FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 0-23776
Hemasure Inc.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-3216862
(State or other jurisdiction of (I.R.S. Employer
organization or incorporation) Identification No.)
140 Locke Drive, Marlborough, Massachusetts 01752
(Address of principal executive offices)
(zip code)
(508) 490-9500
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
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
--- ------
APPLICABLE ONLY TO CORPORATE ISSUERS
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 9,042,850
-------------------------------------- ------------------------------
Class Outstanding at August 14, 1998
1
747001.1
<PAGE>
HemaSure Inc.
INDEX
<TABLE>
Page
Part I -Financial Information
Item 1. Financial Statements.
<S> <C> <C>
Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997 3
Consolidated Statements of Operations for the Three and Six Month
Periods Ended June 30, 1998 and 1997 4
Consolidated Statements of Cash Flows for the Periods Ended June 30, 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
Item 1. Legal Proceedings. 10
Item 2. Changes in Securities and Use of Proceeds. 10
Item 3. Defaults Upon Senior Securities. 10
Item 4. Submission of Matters to a Vote of Security Holders. 10
Item 5. Other Information. 11
Item 6. Exhibits and Reports on Form 8-K. 12
Signatures 13
</TABLE>
2
747001.1
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
HemaSure Inc.
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
( In thousands ) June 30, December 31,
1998 1997
----------------- -------------------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 1,782 $ 1,274
Marketable securities -- 6,882
Accounts receivable -- 436
Inventories 283 158
Prepaid expenses 362 347
----------------- -------------------
Total current assets 2,427 9,097
Property and equipment, net 1,445 1,478
Other assets 32 32
----------------- -------------------
Total assets $ 3,904 $ 10,607
================= ===================
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 814 $ 876
Accrued expenses 1,489 1,846
Note payable - current portion 38 37
Capital lease obligations - current portion 262 267
----------------- -------------------
Total current liabilities 2,603 3,026
Capital lease obligations 188 289
Note payable 53 72
Convertible subordinated note payable -- 8,687
----------------- -------------------
Total liabilities 2,844 12,074
----------------- -------------------
Stockholders' equity (deficit):
Common stock 90 82
Additional paid-in capital 69,599 60,878
Unearned compensation -- (89)
Unrealized holding loss of available for sale marketable securities -- (1)
Accumulated deficit (68,629) (62,337)
----------------- -------------------
Total stockholders' equity (deficit) 1,060 (1,467)
----------------- -------------------
$ 3,904 $ 10,607
Total liabilities and stockholders' equity (deficit)
================= ===================
</TABLE>
The accompanying notes are an integral part
of the financial statements.
3
747001.1
<PAGE>
HemaSure Inc.
Consolidated Statements of Operations
For The Three and Six Month Periods Ended
June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
(In thousands, except per share amounts) Three-month periods Six-month periods
ended June 30, ended June 30,
--------------------------- ---------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ -- $ 517 $ 25 $ 1,068
Costs and expenses:
Cost of products sold -- 847 657 1,879
Research & Development 1,249 876 2,011 1,761
Legal expense related to patents 394 106 1,456 200
Selling, general and administrative 1,252 1,000 2,263 2,319
Restructuring charge -- 1,215 -- 1,215
---------- ----------- ---------- -----------
Total costs and expenses 2,895 4,044 6,387 7,374
---------- ----------- ---------- -----------
Loss from operations (2,895) (3,527) (6,362) (6,306)
Interest income 46 160 120 341
Interest expense (14) (377) (50) (668)
Other income (expense) -- -- -- (1)
---------- ----------- ---------- -----------
Net (loss) $ (2,863) $ (3,744) $ (6,292) $ (6,634)
========== =========== ========== ===========
Net (loss) per share - basic and diluted $ (0.32) $ (0.46) $ (0.70) $ (0.82)
========== =========== ========== ===========
Weighted average number of shares of 9,008 8,124 9,000 8,119
common stock outstanding - basic and
diluted
</TABLE>
The accompanying notes are an integral part of
the financial statements.
4
747001.1
<PAGE>
HemaSure Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
(In thousands) Six-month periods
ended June 30,
--------------------------------
1998 1997
--- ----------- --- -----------
<S> <C> <C>
Cash flows from operating activities:
Net Loss $ (6,292) $ (6,634)
Adjustments to reconcile net loss to net cash in operating activities:
Depreciation and amortization 284 394
Accretion of marketable securities discount 20 (15)
Loss on disposal of equipment 5 ---
Changes in operating assets and liabilities:
Net assets of discontinued business --- 350
Accounts receivable 436 (23)
Inventories (125) (87)
Prepaid expenses (15) 179
Accounts payable and accrued expenses (418) (87)
----------- -----------
Net cash used in operating activities (6,105) (5,749)
----------- -----------
Cash flows from investing activities:
Purchase of available-for-sale marketable securities (20,255) (54,837)
Maturities of available-for-sale marketable securities 27,117 56,641
Unrealized holding loss of available-for-sale marketable securities 1 1
Additions to property and equipment (167) (99)
Decrease in other assets - (12)
----------- -----------
Net cash provided from investing activities 6,696 1,694
----------- -----------
Cash flows from financing activities:
Proceeds from insurance of common stock 42 36
Borrowing from notes payable arrangements --- 140
Repayments of notes payable (19) (9)
Repayments of capital lease obligations (106) (117)
----------- -----------
Net cash (used in) provided from financing activities (83) 50
----------- -----------
Net increase (decrease) in cash and cash equivalents 508 (4,005)
Cash and cash equivalents at beginning of period 1,274 5,527
----------- -----------
Cash and cash equivalents at end of period $ 1,782 $ 1,522
=========== ===========
</TABLE>
The accompanying notes are an integral part
of the financial statements
5
747001.1
<PAGE>
HemaSure Inc.
Notes To Consolidated Financial Statements
1. Basis of Presentation
The accompanying financial statements are unaudited and have been
prepared on a basis substantially consistent with the audited financial
statements.
Certain information and footnote disclosures normally included in the
Company's annual statements have been condensed or omitted. The
condensed interim financial statements, in the opinion of management,
reflect all adjustments (including normal recurring accruals) necessary
for a fair statement of the results for the interim periods ended June
30, 1998 and 1997.
The results of operations for the interim periods are not necessarily
indicative of the results of operations to be expected for the fiscal
year. These interim financial statements should be read in conjunction
with the audited financial statements for the year ended December 31,
1997, which are contained in the Company's Form 10-K (File No. 0-
23776), filed with the Securities and Exchange Commission on March 31,
1998.
2. Inventories
Inventories consist of the following:
June 30, 1998 December 31, 1997
------------- -----------------
Raw Materials $ 133 $ -
Work in progress - -
Finished goods 150 158
------------- -----------------
$ 283 $ 158
============= =================
3. Property and Equipment
Property and equipment consists of the following:
June 30, 1998 December 31,1997
Property and equipment $ 2,870 $ 3,176
Less accumulated depreciation and
amortization (1,654) (1,771)
------------- ----------------
1,216 1,405
Construction in progress 229 73
------------- ----------------
$ 1,445 $ 1,478
============= ================
4. Convertible subordinated note payable
In January 1997, the Company entered into a Restructuring Agreement of
the debt related to its acquisition of Novo Nordisk's plasma products
unit. The amount included in the balance sheet at December 31, 1997
includes the effect of the Restructuring Agreement net of a $3,000,000
contingency amount to reflect the most probable result of the Company's
decision to exit the plasma business. On January 6, 1998, $8,687,000 of
debt, which the Company believes was the entire amount outstanding as of
the date of conversion, was converted into Common Stock at a conversion
price of $10.50 per share, or 827,375 shares, pursuant to the terms of
the note. The holder of the note has contested the conversion of the
note, including the forgiveness of the $3,000,000 amount
6
747001.1
<PAGE>
5. Net loss per share- basic and diluted
The net loss per share is based on the weighted average number of shares
of common stock outstanding during each period. Common equivalent shares
are not included in the per share calculation where the effect of their
inclusion would be antidilutive.
6. Litigation
The Company is a defendant in two lawsuits brought by Pall Corporation
("Pall"). In complaints filed in February 1996 and November 1996, Pall
alleged that HemaSure's manufacture, use and/or sale of the LeukoNet
product infringes upon three patents held by Pall.
On October 14, 1996 in connection with the first action concerning U.S.
Patent No. 5,451,321 ( the "'321 patent"), the Company filed for summary
judgment of noninfringement. Pall filed a cross motion for summary
judgment of infringement at the same time.
In October 1997, the Eastern District of New York granted in part Pall's
summary judgment motion relating to the '321 patent. The Company has
agreed to terminate the manufacture, use, sale and offer for sale of the
filter subject to the court's order. In April 1998, the Eastern District
of New York granted HemaSure's request to appeal the October 1997
decision. The appeal of the October 1997 decision is currently pending
before the U.S. Court of Appeals for the Federal Circuit.
With respect to the second action concerning U.S. Patent No. 4,952,572
(the "'572 patent"), the Company has answered the complaint stating that
it does not infringe any claim of the asserted patents and has filed for
summary judgment of noninfringement. Pall filed a cross motion for
summary judgment of infringement at the same time. Further, the Company
has counterclaimed for declaratory judgment of invalidity,
noninfringement and unenforceability of the '572 patent.
The Company believes, based on advice of its patent counsel, that a
properly informed court should conclude the manufacture, use and/or sale
by the Company or its customers of the LeukoNet product did not infringe
any valid enforceable claim of the three Pall patents. However, there
can be no assurance that the Company will prevail in the pending
litigations, and an adverse outcome in a patent infringement action
would have a material adverse effect on the Company's future business
and operations.
7. Subsequent event
In August 1998, the Company received a written commitment from a
commercial bank for a $5 million revolving line of credit. Up to $3
million under the line will be available upon the signing of the
definitive loan agreement, with the remainder available upon a
completion of certain events as defined, including clearance of its
510(k) Pre-Market Notification Application currently with the U.S. Food
and Drug Administration. The revolving line of credit, which is expected
to expire in June 2000, will be used to help finance the Company's
working capital requirements and for general corporate purposes. Amounts
borrowed under the line are anticipated to bear interest at the bank's
prime lending rate plus 1/2% payable quarterly in arrears. The bank will
have a first lien on all assets of the Company including its
intellectual property.
Sepracor, the Company's largest stockholder, has agreed in principle to
guarantee repayment by the Company of amounts borrowed under the line of
credit. In exchange for the guarantee, subject to the approval of the
Company's Board of Directors, the Company will grant to Sepracor
warrants to purchase up to 1,700,000 shares of the Company's common
stock at a price of $0.69 per share, of which 1,000,000 warrants will be
exercisable upon issuance and 700,000 warrants will be exercisable in
the event the Company draws down in excess of $3 million under the line
of credit. The warrants will expire in the year 2003 and have certain
registration rights associated with them. HemaSure will value the
warrants as of the date of the final agreement and record a charge over
the term of the line of credit. The closing of the line of credit is
subject to the satisfaction of customary conditions, including the
negotiation and execution of customary loan documents and related
agreements with Sepracor. Accordingly, there can be no assurance that
the line of credit will close on the terms set forth in the commitment,
if at all.
7
747001.1
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Overview
HemaSure was established in December 1993 as a wholly-owned subsidiary of
Sepracor Inc. ("Sepracor"). Prior to that date, its business was conducted as
part of Sepracor's bioprocessing division. Effective as of January 1, 1994, in
exchange for 3,000,000 shares of Common Stock, Sepracor transferred to HemaSure
its technology relating to the manufacture, use and sale of medical devices.
The Company is utilizing its proprietary filtration technologies to develop
products to increase the safety of donated blood and to improve certain blood
transfusion procedures. The Company's products are designed for use in blood
centers and hospital blood banks worldwide. From inception through fiscal 1995,
HemaSure has sold non-blood related filter products primarily to Sepracor. In
February 1998, the Company determined to discontinue manufacturing the LeukoNet
System and focus on the completion of development and market introduction of its
next- generation red cell filtration product. All of the Company's planned
blood-related products are in the research and development state, and certain of
these products may require preclinical and clinical testing prior to submission
of any regulatory application for commercial use. The Company's success will
depend on development and commercial acceptance of these blood-related products
and its ability to raise capital through strategic partnerships, public or
private equity and/or debt financing.
The Company is subject to risks common to companies in the medical technology
industry, including, but not limited to, development by the Company or its
competitors of new technological innovations, dependence on key personnel,
protection of proprietary technology and compliance with FDA regulations.
Three and six months ended June 30, 1998 and 1997
The Company did not record any revenues for the quarter ended June 30, 1998
compared to revenues of $517,000 in the same period in 1997. Revenues were
$25,000 for the first six months of 1998 compared to $1,068,000 for the first
six months of 1997. Revenues for all periods presented represent sales of the
Company's discontinued LeukoNet System.
Total cost of products sold exceeded total product sales in all periods due to
the high costs associated with low-volume production.
Research and development expenses were $1,249,000 in the second quarter of 1998
compared to $876,000 in the second quarter of 1997, and were $2,011,000 in the
six months ended June 30, 1998 compared to $1,761,000 in the six months ended
June 30, 1997. The increase in both the three and six month periods is primarily
attributable to costs associated with the development of the Company's next
generation red cell filtration system, the r/LS system.
Legal expenses related to patents were $394,000 in the second quarter of 1998
compared to $106,000 in the second quarter of 1997, and were $1,456,000 in the
six months ended June 30, 1998 compared to $200,000 in the six months ended June
30, 1997. The increase in both the three and six month periods is due to costs
associated with defending the Company's patent position in its outstanding
litigation with Pall Corp.
Selling, general and administrative expenses were $1,252,000 in the three months
ended June 30, 1998 compared to $1,000,000 in the three months ended June 30,
1997, and were $2,263,000 in the first six months of 1998 compared to $2,319,000
in the first six months of 1997. The increase
8
747001.1
<PAGE>
in the three month period is due primarily to increases in sales and marketing
costs associated with the preparation to market and sell the Company's r/LS
system. The decrease in the six month period is primarily attributable to lower
administrative costs associated with the Company's decision to focus on its core
blood filtration business offset in part by sales and marketing costs associated
with the preparation to market and sell the Company's r/LS system. Sales and
marketing costs may increase in future periods from current levels as the
Company continues its efforts to expand sales of its blood filtration products.
In the three month period ended June 30, 1997, the Company recorded a one time
charge of $1,215,000 for severance and related charges in connection with
executive management departures pursuant to HemaSure's decision to focus on its
core blood filtration business.
Interest income for both the three and six months ended June 30, 1998 decreased
compared to the three and six months ended June 30, 1997 due to lower average
cash and marketable securities balances available for investment. Interest
expense for the three and six month periods ended June 30, 1998 decreased
compared to the same periods in 1997 related to a convertible subordinated note
payable which is not existence in 1998 and a lower average capital lease
obligation balance.
Liquidity and Capital Resources
The net increase in cash and cash equivalents for the six months ended June 30,
1998 was $508,000. This increase is attributable primarily to net cash provided
from investing activities of $6,696,000 offset in part by net cash used in
operating activities of $6,105,000 and net cash used in financing activities of
$83,000.
Net cash provided from investing activities relates to available-for-sale
marketable securities investing activities of $6,862,000 offset in part by
additions to property and equipment of $167,000. Net cash used in operating
activities is primarily attributable to the net loss of $6,292,000 and a
reduction in accounts payable and accrued expenses of $418,000 offset in part by
deprecation and amortization of $284,000 and the reduction of accounts
receivable of $436,000.
In August 1998, the Company received a written commitment from a commercial bank
for a $5 million revolving line of credit. Up to $3 million under the line will
be available upon the signing of the definitive loan agreement, with the
remainder available upon a completion of certain events as defined including
clearance of its 510(k) Pre-Market Notification Application currently with the
U.S. Food and Drug Administration. The revolving line of credit, which is
expected to expire in June 2000, will be used to help finance the Company's
working capital requirements and for general corporate purposes. Amounts
borrowed under the line are anticipated to bear interest at the bank's prime
lending rate plus 1/2% payable quarterly in arrears. The bank will have a first
lien on all assets of the Company including its intellectual property.
Sepracor, the Company's largest stockholder, has agreed in principle to
guarantee repayment by the Company of amounts borrowed under the line of
credit. In exchange for the guarantee, subject to the approval of the
Company's Board of Directors, the Company will grant to Sepracor
warrants to purchase up to 1,700,000 shares of the Company's common
stock at a price of $0.69 per share, of which 1,000,000 warrants will be
exercisable upon issuance and 700,000 warrants will be exercisable in
the event the Company draws down in excess of $3 million under the line
of credit. The warrants will expire in the year 2003 and have certain
registration rights associated with them. HemaSure will value the
warrants as of the date of the final agreement and record a charge over
the term of the line of credit. The closing of the line of credit is
subject to the satisfaction of customary conditions, including the
negotiation and execution of customary loan documents and related
agreements with Sepracor. Accordingly, there can be no assurance that
the line of credit will close on the terms set forth in the commitment,
if at all.
9
747001.1
<PAGE>
contingency amount to reflect the most probable result of the Company's decision
to exit the plasma business. On January 6, 1998, $8,687,000 of debt, which the
Company believes was the entire amount outstanding as of the date of conversion,
was converted into Common Stock at a conversion price of $10.50 per share, or
827,375 shares, pursuant to the terms of the note. The holder of the note has
contested the conversion of the note, including the forgiveness of the
$3,000,000 amount.
The Company believes based on its current operating plan, that, in addition to
its available cash and marketable securities balances, and the use of the funds
available to it under the line of credit commitment, it will be able to fund the
Company's operations through 1998. The Company expects to continue to evaluate
the need for additional capital over the remainder of 1998 in order to continue
to fund working capital and general corporate financing requirements. Possible
sources of such additional capital could include strategic partnerships, public
or private equity and/or debt financing. No assurance can be given, however,
that the Company will be able to obtain additional financing on terms acceptable
to the Company, if at all. Should the Company fail to obtain any such financing,
or to obtain such financing on terms favorable to the Company, the Company may
be unable to continue or complete the development of its proposed products
and/or market such products successfully, or to continue its current operations
as presently conducted, if at all, beyond 1998. Should the Company be unable to
complete the financing expected from its written commitment for such financing,
it would not be able to continue its current operations beyond August 1998, if
at all. The Company's cash requirements may vary materially from those now
planned because of factors such as successful development of products, results
of product testing, approval process at the FDA and similar foreign agencies,
commercial acceptance of its products, patent developments and the introduction
of competitive products.
10
747001.1
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is a defendant in two lawsuits brought by Pall Corporation
("Pall"). In complaints filed in February 1996 and November 1996, Pall
alleged that HemaSure's manufacture, use and/or sale of the LeukoNet
product infringes upon three patents held by Pall.
On October 14, 1996 in connection with the first action concerning U.S.
Patent No. 5,451,321 (the "'321 patent"), the Company filed for summary
judgment of noninfringement. Pall filed a cross motion for summary
judgment of infringement at the same time.
In October 1997, the Eastern District of New York granted in part
Pall's summary judgment motion relating to the '321 patent. The Company
has agreed to terminate the manufacture, use, sale and offer for sale
of the filter subject to the court's order. In April 1998, the Eastern
District of New York granted to HemaSure its request to appeal the
October 1997 decision. The appeal of the October 1997 decision is
currently pending before the U.S. Court of Appeals for the Federal
Circuit.
With respect to the second action concerning U.S. Patent No. 4,952,572
(the "'572 patent"), the Company has answered the complaint stating
that it does not infringe any claim of the asserted patents and has
filed for summary judgment of noninfringement. Pall filed a
cross-motion for summary judgment of infringement at the same time.
Further, the Company has counterclaimed for declaratory judgment of
invalidity, noninfringement and unenforceability of the '572 patent.
The Company believes, based on advice of its patent counsel, that a
properly informed court should conclude the manufacture, use and/or
sale by the Company or its customers of the LeukoNet product did not
infringe any valid enforceable claim of the three Pall patents.
However, there can be no assurance that the Company will prevail in the
pending litigations, and an adverse outcome in a patent infringement
action would have a material adverse effect on the Company's future
business and operations.
Items 2 - 3. None
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Stockholders held on May 26, 1998, the
following proposals were adopted by the vote specified below.
Proposal For Withheld
-------- --- --------
1. Election of Directors
Timothy J. Barberich 7,655,997 74,380
John F. McGuire 7,655,997 74,380
Rolf S. Stutz 7,655,997 74,380
David S. Barlow 7,655,997 74,380
Justin E. Doheny 7,655,997 74,380
11
747001.1
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<TABLE>
For Against Abstain Broker Nonvotes - (1)
--- ------- ------- ---------------------
<S> <C> <C> <C> <C> <C>
2. Amendments to the Company's 1995 4,817,967 152,358 18,425 2,741,627
Employee Stock Purchase Plan
</TABLE>
At the Company's Annual Meeting of Stockholders held on May 26, 1998, the
following proposals were not adopted by the vote specified below.
<TABLE>
For Against Abstain Broker Nonvotes -(1)
--- ------- ------- --------------------
<S> <C> <C> <C> <C> <C>
3 Amendments to the Company's 1994 4,267,279 602,092 20,125 2,840,881
Stock Purchase Plan
</TABLE>
(1) Votes counted for purposes of determining whether a quorum is present for
the meeting but indicates that the broker or other holder was not authorized by
the beneficial owner to cast a vote on certain proposals but was authorized to
cast (and did cast) a vote on at least one other proposal.
Item 5. None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
The exhibits noted on the Exhibit Index immediately preceding
the exhibits are filed as part of this Quarterly Report on
Form 10-Q.
27.1 Financial Data Schedule
b) Reports on Form 8-K - None
12
747001.1
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SIGNATURES
Pursuant to 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.
Hemasure Inc.
Date: August 14, 1998 /s/ John F. McGuire
-------------------------------------
Name: John F. McGuire
Title: President and Chief Executive Officer
(Principal Executive Officer)
Date: August 14, 1998 /s/ James B. Murphy
--------------------------------------
Name: James B. Murphy
Title: Senior Vice President Finance
and Administration
(Principal Financial Officer)
13
747001.1
<PAGE>
Exhibit No. Description
- ----------- ---------------------------------------------------------------
2.1** Heads of Agreement, dated as of January 31, 1996, between
the Company and Novo Nordisk A/S.
3.1* Certificate of Incorporation of the Company.
3.2* By-Laws of the Company.
4.1* Specimen Certificate for shares of Common Stock, $.01 par value,
of the Company.
4.2*** Registration Rights Agreement, dated January 23, 1997, by and
among the Company and Novo Nordisk A/S.
10.1 The Company's 1995 Employee Stock Purchase Plan, as amended.
27.1 Financial Data Schedule.
- ---------------------------------------
* Incorporated herein by reference to the Company's Registration
Statement on Form S-1, as amended (File No. 33-75930).
** Incorporated herein by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1995.
*** Incorporated herein by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1996.
14
747001.1
<PAGE>
HEMASURE INC.
1995 EMPLOYEE STOCK PURCHASE PLAN
(As Amended Through April 3, 1998)
The purpose of this Plan is to provide eligible employees of
HemaSure Inc. (the "Company") and certain of its subsidiaries with opportunities
to purchase shares of the Company's common stock, par value $.01 per share (the
"Common Stock"), of the Company. Two Hundred Fifty Thousand (250,000) shares of
Common Stock in the aggregate have been approved for this purpose.
1. Administration. The Plan will be administered by the
Company's Board of Directors (the "Board") or by a Committee appointed by the
Board (the "Committee") . The Board or the Committee has authority to make rules
and regulations for the administration of the Plan and its interpretation and
decisions with regard thereto shall be final and conclusive.
2. Eligibility. Participation in the Plan will neither be
permitted nor denied contrary to the requirements of Section 423 of the Internal
Revenue Code of 1986, as amended (the "Code"), and regulations promulgated
thereunder. All employees of the Company, including Directors who are employees,
and all employees of any subsidiary of the Company (as defined in Section 424(f)
of the Code) designated by the Board or the Committee from time to time (a
"Designated Subsidiary"), are eligible to participate in any one or more of the
offerings of options (as defined in Section 9) to purchase Common Stock under
the Plan provided that:
(a) they are regularly employed by the Company or a
Designated Subsidiary for more than 20 hours a week and for
more than five months in a calendar year; and
(b) they are employees of the Company or a Designated
Subsidiary on the first day of the applicable Plan Period (as
defined below).
No employee may be granted an option hereunder if such
employee, immediately after the option is granted, owns 5% or more of the total
combined voting power or value of the stock of the Company or any subsidiary.
For purposes of the preceding sentence, the attribution rules of Section 424(d)
of the Code shall apply in determining the stock ownership of an employee, and
all stock which the employee has a contractual right to purchase shall be
treated as stock owned by the employee.
3. Offerings. The Company will make one or more offerings
("Offerings") to employees to purchase stock under this Plan. Offerings will
begin each June 1 and December 1, or the first business day thereafter (the
"Offering Commencement Dates"). Each Offering Commencement Date will begin a six
(6) month period (a "Plan Period") during which payroll
1
471152.3
<PAGE>
deductions will be made and held for the Purchase of Common Stock at the end of
the Plan Period. The Board or the Committee may, at its discretion, choose a
different Plan Period of twelve (12) months or less for subsequent Offerings.
Offerings under this Plan will include:
June 1, 1995 to November 30, 1995 December 1, 1995 to May 31, 1996 June 1, 1996
to November 30, 1996 December 1, 1996 to May 31, 1997 June 1, 1997 to November
30, 1997 December 1, 1997 to May 31, 1998 June 1, 1998 to November 30, 1998
December 1, 1998 to May 31, 1999
4. Participation. An employee eligible on the Offering
Commencement Date of any Offering may participate in such offering by completing
and forwarding a payroll deduction authorization form to the employee's
appropriate payroll office at least 30 days prior to the applicable Offering
Commencement Date. The form will authorize a regular payroll deduction from the
Compensation received by the employee during the Plan Period. Unless an employee
files a new form or withdraws from the Plan, his deductions and purchases will
continue at the same rate for future Offerings under the Plan as long as the
Plan remains in effect. The term "Compensation" means the amount of money
reportable on the employee's Federal Income Tax Withholding Statement, excluding
overtime, incentive or bonus awards, allowances and reimbursements for expenses
such as relocation allowances for travel expenses, income or gains on the
exercise of Company stock options and similar items, whether or not shown on the
employee's Federal Income Tax Withholding Statement.
5. Deductions. The Company will maintain payroll deduction
accounts for 11 participating employees. Payroll-deductions may be at the rate
of 1%, 2%, 3%, 4%, 5%, 6%, 7%, 8%, 9% or 10% of Compensation with any change in
compensation during the Plan Period to result in an automatic corresponding
change in the dollar amount withheld.
No employee may be granted an Option (as defined in Section 9)
which permits his rights to purchase Common Stock under this Plan and any other
stock purchase plan of the Company and its subsidiaries, to accrue at a rate
which exceeds $25,000 of the fair market value of such Common Stock (determined
at the Offering Commencement Date of the Plan Period) for each calendar year in
which the option is outstanding at any time.
6. Deduction Changes. An employee may decrease or discontinue
his payroll deduction once during any Plan Period, by filing a new payroll
deduction authorization form. However, an employee may not increase his payroll
deduction during a Plan Period. If an employee elects to discontinue his payroll
deductions during a Plan Period, but does not elect to withdraw his funds
pursuant to Section 8 hereof, funds deducted prior to his election to
2
471152.3
<PAGE>
discontinue will be applied to the purchase of Common Stock on the Exercise Date
(as defined below).
7. Interest. Interest will not be paid on any employee
accounts, except to the extent that the Board or the Committee, in its sole
discretion, elects to credit employee accounts with interest at such per annum
rate as it may from time to time determine.
8. Withdrawal of Funds. An employee may at any time prior to
the close of business on the last business day in a Plan Period and for any
reason permanently draw out the balance accumulated in the employee's account
and thereby withdraw from participation in an Offering. Partial withdrawals are
not permitted. The employee may not begin participation again during the
remainder of the Plan Period. The employee may participate in any subsequent
Offering in accordance with terms and conditions established by the Board or the
Committee.
9. Purchase of Shares. On the Offering Commencement Date of
each Plan Period, the Company will grant to each eligible employee who is then a
participant in the Plan an option ("Option") to purchase on the last business
day of such Plan Period (the "Exercise Date"), at the Option Price hereinafter
provided for, such number of whole shares of Common Stock of the Company
reserved for the purposes of the Plan as does not exceed the number of shares
determined by dividing 6% of such employee's annualized Compensation for the
immediately prior six-month period by the price determined in accordance with
the formula set forth in the following paragraph but using the closing price on
the Offering Commencement Date of such Plan Period.
The purchase price for each share purchased will be 85% of the
closing price of the Common Stock on (i) the first business day of such Plan
Period or (ii) the Exercise Date, whichever closing price shall be less. Such
closing price shall be (a) the closing price on any national securities exchange
on which the Common Stock is listed, (b) the closing price of the Common Stock
on the Nasdaq National Market or (c) the average of the closing bid and asked
prices in the over-the-counter-market, whichever is applicable, as published in
The Wall Street Journal. If no sales of Common Stock were made on such a day,
the price of the Common Stock for purposes of clauses (a) and (b) above shall be
the reported price for the next preceding day on which sales were made.
Each employee who continues to be a participant in the Plan on
the Exercise Date shall be deemed to have exercised his option at the Option
Price on such date and shall be deemed to have purchased from the Company the
number of full shares of Common Stock reserved for the purpose of the Plan that
his accumulated payroll deductions on such date will pay for pursuant to the
formula set forth above (but not in excess of the maximum number determined in
the manner set forth above).
Any balance remaining in an employee's payroll deduction
account at the end of a Plan Period will be automatically refunded to the
employee, except that any balance which is less than the purchase price of one
share of Common Stock will be carried forward into the
3
471152.3
<PAGE>
employee's payroll deduction account for the following Offering, unless the
employee elects not to participate in the following Offering under the Plan, in
which case the balance in the employee's account shall be refunded.
10. Issuance of Certificates. Certificates representing shares
of Common Stock purchased under the Plan may be issued only in the name of the
employee, in the name of the employee and another person of legal age as joint
tenants with rights of survivorship, or (in the Company's sole discretion) in
the street name of a brokerage firm, bank or other nominee holder designated by
the employee.
11. Rights on Retirement, Death or Termination of Employment.
In the event of a participating employee's termination of employment prior to
the last business day of a Plan Period, no payroll deduction shall be taken from
any pay due and owing to an employee and the balance in the employee's account
shall be paid to the employee or, in the event of the employee's death, (a) to a
beneficiary previously designated in a revocable notice signed by the employee
(with any spousal consent required under state law) or (b) in the absence of
such a designated beneficiary, to the executor or administrator of the
employee's estate or (c) if no such executor or administrator has been appointed
to the knowledge of the Company, to such other person(s) as the Company may, in
its discretion, designate. If, prior to the last business day of the Plan
Period, the Designated Subsidiary by which an employee is employed shall cease
to be a subsidiary of the Company, or if the employee is transferred to a
subsidiary of the Company that is not a Designated Subsidiary, the employee
shall be deemed to have terminated employment for the purposes of this Plan.
12. Optionees Not Stockholders. Neither the granting of an
Option to an employee nor the deductions from his pay shall constitute such
employee a stockholder of the shares of Common Stock covered by an Option under
this Plan until such shares have been purchased by and issued to him.
13. Rights Not Transferable. Rights under this Plan are not
transferable by a participating employee other than by will or the laws of
descent and distribution, and are exercisable during the employee's lifetime
only by the employee.
14. Application of Funds. All funds received or held by the
Company under this Plan may be combined with other corporate funds and may be
used for any corporate purpose.
15. Adjustment in Case of Changes Affecting Common Stock. In
the event of a subdivision of outstanding shares of Common Stock, or the payment
of a dividend in Common Stock, the number of shares approved for this Plan, and
the share limitation set forth in Section 9, shall be increased proportionately,
and such other adjustment shall be made as may be deemed equitable by the Board
or the Committee. In the event of any other change affecting the Common
4
471152.3
<PAGE>
Stock such adjustment shall be made as may be deemed equitable by the Board or
the Committee to give proper effect to such event.
16. Merger. If the Company shall at any time merge or
consolidate with another corporation and the holders of the capital stock of the
Company immediately prior to such merger or consolidation continue to hold at
least 80% by voting power of the capital stock of the surviving corporation
("Continuity of Control"), the holder of each Option then outstanding will
thereafter be entitled to receive at the next Exercise Date upon the exercise of
such Option for each share as to which such Option shall be exercised the
securities or property which a holder of one share of the Common Stock was
entitled to receive at the time of such merger, and the Committee shall take
such steps in connection with such merger as the Committee shall deem necessary
to assure that the provisions of Paragraph 15 shall thereafter be applicable, as
nearly as reasonably may be, in relation to the said securities or property as
to which such holder of such Option might thereafter be entitled to receive
thereunder.
In the event of a merger or consolidation of the Company with
or into another corporation which does not involve Continuity of Control, or of
a sale of all or substantially all of the assets of the Company while
unexercised Options remain outstanding under the Plan, (a) subject to the
provisions of clauses (b) and (c), after the effective date of such transaction,
each holder of an outstanding Option shall be entitled, upon exercise of such
Option, to receive in lieu of shares of Common Stock, shares of such stock or
other securities as the holders of shares of Common Stock received pursuant to
the terms of such transaction; or (b) all outstanding Options may be canceled by
the Board or the Committee as of a date prior to the effective date of any such
transaction and all payroll deductions shall be paid out to the participating
employees; or (c) all outstanding options may be canceled by the Board or the
Committee as of the effective date of any such transaction, provided that notice
of such cancellation shall be given to each holder of an Option, and each holder
of an Option shall have the right to exercise such option in full based on
payroll deductions then credited to his account as of a date determined by the
Board or the Committee, which date shall not be less than ten (10) days
preceding the effective date of such transaction.
17. Amendment of the Plan. The Board may at any time, and from
time to time, amend this Plan in any respect, except that (a) if the approval of
any such amendment by the shareholders of the Company is required by Section 423
of the Code, such amendment shall not be effected without such approval, and (b)
in no event may any amendment be made which would cause the Plan to fail to
comply with Section 423 of the Code.
18. Insufficient Shares. In the event that the total number of
shares of Common Stock specified in elections to be purchased under any offering
plus the number of shares purchased under previous Offerings under this Plan
exceeds the maximum number of shares issuable under this Plan, the Board or the
Committee will allot the shares then available on a pro rata basis.
5
471152.3
<PAGE>
19. Termination of the Plan. This Plan may be terminated at
any time by the Board. Upon termination of this Plan all amounts in the accounts
of participating employees shall be promptly refunded.
20. Governmental Regulations. The Company's obligation to sell
and deliver Common Stock under this Plan is subject to listing on a national
stock exchange or quotation on the Nasdaq National Market and the approval of
all governmental authorities required in connection with the authorization,
issuance or sale of such stock.
The Plan shall be governed by Delaware law except to the
extent that such law is preempted by federal law.
The Plan is intended to constitute a "Stock Purchase Plan"
within the meaning of Rule 16b-3(b)(5) promulgated under the Securities Exchange
Act of 1934.
21. Issuance of Shares. Shares may be issued upon exercise of
an Option from authorized but unissued Common Stock, from shares held in the
treasury of the Company, or from any other proper source.
22. Notification upon Sale of Shares. Each employee agrees, by
entering the Plan, to promptly give the Company notice of any disposition of
shares purchased under the Plan where such disposition occurs within two years
after the date of grant of the Option pursuant to which such shares were
purchased.
23. Effective Date and Approval of Shareholders. The Plan
initially took effect upon the closing of the Company's initial public offering
of Common Stock pursuant to an effective registration statement under the
Securities Act of 1933, as amended, subject to approval by the shareholders of
the Company as then required by Rule 16b-3 under the Exchange Act and by Section
423 of the Code, which approval occurred within twelve months of the adoption of
the Plan by the Board. The Plan was first amended by action of the Board of
Directors on April 16, 1997 subject to approval by the shareholders of the
Company.
Originally adopted by the Board of Directors on March 16, 1995 and approved by
the shareholders on May 17, 1995. The amended Plan was adopted by the Board of
Directors on April 16, 1997 and approved by the shareholders on May 15, 1997.
The current amended Plan was adopted by the Board of Directors on April 3, 1998
and approved by the shareholders on May 26, 1998.
6
471152.3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF HEMASURE INC., FOR THE THREE MONTHS
ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 1,782
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 283
<CURRENT-ASSETS> 2,427
<PP&E> 3,099
<DEPRECIATION> 1,654
<TOTAL-ASSETS> 3,904
<CURRENT-LIABILITIES> 2,603
<BONDS> 0
<COMMON> 90
0
0
<OTHER-SE> 969
<TOTAL-LIABILITY-AND-EQUITY> 3,904
<SALES> 25
<TOTAL-REVENUES> 25
<CGS> 657
<TOTAL-COSTS> 657
<OTHER-EXPENSES> 5,730
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (50)
<INCOME-PRETAX> (6,292)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,292)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,292)
<EPS-PRIMARY> (0.70)
<EPS-DILUTED> 0
</TABLE>