid to executives with comparable
qualifications, experience and responsibilities in the same or
similar businesses and of comparable size and success. The
Company also strives to achieve equitable relationships both
among the compensation of individual officers and between the
compensation of officers and other employees throughout the
organization.
o Sustained Performance
Executive officers are rewarded based upon corporate
performance and individual performance. Corporate performance
is evaluated by reviewing the extent to which strategic and
business plan goals are met, including such factors as
achievement of operating budgets, timely development and
commercial introduction of new processes and products,
establishment of strategic licensing and development alliances
with third parties and performance relative to competitors.
Individual performance is evaluated by reviewing attainment of
specified individual objectives and the degree to which
teamwork and Company values are fostered.
In evaluating each executive officer's performance, the Company
generally conforms to the following process:
o Company and individual goals and objectives are set at the
beginning of the performance cycle.
o At the end of the performance cycle, the accomplishment of
the executive's goals and objectives and his contributions to
the Company are evaluated.
o The executive's performance is then compared with peers within
the Company and the results are communicated to the executive.
o The comparative results, combined with comparative
compensation practices of other companies in the industry, are
then used to determine salary and stock compensation levels.
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<PAGE>
Annual compensation for the Company's executives generally consists of
two elements: salary and stock options. From time to time, the Committee may
consider payment of cash bonuses based upon performance in a particular year.
The salary for executives is generally set by reviewing compensation
for competitive positions in the market and the historical compensation levels
of the executives. Increases in annual salaries are based on actual corporate
and individual performance against targeted performance and various subjective
performance criteria. Targeted performance criteria vary for each executive
based on his area of responsibility, and may include achievement of the
operating budget for the Company as a whole or of a business group of the
Company, continued innovation in development and commercialization of the
Company's technology and products, timely development and commercial
introduction of new products or processes, implementation of financing
strategies and establishment of strategic licensing and development alliances
with third parties. Subjective performance criteria include an executive's
ability to motivate others, develop the skills necessary to grow as the Company
matures, recognize and pursue new business opportunities and initiate programs
to enhance the Company's growth and success. The Committee does not use a
specific formula based on these targeted performance and subjective criteria,
but instead makes an evaluation of each executive officer's contributions in
light of all such criteria.
Compensation at the executive officer level also includes the long-term
incentives afforded by stock options. The stock option program is designed to
promote the identity of long-term interests between the Company's employees and
its shareholders and assist in the retention of executives. The size of option
grants is generally intended to reflect the executive's position with the
Company and his contributions to the Company, including his success in achieving
the individual performance criteria described above. The option program
generally uses a five-year vesting period to encourage key employees to continue
in the employ of the Company. All stock options granted to executive officers in
1996 were granted at fair market value on the date of grant. During 1996, all
executive officers received options to purchase an aggregate of 1,235,000 shares
of Common Stock, at a weighted average exercise price of $12.69 per share.
Executive officers are also eligible to participate in the Company's
1995 Employee Stock Purchase Plan (the "Purchase Plan"). The Purchase Plan is
available to virtually all employees of the Company and generally permits
participants to purchase shares of Common Stock at a discount of approximately
15% from the fair market value at the beginning or end of the applicable
purchase period.
Base Salaries
Base salaries paid to the Named Executive Officers in 1996 were set
forth in their respective employment agreements, except that, effective February
16, 1996 (the date Mr. Zurlo was appointed Chairman of the Company and resigned
as President and Chief Executive Officer of the Company), Mr. Zurlo's base
salary was reduced by 50%, consistent with the reduction of his duties. The
employment agreements with the Named Executive Officers are described more fully
under "Certain Relationship and Related Transactions." The base salaries of
executives without employment agreements have been set by reviewing compensation
for competitive positions in the market and the historical compensation levels
of such executives.
Annual Bonus
Mr. Zurlo and Mr. Rouhandeh each received bonuses of $50,000 in 1996 in
respect of the Company's 1995 fiscal year and the achievement of certain
performance related goals which were
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<PAGE>
established in 1995, consistent with the terms of their respective employment
agreements. No executive officer received a bonus in respect of the Company's
1996 fiscal year due to the failure to achieve certain performance related goals
which were established in 1996.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), enacted in 1993, generally disallows a tax deduction to public
companies for compensation over $1 million paid to the corporation's Chief
Executive Officer and four other most highly compensated executive officers.
Qualifying performance compensation will not be subject to the deduction limit
if certain requirements are met. The Company intends to structure the
performance-based portion of the compensation of its executive officers (which
currently consists of stock option grants and performance based bonuses
described above) in a manner that complies with the new statute to mitigate any
disallowance of deductions.
Compensation Committee
John T. Kimbell
Rolf S. Stutz
Compensation Committee Interlocks and Insider Participation
The current members of the Compensation Committee are Messrs. Kimbell
and Stutz. Neither member of the Compensation Committee was at any time during
1996, 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.
Comparative Stock Performance
The comparative stock performance graph below compares the cumulative
stockholder return on the Common Stock of the Company for the period from April
7, 1994 through the year ended December 31, 1996 with the cumulative total
return on (i) the CRSP Total Return Index for The Nasdaq Stock Market (the
"Nasdaq Composite Index"), and (ii) the Nasdaq Pharmaceutical Index (assuming
the investment of $100 in the Company's Common Stock (at the initial public
offering price), the Nasdaq Composite Index and the Nasdaq Pharmaceutical Index
on April 7, 1994 and reinvestment of all dividends).
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<PAGE>
Measurement points are on April 7, 1994 and the last trading day of the
years ended December 31, 1994, December 31, 1995 and December 31, 1996. Prior to
April 7, 1994, the Company's Common Stock was not registered under the Exchange
Act.
<TABLE>
<CAPTION>
PERFORMANCE GRAPH
4/7/94 12/31/94 12/31/95 12/31/96
<S> <C> <C> <C> <C>
HemaSure Inc. $100 $ 46 $182 $ 89
Nasdaq Composite Index 100 103 145 179
Nasdaq Pharmaceutical Index 100 92 169 169
</TABLE>
Certain Relationships and Related Transactions
Sepracor. The Company was organized in December 1993 as a subsidiary of
Sepracor. Effective January 1, 1994, Sepracor transferred its blood filtration
and membrane filter design business to the Company in exchange for 3,000,000
shares of Common Stock. Sepracor currently owns approximately 37% of the
Company's outstanding Common Stock. Messrs. Barberich and Barlow, directors of
the Company, are President and Chief Executive Officer and Executive Vice
President and President, Pharmaceuticals Division, respectively, of Sepracor.
Employment Agreements. Effective April 2, 1997, Messrs. Zurlo,
Rouhandeh, Davis, and Kelly were relieved of their duties as executive officers
and employees of the Company. The Company has initiated discussions with such
executive officers regarding severance arrangements. On February 16, 1996, the
Company entered into employment agreements with Mr. Zurlo and Mr. Rouhandeh
(collectively, the "Officers") which provided that Mr. Zurlo serve as Chairman
and Chief Executive Officer and Mr. Rouhandeh serve as Executive Vice President
of the Company. The term of each employment agreement was from February 16, 1996
through February 16, 1999, subject to automatic renewal, unless ninety days
prior written notice is provided. The employment agreements established a base
salary of $225,000 per year for Mr. Zurlo and $200,000 per year for Mr.
Rouhandeh, subject to annual increases as determined by the Board of Directors.
Under each agreement, such Officers were entitled to receive an annual bonus as
determined by the Board of Directors which would have equalled a minimum of
$50,000 for the achievement of predetermined goals. Upon execution of the
employment agreements, each Officer received options to purchase an aggregate of
480,000 shares of Common Stock (subject to the
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<PAGE>
approval by the stockholders of the amendments to the Option Plan described
herein), at an exercise price of $12.375 per share (the closing price of the
Company's Common Stock on February 15, 1996), of which options to purchase
330,000 shares vest in four equal annual installments and options to purchase
150,000 shares vest after ten years, subject to acceleration based upon the
achievement of certain milestones set forth in the employment agreements (the
"Special Options"). In the event of a change in control of the Company, all
options other than Special Options vest immediately and each Officer is entitled
to receive all compensation owed for the balance of the employment agreement (or
299% of such Officer's annual compensation for the immediately preceding
calendar year, whichever is greater). Special Options shall vest immediately in
the event of a change in control in which stockholders of the Company receive in
excess of a fixed dollar amount per share of Common Stock. Finally, if either
Officer is terminated without cause, he will be entitled to receive an amount
equal to 100% of his annual compensation for the immediately preceding year,
whether or not services are performed.
On April 22, 1996, the Company entered into an employment agreement
with Mr. Kelly which provided that Mr. Kelly serve as president of the Company's
medical devices division. The employment agreement established a base salary of
$160,000 per year and provided for a bonus of 20% of Mr. Kelly's base salary and
an additional bonus of up to 10% of Mr. Kelly's base salary for the achievement
of certain predetermined goals. Upon execution of his employment agreement, Mr.
Kelly received options to purchase an aggregate of up to 45,000 shares of Common
Stock, at an exercise price equal to $14.375, vesting in equal installments over
a period of five years from the date of grant.
On May 23, 1996, the Company entered into an employment agreement with
Mr. Davis which provided that Mr. Davis serve as Senior Vice President and Chief
Financial Officer of the Company. The employment agreement established a base
salary of $165,000 per year, subject to annual increases each year as determined
by the Board of Directors. Mr. Davis received a signing bonus of $25,000 and his
employment agreement provided for the payment of an annual bonus as determined
by the Board of Directors, which was targeted at $50,000 for the achievement of
predetermined goals. Upon execution of his employment agreement, Mr. Davis
received options to purchase an aggregate of up to 150,000 shares of Common
Stock at an exercise price of $14.375 per share, of which options to purchase
100,000 shares vest in equal installments over a period of five years from the
date of grant and the right to purchase 50,000 Special Options at the same
exercise price as determined above. In the event of a change in control of the
Company or termination other than for cause, all options, other than Special
Options, vest immediately and Mr. Davis is entitled to receive 200% of his
annualized cash compensation, whether or not services are performed.
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<PAGE>
APPROVAL OF AMENDMENTS TO 1995 EMPLOYEE STOCK PURCHASE PLAN
On April 16, 1997, the Company's Board of Directors adopted, subject to
stockholder approval, amendments to the Company's Purchase Plan to (i) provide
for four additional semi-annual offerings of one-fourth of the number of shares
of Common Stock of the Company remaining under the Purchase Plan following the
last offering currently permitted under such Purchase Plan, and (ii) modify the
Purchase Plan to reflect recent changes in applicable laws (as so amended, the
"Amended Purchase Plan"). The Board of Directors believes that it is in the best
interest of the Company to continue to encourage stock ownership by employees of
the Company. A copy of the Amended Purchase Plan may be obtained from the
Company by contacting James B. Murphy, Senior Vice President Finance and
Administration, 140 Locke Drive, Marlborough, Massachusetts 01752.
Description of the Offering Periods
Under the Purchase Plan, the fourth and final offering period during
which employees may purchase shares of Common Stock is scheduled to expire on
May 31, 1997. As of such date, the Company expects that approximately 60,000 of
the original 100,000 shares authorized under the Purchase Plan will remain
unpurchased. The Amended Purchase Plan will provide for four additional
semi-annual offerings of one-fourth of the number of shares of Common Stock
remaining under the Purchase Plan (e.g., 15,000 shares per offering period). No
additional shares will be included in the Amended Purchase Plan. The offering
periods shall be June 1 to the next succeeding November 30, and December 1 to
the next succeeding May 31, beginning June 1, 1997. The number of shares
available for any offering may be increased by the shares, if any, which were
made available but not purchased during prior offerings under the Purchase Plan.
Thereafter, the Board may, but is not obligated to, continue offerings under the
Amended Purchase Plan of shares still remaining thereunder.
During each offering period, the maximum number of shares which may be
purchased by an employee is determined on the first day of the offering period
under a formula whereby 85% of the market value of the share of Common Stock on
the first day of the offering period is divided into an amount equal to 6% of
the employee's annualized regular salary. An employee may elect to have up to a
maximum of 10% deducted from his or her regular salary for this purpose. The
price at which the employee's option is exercised is the lower of (a) 85% of the
closing price of the Common Stock as quoted on the Nasdaq Stock Market on the
day that the offering commences, or (b) 85% of the closing price of the Common
Stock as quoted on the Nasdaq Stock Market on the day that the offering
terminates.
Recent Changes in Applicable Laws
The Amended Purchase Plan eliminates certain provisions in the Purchase
Plan which previously were required by Section 16 of the Exchange Act prior to
the amendment of Section 16, effective August 15, 1996. Pursuant to the Amended
Purchase Plan and consistent with Section 16 under the Exchange Act, directors
and officers who determine to reverse a prior determination to participate in
any one offering period may now participate in the next succeeding offering
period. Under the Purchase Plan, such persons were required to cease
participation in the Purchase Plan for a six month period under such
circumstances. In addition, the Amended Purchase Plan reflects the elimination
of the shareholder approval requirement for certain tax conditioned plans,
including the Amended Purchase Plan. However, the Amended Purchase Plan
continues to be subject to the shareholder approval requirements of the Code.
-15-
<PAGE>
Eligibility
With certain limited exceptions in the case of employees already
holding a significant amount of Common Stock, each employee of the Company as of
the date an offering commences and who ordinarily works 20 or more hours per
week and more than five months per year is eligible to participate in the
Purchase Plan. As of April 14, 1997, approximately 55 employees were eligible to
participate in the Purchase Plan.
Administration
Because option grants under the Amended Purchase Plan will be at the
election of each officer or employee, the benefits to be received by any
particular current executive officer, by all current executive officers as a
group, or by non-executive officer employees as a group cannot be determined by
the Company at this time. Directors who are neither officers nor employees of
the Company are not eligible to participate in the Amended Purchase Plan.
Federal Income Tax Consequences
The Amended Purchase Plan is intended to qualify as an "employee stock
purchase plan" as defined in Section 423 of the Code, which provides that an
employee does not have to pay any federal income tax when such employee joins
the Amended Purchase Plan, or when an offering period ends and such employee
receives shares of the Company's Common Stock. The employee is, however,
required to pay a federal income tax on the difference, if any, between the
price at which he sells the shares and the price he or she paid for them.
If an employee has owned shares for more than one year and disposes of
them at least two years after the date an offering period commenced, he will be
taxed as described below. If the market price of the shares on the date they are
sold is less than the price paid for the shares under the Amended Purchase Plan,
the employee will incur a long term capital loss in the amount equal to the
price paid over the sale price. If the sale price is higher than the price paid
under the Purchase Plan, such employee will have to recognize ordinary income in
an amount equal to the lesser of (i) the market price of the shares on the date
the offering commenced over the price paid; or (ii) the excess of the sale price
over the price paid. Any further gain is treated as long-term capital gain.
Except as set forth below, the Company will generally not be entitled to a tax
deduction upon the purchase or sale of shares under the Amended Purchase Plan.
If the employee sells the shares before he or she has owned them for more than
one year or before the expiration of a two-year period commencing on the date
the offering period commenced, the employee will have to recognize ordinary
income in the amount of the difference between the option price and the market
price of the shares on the date of purchase and the Company will receive an
expense deduction for the same amount. The employee will recognize a capital
gain or loss for the difference between the sale price and the market price on
the date of purchase. The gain or loss will be long-term if the employee owned
the shares for more than one year.
Board Recommendation
The Board of Directors believes the Amended Purchase Plan is in the
best interests of the Company and its stockholders and therefore recommends a
vote FOR this proposal.
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<PAGE>
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P. is currently serving as the Company's
independent accountants. Coopers & Lybrand L.L.P. has served as the Company's
independent accountants since 1993. Representatives of Coopers & Lybrand L.L.P.
are expected to be present at the Annual Meeting. They will have the opportunity
to make a statement if they desire to do so and will also be available to
respond to appropriate questions from stockholders.
OTHER MATTERS
The Board of Directors does not know of any other matters which may
come before the meeting. However, if any other matters are properly presented to
the meeting, it is the intention of the persons named in the accompanying proxy
to vote, or otherwise act, in accordance with their judgment on such matters.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph, facsimile and personal interviews. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the owners
of stock held in their names, and the Company will reimburse them for their
reasonable out-of-pocket expenses incurred in connection with the distribution
of proxy materials.
Deadline For Submission of Stockholder Proposals for the 1998 Annual Meeting
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company at its principal office
in Marlborough, Massachusetts not later than December 22, 1997 for inclusion in
the proxy statement for that meeting.
By Order of the Board of Directors
JAMES B. MURPHY
Secretary
April 21, 1997
THE BOARD OF DIRECTORS ENCOURAGES STOCKHOLDERS TO ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. A PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THIS MEETING MAY VOTE THEIR STOCK
PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
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