-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LQG0zmjGxjBglyKD5lLGBTVUDA9LIXtL65GOL5CqbUFuAmuONAZepLG4opi/5b8H DNw7SwF+o5SQ/KK/epjTYg== 0000927016-96-000277.txt : 19960710 0000927016-96-000277.hdr.sgml : 19960710 ACCESSION NUMBER: 0000927016-96-000277 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PERSEPTIVE BIOSYSTEMS INC CENTRAL INDEX KEY: 0000859640 STANDARD INDUSTRIAL CLASSIFICATION: 3829 IRS NUMBER: 042987616 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20032 FILM NUMBER: 96567051 BUSINESS ADDRESS: STREET 1: 500 OLD CONNECTICUT PATH CITY: FRAMINGHAM STATE: MA ZIP: 01701 BUSINESS PHONE: 5083837700 MAIL ADDRESS: STREET 1: 500 OLD CONNECTICUT PATH CITY: FRAMINGHAM STATE: MA ZIP: 01701 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended March 31, 1996 or ( ) 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: 0-20032 PerSeptive Biosystems, Inc. --------------------------- (Exact name of registrant as specified in its charter) Delaware 04-2987616 -------- ---------- (State or other jurisdiction of (IRS Employer ID No.) incorporation or organization) 500 Old Connecticut Path, Framingham, MA 01701 - - ---------------------------------------- ----- (Address of principal executive offices) (Zip Code) (508) 383-7700 -------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock 17,326,799 Shares - - ------------ ----------------- (Class) (Outstanding at May 8, 1996) Page 1 of 22 PerSeptive Biosystems, Inc. Quarterly Report on Form 10-Q March 31, 1996 Table of Contents
Page No. -------- Part I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements: a) Consolidated Balance Sheets at March 31, 1996 (unaudited) and September 30, 1995 3 b) Consolidated Statements of Operations for the three and six-month periods ended March 31, 1996 and 1995 (unaudited) 4 c) Consolidated Statements of Cash Flows for the six-month periods ended March 31, 1996 and 1995 (unaudited) 5 d) Notes to the Consolidated Financial Statements (unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Part II. OTHER INFORMATION Item 1. Legal Proceedings 18 Item 6. Exhibits and Reports on Form 8-K 21 SIGNATURES 22
Page 2 of 22 Part I. FINANCIAL INFORMATION Item 1. Financial Statements PerSeptive Biosystems, Inc. Consolidated Balance Sheets (in thousands)
March 31, September 30, 1996 1995 --------------- --------------- Assets: (unaudited) Current assets: Cash and cash equivalents $10,938 $12,215 Short-term investments 13,006 11,601 Accounts receivable, net 18,590 17,865 Inventories, net 21,475 22,911 Other current assets 2,384 1,913 ------------- ------------- Total current assets 66,393 66,505 Fixed assets, net 36,231 35,584 Patent and license costs, net 6,233 6,681 Purchase options, net - 1,959 Goodwill, net 24,504 25,144 Deferred financing costs, net 993 1,294 Other long-term assets 403 1,042 ------------- ------------- Total assets $134,757 $138,209 ============= ============= Liabilities and stockholders' equity: Current liabilities: Accounts payable $9,863 $9,351 Accrued expenses 21,426 16,154 Advances from PerSeptive Technologies II Corporation - 1,779 Current portion of deferred revenue 1,171 2,485 Short-term borrowing 5,122 3,943 Accrued purchase cost - 3,423 Current portion of long term obligations and other current liabilities 2,497 2,274 ------------- ------------- Total current liabilities 40,079 39,409 Long-term liabilities: Convertible subordinated notes 27,230 27,230 Long-term debt 5,755 3,170 Long-term portion of obligations under capital leases 1,509 2,159 Deferred revenue and other long-term liabilities 1,102 1,134 ------------- ------------- Total long-term liabilities 35,596 33,693 Stockholders' equity: Redeemable convertible preferred stock 27,023 25,992 Common stock 170 140 Additional paid-in capital 130,475 111,372 Accumulated deficit (97,636) (72,566) ------------- ------------- 60,032 64,938 Cumulative translation adjustment (958) 225 Unrealized loss on investments 8 - Deferred compensation - (56) ------------- ------------- Total stockholders' equity 59,082 65,107 ------------- ------------- Total liabilities and stockholders' equity $134,757 $138,209 ============= =============
The accompanying notes are an integral part of these financial statements. Page 3 of 22 PerSeptive Biosystems, Inc. Consolidated Statements of Operations (in thousands, except per share data) (unaudited)
Three months ended, Six months ended, March 31, 1996 March 31, 1996 ---------------------------- ---------------------------- 1996 1995 1996 1995 ------------- ------------- ------------- ------------- Revenue: Product revenue $19,367 $17,330 $38,431 32,484 Contract revenue 5,034 5,000 10,101 $9,994 ------------- ------------- ------------- ------------- 24,401 22,330 48,532 42,478 ------------- ------------- ------------- ------------- Cost of Goods Sold: Cost of product revenue 9,677 8,083 18,700 15,666 Cost of contract revenue 4,267 4,239 8,571 8,476 Other charges 4,837 - 4,837 - ------------- ------------- ------------- ------------- 18,781 12,322 32,108 24,142 ------------- ------------- ------------- ------------- Gross Profit 5,620 10,008 16,424 18,336 Operating Expenses: Research and development 1,701 1,591 3,270 3,810 Selling, general and administrative 11,015 8,025 20,647 15,975 Other Charges 13,496 - 13,496 - Amortization 794 754 1,518 1,588 ------------- ------------- ------------- ------------- 27,006 10,370 38,931 21,373 ------------- ------------- ------------- ------------- Loss from operations (21,386) (362) (22,507) (3,037) ------------- ------------- ------------- ------------- Other income (expense): Interest expense, net (719) (561) (1,422) (772) Other income (expense), net 41 (104) (11) (37) ------------- ------------- ------------- ------------- Loss before provision for income taxes (22,064) (1,027) (23,940) (3,846) Provision for income taxes - - 100 - ------------- ------------- ------------- ------------- Net loss (22,064) (1,027) (24,040) (3,846) ============= ============= ============= ============= Net loss per common share ($1.48) ($0.14) ($1.72) ($0.42) ============= ============= ============= ============= Weighted average common shares outstanding 15,243 12,236 14,609 12,182 ============= ============= ============= =============
The accompanying notes are an integral part of these financial statements. Page 4 of 22 PerSeptive Biosystems, Inc. Consolidated Statements of Cash Flows (in thousands) (unaudited)
Six months ended March 31, ------------------------------ 1996 1995 ------------- ------------- Cash flows from operating activities: Net loss ($24,040) ($3,846) Adjustments to reconcile net loss to net cash used in operating activities, net of acquired amounts: Depreciation and amortization 5,593 4,662 Non-cash portion of other charges 17,261 - Changes in assets and liabilities: Increase in accounts receivable (1,315) (4,662) (Increase) decrease in inventories (2,467) 244 Increase in other current assets (103) (137) Increase in other assets (245) - Increase (decrease) in accounts payable 512 (2,736) Increase (decrease) in accrued expenses (118) 15 Increase (decrease) in other liabilities (2,426) 1,014 ------------- ------------- Net cash used in operating activities (7,348) (5,446) ------------- ------------- Cash flows from investing activities: Purchase of fixed assets (7,188) (12,689) Cash and investments acquired from PTC II 11,851 - Purchase of securities available for sale (3,978) - Proceeds from sale and maturities of securities available for sale 2,556 14,120 Increase in patents and licenses 187 (704) ------------- ------------- Net cash (used in) provided by investing activities 3,428 727 ------------- ------------- Cash flows from financing activities: Proceeds from capital lease financing 306 5,000 Principal payments under capital lease obligations (733) (380) Proceeds from facility financing 2,585 - Net proceeds from short-term borrowing 1,179 4,350 Proceeds from issuance of common stock (6) 222 ------------- ------------- Net cash provided by (used in) financing activities 3,331 9,192 ------------- ------------- Effect of exchange rate changes on cash and cash equivalents (688) ------------- ------------- Net (decrease) increase in cash and cash equivalents (1,277) 4,473 Cash and cash equivalents, beginning of period 12,215 6,600 ------------- ------------- Cash and cash equivalents, end of period $10,938 $11,073 ============= ============= Supplemental disclosure of cash flow information: Interest paid $1,666 $1,078 Supplemental disclosure of non-cash investing activities: Accretion of Series A Preferred Stock 1,031 1,326 Stock and warrants issued in connection with acquisition of PTC II, net of warrants exchanged 15,592 - Stock issued to AMI in connection with the acquisition 3,423 -
The accompanying notes are an integral part of these financial statements. Page 5 of 22 Notes to the Consolidated Financial Statements (Unaudited) (1) Interim Consolidated Financial Statements The accompanying consolidated balance sheet at March 31, 1996, and the consolidated statements of operations for the three and six-month periods ended March 31, 1996 and 1995, and the consolidated statements of cash flows for the six-month periods ended March 31, 1996 and 1995 are unaudited. In the opinion of management, however, these statements reflect all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position and results of operations of the Company and its subsidiaries as of and for the three and six-month periods ended March 31, 1996 and 1995. The results of operations for the three and six-month periods ended March 31, 1996 are not necessarily indicative of the results expected for the full year. These consolidated financial statements do not include all disclosures associated with annual consolidated financial statements. Accordingly, these statements should be read in conjunction with the Company's consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K, as amended, for the year ended September 30, 1995. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that effect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. (2) Inventories Inventories consist of the following (in thousands):
March 31, 1996 September 30, 1995 -------------- ------------------ Raw material $11,006 $10,838 Work in process 2,708 2,495 Finished goods 7,761 9,578 ------- ------- Total inventories $21,475 $22,911 ======= ======= - - -------------------------------------------------------
Page 6 of 22 (3) Net Loss Per Share Net loss per share is determined by dividing net loss, including accretion on preferred stock by the weighted average common shares outstanding during the period. Accretion on preferred stock was $515,000 and $1,031,000 for the three and six-months ended March 31, 1996 and $663,000 and $1,326,000 for the three and six-months ended March 31, 1995, respectively. All common stock equivalents consisting of options, warrants, contingently issuable shares and shares held in escrow, have been excluded from the calculation of weighted average common shares outstanding, since their inclusion would be anti-dilutive. (4) Acquisition of PerSeptive Technologies II Corporation On November 1, 1995, the Company, PerSeptive Acquisition Corporation ("PAC"), a wholly owned subsidiary of the Company, and PerSeptive Technologies II Corporation ("PTC II") entered into a definitive agreement pursuant to which the Company agreed to an exchange offer for all of the 2,645,000 outstanding units of PTC II followed by a merger of PTC II with PAC. Each PTC II unit consisted of one share of callable common stock of PTC II and one Class E Warrant of PerSeptive Biosystems exercisable at $33.00 until December 1998. Effective March 8, 1996, the Company acquired 2,603,125 units of PTC II that were validly tendered and not withdrawn in the exchange offer. The PTC II shareholders, who participated in the exchange offer, exchanged their units for 2,603,125 shares of PerSeptive's common stock and 2,603,125 new Class I Warrants to purchase PerSeptive Biosystems common stock exercisable until August 8, 1997 at an exercise price per share of $13.50. On March 13, 1996, PTC II merged with PAC and became a wholly owned subsidiary of the Company. Each of the remaining 41,875 shares of callable common stock of PTC II not exchanged in the exchange offer were automatically converted into a right to receive one share of the Company's common stock upon the merger of PTC II with PAC. The total value of the common stock issued in the exchange offer was approximately $16 million based on the market value of the Company's common stock on March 8, 1996. The transaction has been accounted for as a purchase and the Company has recorded an in-process research and development charge of approximately $6.8 million which represents the value of acquired technologies which have not reached commercialization. During the three-month period ended March 31, 1996, the Company recognized research and development revenue from PTC II totaling approximately $5 million. Page 7 of 22 The following is a summary of the purchase price and the allocation of the purchase price to the net assets acquired, calculated using the closing price of PerSeptive's common stock of $5.875 on March 8, 1996:
Purchase Price: 000's - - --------------- ----- Shares of Common Stock Issued 2,603,125 at $5.875 $15,294 Shares of Common Stock to be Issued 41,875 at $5.875 246 Warrants Issued 2,603,125 at $0.90 2,343 Warrants Returned 2,603,125 at $0.88 (2,291) Estimated Tax Obligation on Interest 1,000 Income Write off of Purchase Option Cost 1,082 Estimated transaction costs (i) 1,620 ------- Total purchase price $19,294 =======
(i) Amount represents the estimated acquisition costs associated with the Transaction which include professional fees, printing costs and regulatory filing fees.
March 8, 1996 Allocation of the Purchase Price: 000's - - --------------------------------- ------- Net asset values: Cash and investments $11,851 Other current assets 693 Accrued expenses (35) In-process research and development 6,785 ------- Allocation of consideration $19,294 =======
The pro forma results of operations for the three and six month periods ended March 31, 1996 and 1995 reflecting the acquisition of PTC II as if the companies had been combined as of September 30, 1995 and 1994, respectively, are as follows (amounts in thousands, except per share data):
March 31, 1996 March 31, 1995 ---------------- ------------------ Three months Six months Three months Six months ended ended ended ended ----- ----- ----- ----- Revenue $ 19,367 $ 38,431 $17,330 $ 32,484 Net loss (12,219) (18,619) (4,895) (11,886) Net loss per share $ (0.74) $ (1.16) $ (0.37) $ (0.89) - - ------------------------------------------------------------------------------------------
Page 8 of 22 The pro forma condensed combined statement of income does not reflect the estimated charge of $10.1 million for the acquired in-process research and development, the write-down of long-term assets used in discontinued research and development programs related to PTC II, and severance costs consisting principally of wages and benefits for terminated employees, as the amount is not expected to have a continuing impact on the results of operations of the combined companies. (5) Other Charges During the three-month period ended March 31, 1996, the Company announced the introduction of several new product offerings, completed the acquisition of PTC II, and took certain actions to identify the research and development programs, previously funded by PTC II, which would be discontinued. As a result of these actions the Company recorded other charges totaling $18.3 million. The components of these other charges include $10.1 million related to the acquisition of PTC II which includes $6.8 million for in-process research and development, $2.2 million related to the write-down of long-term assets used in discontinued research and development programs related to PTC II, and $1.1 million of severance costs principally resulting from wages and benefits for employees terminated as a result of the acquisition and related management actions. Other charges also include reserves for inventory and other assets of $4.8 million recorded in cost of revenue. This represents provisions to reserve for inventory associated with discontinued product lines as well as the repositioning of certain products within the purification, analysis, and chemical product lines. The remaining $3.4 million of other charges represent accrued legal costs primarily related to the Company's ongoing legal defense of its patents and certain other miscellaneous charges. (6) Litigation and Other Matters On December 26, 1994, the Company announced a restatement of its financial results for its fiscal year ended September 30, 1993 and for the first three quarters of its 1994 fiscal year. Shortly thereafter, a number of class action lawsuits were filed in the U.S. District Court for the District of Massachusetts against the Company and certain of its officers. These lawsuits were consolidated in an amended complaint filed on March 8, 1995. The complaint asserted, on behalf of the class of all purchasers of the Company's Common Stock from February 2, 1993 through December 26, 1994, violations of federal securities laws and common law consisting of the issuing of allegedly materially false and misleading financial results with respect to the Company's quarterly and year-end fiscal 1993 financial statements and the Company's quarterly financial statements for the first, second and third quarters of fiscal 1994. The complaint sought unspecified damages, interest, costs and fees. On May 8, 1995, the Company filed its answer which denied all of plaintiffs' material allegations and raised several affirmative defenses. On June 14, 1995, the Court entered a preliminary order of approval of a stipulation of compromise and settlement (the "Stipulation") between the defendants in this action and the plaintiff class. On August 11, 1995, the court approved the Stipulation. Pursuant to the terms of the Stipulation, the purchasers of (a) the Company's Class E Warrants, which were originally issued as part of units with the common stock of PerSeptive Technologies II Corporation, and (b) its 8 1/4% Convertible Subordinated Notes due 2001, are included in the plaintiff class in addition to the Page 9 of 22 purchasers of the Company's Common Stock. In exchange for releases of the defendants, the plaintiff class is entitled to receive: $5,000,000 in cash, a portion of which is paid by third parties; $5,000,000 in shares of the Company's Common Stock; and $2,000,000 in warrants to purchase shares of the Company's Common Stock. In August of 1995, the Company issued 493,827 shares of common stock with an aggregate market value of $5,000,000. The final cash payment of $1,500,000 due under a promissory note issued pursuant to the Stipulation, together with interest thereon, was made on April 1, 1996. The Company issued the Class G Warrants to purchase up to 279,330 shares of the Company's common stock for $12.66 per share. The warrants became exercisable at any time on or after March 11, 1996 and will expire September 11, 2003. The costs of the settlement, including professional fees associated with the settlement, were recorded as a charge during the quarter ended June 30, 1995. The Company was successor to a lawsuit brought by Millipore against ChemGenes Corporation. This lawsuit was filed in May 1993 to seek injunctive relief and monetary damages for the infringement of a patent relating to the preparation of oligonucleotides. The patent and all of Millipore's rights in this lawsuit have been assigned to the Company. After a re-examination of the patent by the U.S. Patent and Trademark Office, the patent was reissued to the Company in February 1996. Subsequently, the action was concluded with ChemGenes agreeing to a consent judgment acknowledging the validity and enforceability of the patent. ChemGenes also agreed to pay infringement penalty royalties and damages, including legal fees. Since November 1994, the Company has been responding to informal requests for information from the Securities and Exchange Commission (the "Commission") relating to certain of the Company's financial matters. In May 1995, the Company was advised by the Commission that it had obtained such formal order of investigation so that, among other matters, it may utilize subpoena powers to obtain information relevant to its inquiry. The Commission has and may in the future utilize its subpoena powers to obtain information from various officers, directors and employees of the Company and from persons not presently associated with the Company. If, after completion of its investigation, the Commission finds that violations of the federal securities laws have occurred, the Commission has the authority to order persons to cease and desist from committing or causing such violations and any future violations. The Commission may also seek administrative, civil and criminal fines and penalties and injunctive relief. The Department of Justice has the authority in respect of criminal matters. The Company has been cooperating fully with this investigation. There can be no assurance as to the timeliness of the completion of this investigation or as to the final result thereof, and no assurance can be given that the final result of the investigation will not have a material adverse effect on the Company. On October 14, 1993, the Company filed suit in the United States District Court for the District of Massachusetts against Pharmacia Biotech, Inc. together with certain of its affiliates (collectively, "Pharmacia"), its parent Procordia AB, and Sepracor Inc., ("Sepracor"), for willful infringement of certain PerSeptive patents (collectively, the "Patents") covering the process of Perfusion Chromatography(registered trademark) and the manufacture, sale and use of chromatography particles that enable Perfusion Chromatography. This lawsuit seeks to enjoin the defendants from infringing the Patents and asks for treble damages. On October 15, 1993, the Company filed a related action against Sepracor in which the Company claims that Sepracor made false and misleading Page 10 of 22 representations of fact with respect to the Company's products. On October 12, 1993, Pharmacia filed a suit against the Company seeking a declaratory judgment: (i) that Pharmacia's products do not infringe the Patents; and (ii) that the Patents are invalid and unenforceable. The Company believes that this suit lacks merit. This action has been consolidated with PerSeptive's actions in the United States District Court for the District of Massachusetts. On May 19, 1994, the Company joined BioSepra Inc. ("BioSepra"), which is partially owned by Sepracor, as a party to this suit and amended the pleadings to assert claims against BioSepra for willful infringement of the Patents and for false and misleading advertising. The Company's claims against BioSepra are consolidated with claims against Sepracor and Pharmacia for pretrial proceedings. Discovery in these matters is substantially completed. Pharmacia, Sepracor and BioSepra each have asserted counterclaims against the Company. On February 10, 1995, Sepracor and BioSepra filed a counterclaim against the Company alleging that its allegations that Sepracor and BioSepra have infringed the Patents and alleged statements concerning the litigation made to customers constitute unfair competition, commercial disparagement, unfair trade practices, tortious interference with customer relationships and violation of the Lanham Act. On March 6, 1995, Pharmacia filed a counterclaim alleging that the Company's allegations that Pharmacia has infringed the Patents and alleged statements concerning the litigation made to customers constitute unfair competition, commercial disparagement, unfair trade practices and violation of the Lanham Act. The Company has denied any liability on the counterclaims. On January 9, 1996, the Court entered an order denying the Company's motion for partial summary judgment relating to the inventorship of the three Perfusion Chromatography patents, and granting the Defendants' motions for partial summary judgment that inventorship of those patents is improper for failure to name two or more persons as joint inventors. The Court, however, affirmed the Company's inventorship. On March 19, 1996, PerSeptive filed a Motion to Vacate the January 9 order and requested the Court to conduct an evidentiary hearing pursuant to 35 U.S.C. (S) 256 to determine whether the patents can and should be corrected by adding additional alleged inventors and, among other issues, if the patents can be corrected, whether the alleged additional inventors should be estopped from asserting any rights on account of their never having claimed to have been inventors, among other factors. On April 29, 1996, the Court denied the Motion to Vacate and scheduled an evidentiary hearing on the inventorship issue to commence on May 20, 1996. The Company has preserved its rights of appeal on a number of issues, including the Court's January 9, 1996 order that inventorship of the patents was improper for failure to name additional persons as joint inventors. The Company intends to vigorously pursue the litigation. (7) Acquisition of Advanced Magnetics, Inc. - In Vitro Diagnostics Division At September 30, 1995, the Company had a liability of approximately $3.4 million for the final settlement of the Company's acquisition of the In Vitro Diagnostics Division of Advanced Magnetics, Inc ("AMI"). In December 1995, the Company issued 373,678 shares of common stock with a value of $3.4 million, to satisfy this obligation. Page 11 of 22 (8) Subsequent Event On May 7, 1996 the Company executed a Master Agreement (the "Agreement") with Myco Pharmaceuticals Inc., a Delaware corporation located in Cambridge, Massachusetts doing business as ChemGenics Pharmaceuticals ("ChemGenics"). Pursuant to the terms of the Agreement, the Company has agreed to transfer certain assets and employees of the Company's drug discovery program and to enter into a non-exclusive license, licensing the Company's technology in the field of drug discovery to ChemGenics in exchange for shares of ChemGenics Common Stock equal to 40% of the fully diluted capital stock of ChemGenics as of the date of the Agreement plus warrants to purchase, for a period of four years, additional shares of Common Stock at $5.00 per share equal to 10% of such fully diluted amount. The transaction will combine the Company's proprietary technology in the field of drug discovery with ChemGenics' gene technologies. Additional terms have not been disclosed. The closing of the transaction is subject to customary closing conditions, as well as the expiration or early termination of, or an exemption from, the waiting period under the Hart-Scott- Rodino Antitrust Improvement Act of 1976. Page 12 of 22 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This report contains forward-looking statements which involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors that may cause such a difference include, but are not limited to, those discussed below under the caption "Certain Factors That May Affect Future Results," as well as elsewhere in this Management's Discussion and Analysis of Financial Condition and Results of Operations, and those discussed in the Company's other filings with the Securities and Exchange Commission. Results of Operations Three-months ended March 31, 1996 and 1995 Revenue for the three-months ended March 31, 1996 was $24,401,000 compared with $22,330,000 for the comparable 1995 period. Product revenue totaled $19,367,000 and $17,330,000 for the three-months ended March 31, 1996 and 1995, respectively. The growth in product revenue is attributable to continued strong sales growth in the analysis product line on top of relatively stable to expanding revenues from the purification product line and further expansion of the Company's products into the European and Japanese market place. Gross profit from product and related revenue for the three months ended March 31, 1996 and 1995 was $9,690,000 and $9,247,000, respectively. Gross margin from product and related revenue was 50% during the three months ended March 31, 1996 as compared to 53% during the same period in the prior year. This decrease in gross margin on product and related revenues is primarily attributable to unfavorable overhead absorption resulting from efforts to control the level of product inventory on hand and the existence of excess manufacturing capacity established to support future revenue growth. Included in cost of goods sold for the three months ended March 31, 1996 are other charges totaling $4.8 million. These charges represent provisions to write-off inventory and other assets associated with discontinued product lines as well as the repositioning of certain products within the purification, analysis, and chemical product lines. Research and development expenses were relatively constant at $1,701,000 for the three-months ended March 31, 1996 as compared with $1,591,000 for the comparable period in the prior year. As a percent of product and related revenue, research and development expenses have remained constant at 9% for the three months ended March 31, 1996 and 1995, respectively. Following the acquisition of PTC II, management anticipates that the level of research and development expenses will increase significantly due to the elimination of funding previously provided by PTC II. Actions have been taken to control the level of research and development expense actually incurred following the acquisition. This has been accomplished, in part, through the recently announced restructuring program (discussed further below) that resulted in the elimination of a significant portion of the Company's research and development staffing and related variable support costs. Management intends to pursue commercialization opportunities and alliances in Page 13 of 22 order to obtain value from the acquired technology. Management continues to evaluate the scope and direction of the various programs, however there is no assurance that funding sources and/or third party arrangements will be obtained or established to defray the cost of research and development or that any of these acquired technologies will ultimately be successfully commercialized. Selling, general and administrative expenses were $11,015,000 in the three-month period ended March 31, 1996, as compared with $8,025,000 in the comparable period in the prior year. Selling, general and administrative expenses as a percentage of product and related revenue have increased from 46% for the three months ended March 31, 1995 to 57% for the comparable period in the current fiscal year. The increase in the aggregate spending level in the three month period ending March 31, 1996 as compared to the comparable prior year period is attributable to continued investment in the sales and marketing organizations and marketing and promotional activities to support the Company's new product offerings. During the three-month period ended March 31, 1996, the Company recorded other charges of $13.5 million. The Company completed the acquisition of PTC II and took certain actions to identify the research and development programs, previously funded by PTC II, which would be discontinued. As a result of these actions the Company recorded other charges totaling $10.1 million. The PTC II charge includes $6.8 million for in-process research and development, $2.2 million related to the write-down of fixed assets previously used to support the contract research and development activities related to PTC II and $1.1 million of severance costs, principally wages and benefits for terminated employees, resulting from the discontinuation of certain research programs and other headquarters support functions. The remaining $3.4 million of other charges represent accrued legal costs primarily related to the Company's ongoing legal enforcement of its patents and certain other miscellaneous charges. Net interest expense was $720,000 in the three-month period ended March 31, 1996, as compared with $561,000 in the comparable period in the prior year. This increase is primarily attributable to higher interest expense incurred during the period ended March 31, 1996 as a result of current year short-term and long-term borrowings and capital lease agreements as well as lower interest income due to a lower average cash and investments balance during the three- months ended March 31, 1996 as compared to the comparable period in the prior year. Six Months Ended March 31, 1996 and 1995 Revenue for the six-months ended March 31, 1996 was $48,533,000, as compared with $42,478,000 for the comparable period in the prior year. Product revenue totaled $38,431,000 and $32,484,000 for the 1996 and 1995 periods, respectively. The growth in product revenue is attributable to continued sales growth in both the purification and analysis product lines and the further expansion of the Company's products into the European and Japanese market place. The increase in contract research revenue is attributable to additional revenue derived from contract research activities undertaken pursuant to the Development Agreement between PTC II and the Company, prior to its acquisition (see Note 4 to the Consolidated Financial Statements). Page 14 of 22 Gross margin from product and related revenue for the six-months ended March 31, 1996 and 1995 was $19,731,000 and $16,818,000, respectively. Gross margin from product and related revenue was 51% during the six-months ended March 31, 1996 as compared to 52% during the same period in the prior year. This decrease in gross margin on product and related revenues is primarily attributable to changes in product mix and unfavorable overhead absorption resulting from efforts to control the level of product inventory on hand and the existence of excess manufacturing capacity established to support future revenue growth. Research and development expenses were $3,720,000 in the 1996 period as compared with $3,810,000 in the comparable 1995 period. As a percent of product and related revenue, research and development expenses have declined from 12% to 9% for the six-month periods ended March 31, 1996 and 1995, respectively. The decrease in research and development expense is attributable, in part, to the subsequent elimination of and/or reduction in certain common research and development activities following the acquisition of the synthesis product business. Selling, general and administrative expenses were $20,647,000 in the six-month period ended March 31, 1996, as compared with $15,975,000 in the comparable period in the prior year. The increase in the aggregate spending level in the six-month period ending March 31, 1996 as compared to the comparable prior year period is attributable to continued investment in the sales and marketing organizations and marketing and promotional activities to support the Company's new product offerings. Net interest expense was $1,422,000 in the six-month period ended March 31, 1996, as compared with $772,000 in the comparable period in the prior year. This increase is primarily attributable to higher interest expense incurred during the period ended March 31, 1996 as a result of current year short-term and long-term borrowings and capital lease agreements as well as lower interest income due to a lower average cash and investments balance during the six-months ended March 31, 1996 as compared to the comparable period in the prior year. Liquidity and Capital Resources Cash and investments at March 31, 1996 were $23,944,000 as compared to $23,816,000 at September 30, 1995. Expenditures of cash and investments during the six-month period ended March 31, 1996 primarily related to the funding of capital programs for $7.2 million and operational requirements for $7.4 million. These expenditures were offset by the receipt of cash and investments of $11.9 million from PTC II as a result of the acquisition. Cash expenditures for capital programs, primarily related to the construction of the Company's new manufacturing facility in Hamburg, Germany, were partially funded by $2.6 million from various financing facilities obtained by the Company during the prior fiscal year. In addition, additional short-term borrowings were used to fund operational needs. Total proceeds from short-term financing during the six-month period ending March 31, 1996 were $1.2 million. Management anticipates additional cash usage relating to various factors including, but not limited to a semi-annual interest payment due on the 8 1/4% convertible subordinated notes, final shareholder settlement payment due on April 1, 1996, and cash requirements associated with capital expenditures, patent enforcement actions, working capital and operational needs. Page 15 of 22 The Company believes that its capital resources will be sufficient to fund its planned operations through the end of fiscal 1996. The Company believes that additional financing will be required for the development of some of its future planned product introductions and to support the Company's future operations and revenue growth. The Company's future working capital and capital requirements will in general depend on numerous factors, including the progress of the Company's research and development of new products, the level of resources that the Company devotes to the development of manufacturing and marketing capabilities, the consistency of cash collections, the success of cost containment initiatives, the competitive environment and the growth in the Company's business, which may cause the Company's actual future capital resources to differ materially, notwithstanding the forward-looking statement in the first sentence of this paragraph. The Company believes that the level of financial resources available to it is an important competitive factor. The Company is actively seeking to raise additional capital through equity or debt financing in the future or to enter into corporate partnering arrangements. However, there can be no assurance that the Company will be able to successfully raise additional capital at acceptable terms, and any failure to do so could have adverse consequences on planned future product introductions and the Company's growth and operations. Subsequent Events On May 7, 1996 the Company executed a Master Agreement ("the Agreement") with Myco Pharmaceuticals Inc., a Delaware corporation located in Cambridge, Massachusetts doing business as ChemGenics Pharmaceuticals ("ChemGenics"). Pursuant to the terms of the Agreement, the Company has agreed to transfer certain assets and employees of the Company's drug discovery program and to enter into a non-exclusive license, licensing the Company's technology in the field of drug discovery to ChemGenics in exchange for shares of ChemGenics Common Stock equal to 40% of the fully diluted capital stock of ChemGenics as of the date of the Agreement plus warrants to purchase, for a period of four years, additional shares of Common Stock at $5.00 per share equal to 10% of such fully diluted amount. The transaction will combine the Company's proprietary technology in the field of drug discovery with ChemGenics' gene technologies. Additional terms have not been disclosed. The closing of the transaction is subject to customary closing conditions, as well as the expiration or early termination of, or an exemption from, the waiting period under the Hart-Scott- Rodino Antitrust Improvement Act of 1976. Certain Factors That May Affect Future Results Fluctuations in Timing and Amount of Revenues. The Company's operating results may vary significantly from quarter to quarter or year to year, depending on factors such as the timing of biopharmaceutical development and commercialization programs of the Company's customers, the timing of increased research and development and sales and marketing expenses, the timing and size of orders and the introduction of new products by the Company. The Company's current and planned expense levels are based in part on its expectations as to future revenue. Consequently, results may vary significantly from quarter to quarter or year to year based on timing of revenue, and revenue or profits in any period will not necessarily be indicative of results Page 16 of 22 in subsequent periods. No Assurance of Profitability. The Company expects to continue to improve operating results in future periods; however, there can be no assurance that the Company will achieve or maintain profitability or that its revenue growth can be sustained in the future. The Company's success in the market for biopharmaceutical purification, analysis and synthesis products will depend, in part, on attracting and maintaining key employees, continued development of foreign sales operations, successful integration of recent acquisitions, continued support from current customers, development of new customers and successful enforcement of the Company's patent rights (see "Legal Proceedings"). Access To Capital. The Company is considering various financing alternatives, is seeking to raise additional capital through equity or debt financing or to enter into corporate partnering arrangements; however, there can be no assurances that this funding will be made available or that acceptable terms will be reached (see related discussion in Liquidity and Capital Resources section above). Patent and License Uncertainties. Proprietary rights relating to the Company's products will be protected from unauthorized use by third parties only to the extent that they are covered by valid and enforceable patents or are maintained in confidence as trade secrets. There can be no assurance that any pending patent applications filed by the Company will result in patents being issued or that any patents now or hereafter owned by the Company will afford protection against competitors. In the absence of patent protection, the Company's business may be adversely affected by competitors that independently develop functionally equivalent technology. The Company has established a policy of vigorously enforcing its patent rights (see "Legal Proceedings"). Pending Governmental Investigation. Since November 1994, the Securities and Exchange Commission (the "SEC") has been conducting an investigation into certain financial matters of the Company. If, after completion of its investigation, the SEC finds that violations of the federal securities laws have occurred, the SEC has the authority to order persons to cease and desist from committing or causing such violations and any future violations. The SEC may also seek administrative, civil and criminal fines and penalties and injunctive relief. The Department of Justice has the authority in respect of criminal matters. The Company has been cooperating fully with this investigation. There can be no assurance as to the timeliness of the completion of this investigation or as to the final result thereof, and no assurance can be given that the final result of the investigation will not have a material adverse effect on the Company (see "Legal Proceedings"). Intense Competition and Risk of Technological Obsolescence. The Company encounters, and expects to continue to encounter, intense competition in the sale of its current and future products. There can be no assurance that developments by others will not render the Company's products or technologies obsolete or non-competitive. Page 17 of 22 PART II. OTHER INFORMATION Item 1. Legal Proceedings 1. The Company was a successor to a lawsuit brought by Millipore against ChemGenes Corporation in the United States District Court for the District of Massachusetts. This lawsuit was filed in May 1993 to seek injunctive relief and monetary damages for the infringement of U.S. Patent No. RE34,069 relating to the preparation of oligonucleotides (the "RE34,069 Patent"). The RE34,069 Patent and all of Millipore's rights in this lawsuit have been assigned to the Company. In February 1996, the U.S. Patent and Trademark Office issued a reexamination certificate confirming patentability of the claims of RE34,069. Subsequently, the action was concluded with Chemgenes agreeing to a consent judgment acknowledging the validity and enforceability of the patent. ChemGenes also agreed to pay infringement penalty royalties and damages, including legal fees. 2. Since November 1994, the Company has been responding to informal requests for information from the Securities and Exchange Commission (the "Commission") relating to certain of the Company's financial matters. In May 1995, the Company was advised by the Commission that it had obtained a formal order of investigation so that, among other matters, it could utilize subpoena powers to obtain information relevant to its inquiry. The Commission has and may in the future utilize its subpoena powers to obtain information variously from officers, directors and employees of the Company and from persons not presently associated with the Company. If, after completion of its investigation, the Commission finds that violations of the federal securities laws have occurred, the Commission has the authority to order persons to cease and desist from committing or causing such violations and any future violations. The Commission may also seek administrative, civil and criminal fines and penalties and injunctive relief. The Department of Justice has the authority in respect of criminal matters. There can be no assurance as to the timeliness of the completion of this investigation, or as to the final result thereof, and no assurance can be given that the final result of the investigation will not have a material adverse effect on the Company. The Company has responded and will continue to respond to requests for information in connection with this investigation. 3. On October 14, 1993, the Company filed suit against Pharmacia Biotech, Inc., a New Jersey corporation, together with certain of its affiliates (collectively, "Pharmacia"), and their parent Pharmacia AB, a Swedish corporation, and Sepracor Inc., a Delaware corporation ("Sepracor"), in the United States District Court for the District of Massachusetts (Civil Action No. 93-12237-PBS) for willful infringement of the Company's US Patents Nos. 5,019,270 and 5,228,989 (collectively, the "Patents") covering the process of Perfusion Chromatography and the manufacture, sale and use of chromatography particles that enable Perfusion Chromatography. This lawsuit seeks to enjoin the defendants from infringing the Patents and asks for treble damages. On October 15, 1993, the Company filed a related action against Sepracor in the United States District Court for the District of Massachusetts (Civil Action No. 93-12249-PBS) in which the Company claims that Sepracor has made false and misleading representations of fact with respect to the Company's products in violation of applicable state and federal law. On October 12, 1993, as a result of prior correspondence with the Company, Pharmacia filed a suit against the Page 18 of 22 Company in the United States District Court for the District of New Jersey (Civil Action No. 93-4450 (HAA)) seeking a declaratory judgment: (i) that Pharmacia's products do not infringe the Patents and (ii) that the Patents are invalid and unenforceable. On January 18, 1994, the United States District Court for the District of New Jersey allowed the Company's motion to transfer all proceedings in Pharmacia's action to the United States District Court for the District of Massachusetts. By orders dated December 3, 1993 and March 29, 1994, the United States District Court for the District of Massachusetts has consolidated all three actions identified above for pretrial proceedings. On May 19, 1994, the United States District Court for the District of Massachusetts allowed the Company's motion to join BioSepra Inc., which is partially owned by Sepracor ("BioSepra"), as a party and to amend the pleadings to assert claims against BioSepra for willful infringement of the Patents and for false and misleading advertising. The Company's claims against BioSepra are consolidated with claims against Sepracor and Pharmacia for pretrial proceedings. On October 5, 1994, the Court allowed the Company's motion to amend its pleadings to allege claims against Sepracor and BioSepra for infringement of United States Patent No. 5,030,352 (the "'352 Patent"), covering novel coatings for chromatography media, which is assigned to the Purdue Research Foundation and exclusively licensed to the Company. On January 24, 1995, the US Patent and Trademark Office issued a third patent assigned to the Company, US Patent No. 5,384,042 (the "'042 Patent"), covering the manufacture, sale and use of matrices that enable Perfusion Chromatography. On January 25, 1995, the Company filed a complaint in the United States District Court for the District of Massachusetts against Pharmacia, Sepracor and BioSepra alleging willful infringement of the '042 Patent. On February 14, 1995, the Court allowed an assented-to motion to consolidate that action, designated Civil Action No. 95-10157-PBS, with the pending actions described above. Pharmacia, Sepracor and BioSepra each have asserted counterclaims against the Company. On February 10, 1995, Sepracor and BioSepra filed a counterclaim against the Company alleging that its allegations that Sepracor and BioSepra have infringed the Patents and alleged statements concerning the litigation made to customers constitute unfair competition, commercial disparagement, unfair trade practices pursuant to Mass. Gen. Laws ch. 93A, tortious interference with customer relationships and violation of the Lanham Act. Sepracor requested relief in the form of an unspecified amount of damages, double or treble damages to the extent permitted by Mass. Gen. Laws ch. 93A, dismissal of all claims asserted by PerSeptive, and Sepracor's costs and attorney's fees. On March 6, 1995, Pharmacia filed a counterclaim alleging that the Company's allegations that Pharmacia has infringed the Patents and alleged statements concerning the litigation made to customers constitute unfair competition, commercial disparagement, unfair trade practices pursuant to Mass. Gen. Laws ch. 93A, and violation of the Lanham Act. Pharmacia requested relief in the form of an unspecified amount of damages, double or treble damages to the extent permitted by Mass. Gen. Laws ch. 93A, dismissal of all claims asserted by PerSeptive, and Pharmacia's costs and attorney's fees. Since the Court has bifurcated discovery on damages issues, Sepracor and Pharmacia have not quantified the amount of damages sought in Page 19 of 22 their respective counterclaims. The Company has denied any liability on the counterclaims. On January 9, 1996, the Court entered an order denying the Company's motion for partial summary judgment relating to the inventorship of the three Perfusion Chromatography patents, and granting the Defendants' motions for partial summary judgment that inventorship of those patents is improper for failure to name two or more persons as joint inventors. The Court, however, affirmed the Company's inventorship. On March 19, 1996, PerSeptive filed a Motion to Vacate the January 9 order and requested the Court to conduct an evidentiary hearing pursuant to 35 U.S.C. (S) 256 to determine whether the patents can and should be corrected by adding additional alleged inventors and, among other issues, if the patents can be corrected, whether the alleged additional inventors should be estopped from asserting any rights on account of their never having claimed to have been inventors, among other factors. On April 29, 1996, the Court denied the Motion to Vacate and scheduled an evidentiary hearing on the inventorship issue to commence on May 20, 1996. The Company has preserved its rights of appeal on a number of issues, including the Court's January 9, 1996 order that inventorship of the patents was improper for failure to name additional persons as joint inventors. The Company may incur substantial additional expenses relating to these lawsuits. There can be no assurance that the outcome of the litigation will not have a material adverse effect on the Company. The Company intends to continue vigorously pursuing this litigation. Page 20 of 22 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 4.1 1992 Stock Plan of the Company, as amended on February 8, 1996. 4.2 1992 Non-Employee Director Stock Option Plan of the Company, as amended on March 11, 1996. (b) Reports on Form 8-K Current Report on Form 8-K dated January 9, 1996 relating to the Company's pending lawsuit against Pharmacia Biotech, Inc., Sepracor Inc. and BioSepra Inc. Current Report on Form 8-K dated February 8, 1996 relating to the commencement of the Company's exchange offer for all of the outstanding units of PerSeptive Technologies II Corporation. Current Report on Form 8-K dated February 29, 1996 relating to a special meeting of the Company's stockholders at which the issuance of securities to acquire PerSeptive Technologies II Corporation was approved. Current Report on Form 8-K dated March 8, 1996 relating to the acceptance by the Company of all outstanding units of PerSeptive Technologies II Corporation ("PTC-II") validly tendered and not withdrawn in the Company's exchange offer to the stockholders of PTC-II. [The remainder of this page is intentionally left blank.] Page 21 of 22 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. PERSEPTIVE BIOSYSTEMS, INC. Date: May 15, 1996 By:/s/ Noubar B. Afeyan -------------------- Noubar B. Afeyan, President and Chief Executive Officer (Principal Executive Officer) By:/s/ Thomas G. Ruane ------------------- Thomas G. Ruane, Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) Page 22 of 22 EXHIBIT INDEX Exhibit No. Description ----------- ----------- 4.1 1992 Stock Plan of the Company, as amended on February 8, 1996. 4.2 1992 Non-Employee Director Stock Option Plan of the Company, as amended on March 11, 1996. 27 Financial Data Schedule EX-4.1 2 1992 STOCK PLAN EXHIBIT 4.1 (As Amended, February 8, 1996) PERSEPTIVE BIOSYSTEMS, INC. 1992 STOCK PLAN 1. Purpose. This 1992 Stock Plan (the "Plan") is intended to provide incentives: (a) to the officers and other employees of PerSeptive Biosystems, Inc. (the "Company"), its parent (if any) and any present or future subsidiaries of the Company (collectively, "Related Corporations") by providing them with opportunities to purchase stock in the Company pursuant to options granted hereunder which qualify as "incentive stock options" under Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code") ("ISO" or "ISOs"); (b) to directors, officers, employees and consultants of the Company and Related Corporations by providing them with opportunities to purchase stock in the Company pursuant to options granted hereunder which do not qualify as ISOs ("Non-Qualified Option" or "Non-Qualified Options"); (c) to directors, officers, employees and consultants of the Company and Related Corporations by providing them with awards of stock in the Company ("Awards"); and (d) to directors, officers, employees and consultants of the Company and Related Corporations by providing them with opportunities to make direct purchases of stock in the Company ("Purchases"). Both ISOs and Non-Qualified Options are referred to hereafter individually as an "Option" and collectively as "Options". Options, Awards and authorizations to make Purchases are referred to hereafter collectively as "Stock Rights". As used herein, the terms "parent" and "subsidiary" mean "parent corporation" and "subsidiary corporation", respectively, as those terms are defined in Section 424 of the Code. 2. Administration of the Plan. A. Board or Committee Administration. The Plan shall be administered by the Board of Directors of the Company (the "Board") or by a committee appointed by the Board (the "Committee"); provided, that, to the extent required by Rule 16b-3, or any successor provision ("Rule 16b-3"), of the Securities Exchange Act of 1934, with respect to specific grants of Stock Rights, the Plan shall be administered by a disinterested administrator or administrators within the meaning of Rule 16b-3. Hereinafter, all references in this Plan to the "Committee" shall mean the Board if no Committee has been appointed. Subject to ratification of the grant or authorization of each Stock Right by the Board (if so required by applicable state law), and subject to the terms of the Plan, the Committee shall have the authority to (i) determine the employees of the Company and Related Corporations (from among the class of employees eligible under paragraph 3 to receive ISOs) to whom ISOs may be granted, and to determine (from among the class of individuals and entities eligible under paragraph 3 to receive Non-Qualified Options and Awards and to make Purchases) to whom Non-Qualified Options, Awards and authorizations to make Purchases may be granted; (ii) determine the time or times at which Options or Awards may be granted or Purchases made; (iii) determine the option price of shares subject to each Option, which price shall not be less than the minimum price specified in -2- paragraph 6, and the purchase price of shares subject to each Purchase; (iv) determine whether each Option granted shall be an ISO or a Non-Qualified Option; (v) determine (subject to paragraph 7) the time or times when each Option shall become exercisable and the duration of the exercise period; (vi) determine whether restrictions such as repurchase options are to be imposed on shares subject to Options, Awards and Purchases and the nature of such restrictions, if any, and (vii) interpret the Plan and prescribe and rescind rules and regulations relating to it. If the Committee determines to issue a Non-Qualified Option, it shall take whatever actions it deems necessary, under Section 422 of the Code and the regulations promulgated thereunder, to ensure that such Option is not treated as an ISO. The interpretation and construction by the Committee of any provisions of the Plan or of any Stock Right granted under it shall be final unless otherwise determined by the Board. The Committee may from time to time adopt such rules and regulations for carrying out the Plan as it may deem best. No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Stock Right granted under it. B. Committee Actions. The Committee may select one of its members as its chairman, and shall hold meetings at such times and places as it may determine. Acts by a majority of the Committee, or acts reduced to or approved in writing by a majority of the members of the Committee (if consistent with applicable state law), shall be the valid acts of the Committee. From time to time the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies however caused, or remove all members of the Committee and thereafter directly administer the Plan. C. Grant of Stock Rights to Board Members. Stock Rights may be granted to members of the Board consistent with the provisions of the first sentence of paragraph 2(A) above, if applicable. All grants of Stock Rights to members of the Board shall in all other respects be made in accordance with the provisions of this Plan applicable to other eligible persons. Consistent with the provisions of the first sentence of paragraph 2(A) above, members of the Board who are either (i) eligible for Stock Rights pursuant to the Plan or (ii) have been granted Stock Rights may vote on any matters affecting the administration of the Plan or the grant of any Stock Rights pursuant to the Plan, except that no such member shall act upon the granting to himself of Stock Rights, but any such member may be counted in determining the existence of a quorum at any meeting of the Board during which action is taken with respect to the granting to him of Stock Rights. 3. Eligible Employees and Others. The maximum number of shares of Common Stock that may be issued to any officer, director, employee or consultant pursuant to the Plan is 600,000 shares. ISOs may be granted to any employee of the Company or any Related Corporation. Those officers and directors of the Company who are not employees may not be granted ISOs under the Plan. Non-Qualified Options, Awards and authorizations to make Purchases may be granted to any employee, officer or director (whether or not also an employee) or consultant of the Company or any Related Corporation. The Committee may take into consideration a recipient's individual circumstances in determining whether to grant an ISO, a Non-Qualified Option, an Award or an authorization to make a Purchase. Granting of any Stock -3- Right to any individual or entity shall neither entitle that individual or entity to, nor disqualify him from, participation in any other grant of Stock Rights. 4. Stock. The stock subject to Options, Awards and Purchases shall be authorized but unissued shares of Common Stock of the Company, par value $.01 per share (the "Common Stock"), or shares of Common Stock reacquired by the Company in any manner. The aggregate number of shares which may be issued pursuant to the Plan is 3,585,500 subject to adjustment as provided in paragraph 13; provided, however, that such number of shares shall not be subject to adjustment by reason of the four for one stock split in the form of a stock dividend declared by the Board of Directors of the Company at a meeting on March 27, 1992. Any such shares may be issued as ISOs, Non-Qualified Options or Awards, or to persons or entities making Purchases, so long as the number of shares so issued does not exceed such number, as adjusted. If any Stock Right granted under the Plan shall expire or terminate for any reason without having been exercised in full or shall cease for any reason to be exercisable in whole or in part, the unissued shares subject to such Stock Options shall again be available for grants of Stock Rights under the Plan. For the purposes of the foregoing sentence, shares withheld from the Stock Right exercise to pay the exercise price and/or tax consequences of the exercise shall be deemed to have been issued. 5. Granting of Stock Rights. Stock Rights may be granted under the plan at any time on or after March 27, 1992 and prior to March 27, 2002. The date of grant of a Stock Right under the Plan will be the date specified by the Committee at the time it grants the Stock Right; provided, however, that such date shall not be prior to the date on which the Committee acts to approve the grant. The Committee shall have the right, with the consent of the optionee, to convert an ISO granted under the Plan to a Non-Qualified Option pursuant to paragraph 16. 6. Minimum Option Price; ISO Limitations. A. Price for Non-Qualified Options. The exercise price per share specified in the agreement relating to each Non-Qualified Option granted under the Plan shall in no event be less than the minimum legal consideration required therefor under the laws of Delaware or the laws of any jurisdiction in which the Company or its successors in interest may be organized. B. Price for ISOs. The exercise price per share specified in the agreement relating to each ISO granted under the Plan shall not be less than the fair market value per share of Common Stock on the date of such grant. In the case of an ISO to be granted to an employee owning stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Related Corporation, the price per share specified in the agreement relating to such ISO shall not be less than one hundred ten percent (110%) of the fair market value per share of Common Stock on the date of grant. C. $100,000 Annual Limitation on ISOs. Each eligible employee may be granted ISOs only to the extent that, in the aggregate under this Plan and all incentive stock option plans of the Company and any Related Corporation, such ISOs do not become exercisable -4- for the first time by such employee during any calendar year in a manner which would entitle the employee to purchase more than $100,000 in fair market value (determined at the time the ISOs were granted) of Common Stock in that year. Any options granted to an employee in excess of such amount will be granted as Non-Qualified Options. D. Determination of Fair Market Value. If, at the time an Option is granted under the Plan, the Company's Common Stock is publicly traded, "fair market value" shall be determined as of the last business day for which the prices or quotes discussed in this sentence are available prior to the date such Option is granted and shall mean (i) the average (on that date) of the high and low prices of the Common Stock on the principal national securities exchange on which the Common Stock is traded, if the Common Stock is then traded on a national securities exchange; or (ii) the last reported sale price (on that date) of the Common Stock on the NASDAQ National Market List, if the Common Stock is not then traded on a national securities exchange; or (iii) the closing bid price (or average of bid prices) last quoted (on that date) by an established quotation service for over-the-counter securities, if the Common Stock is not reported on the NASDAQ National Market List. However, if the Common Stock is not publicly traded at the time an Option is granted under the Plan, "fair market value" shall be deemed to be the fair value of the Common Stock as determined by the Committee after taking into consideration all factors which it deems appropriate, including, without limitation, recent sale and offer prices of the Common Stock in private transactions negotiated at arm's length. 7. Option Duration. Subject to earlier termination as provided in paragraphs 9 and 10, each Option shall expire on the date specified by the Committee, but not more than (i) ten years and one day from the date of grant in the case of Non-Qualified Options, (ii) ten years from the date of grant in the case of ISOs generally, and (iii) five years from the date of grant in the case of ISOs granted to an employee owning stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Related Corporation. Subject to earlier termination as provided in paragraphs 9 and 10, the term of each ISO shall be the term set forth in the original instrument granting such ISO, except with respect to any part of such ISO that is converted into a Non-Qualified Option pursuant to paragraph 16. 8. Exercise of Option. Subject to the provisions of paragraphs 9 through 12, each Option granted under the Plan shall be exercisable as follows: A. Vesting. The Option shall either be fully exercisable on the date of grant or shall become exercisable thereafter in such installments as the Committee may specify. B. Full Vesting of Installments. Once an installment becomes exercisable it shall remain exercisable until expiration or termination of the Option, unless otherwise specified by the Committee. C. Partial Exercise. Each Option or installment may be exercised at any time or from time to time, in whole or in part, for up to the total number of shares with respect to which it is then exercisable. -5- D. Acceleration of Vesting. The Committee shall have the right to accelerate the date of exercise of any installment of any Option; provided that the Committee shall not, without the consent of an optionee, accelerate the exercise date of any installment of any Option granted to any employee as an ISO (and not previously converted into a Non-Qualified Option pursuant to paragraph 16) if such acceleration would violate the annual vesting limitation contained in Section 422(d) of the Code, as described in paragraph 6(C). 9. Termination of Employment. If an ISO optionee ceases to be employed by the Company and all Related Corporations other than by reason of death or disability as defined in paragraph 10, no further installments of his ISOs shall become exercisable, and his ISOs shall terminate after the passage of ninety (90) days from the date of termination of his employment, but in no event later than on their specified expiration dates, except to the extent that such ISOs (or unexercised installments thereof) have been converted into Non-Qualified Options pursuant to paragraph 16. Employment shall be considered as continuing uninterrupted during any bona fide leave of absence (such as those attributable to illness, military obligations or governmental service) provided that the period of such leave does not exceed 90 days or, if longer, any period during which such optionee's right to reemployment is guaranteed by statute. A bona fide leave of absence with the written approval of the Committee shall not be considered an interruption of employment under the Plan, provided that such written approval contractually obligates the Company or any Related Corporation to continue the employment of the optionee after the approved period of absence. ISOs granted under the Plan shall not be affected by any change of employment within or among the Company and Related Corporations, so long as the optionee continues to be an employee of the Company or any Related Corporation. Nothing in the Plan shall be deemed to give any grantee of any Stock Right the right to be retained in employment or other service by the Company or any Related Corporation for any period of time. 10. Death; Disability. A. Death. If an ISO optionee ceases to be employed by the Company and all Related Corporations by reason of his death, any ISO of his may be exercised, to the extent of the number of shares with respect to which he could have exercised it on the date of his death, by his estate, personal representative or beneficiary who has acquired the ISO by will or by the laws of descent and distribution, at any time prior to the earlier of the specified expiration date of the ISO or 180 days from the date of the optionee's death. B. Disability. If an ISO optionee ceases to be employed by the Company and all Related Corporations by reason of his disability, he shall have the right to exercise any ISO held by him on the date of termination of employment, to the extent of the number of shares with respect to which he could have exercised it on that date, at any time prior to the earlier of the specified expiration date of the ISO or 180 days from the date of the termination of the optionee's employment. For the purposes of the Plan, the term "disability" shall mean "permanent and total disability" as defined in Section 22(e)(3) of the Code or successor statute. -6- 11. Assignability. No Option shall be assignable or transferable by the optionee except by will or by the laws of descent and distribution. During the lifetime of the optionee each Option shall be exercisable only by him. 12. Terms and Conditions of Options. Options shall be evidenced by instruments (which need not be identical) in such forms as the Committee may from time to time approve. Such instruments shall conform to the terms and conditions set forth in paragraphs 6 through 11 hereof and may contain such other provisions as the Committee deems advisable which are not inconsistent with the Plan, including restrictions applicable to shares of Common Stock issuable upon exercise of Options. In granting any Non-Qualified Option, the Committee may specify that such Non-Qualified Option shall be subject to the restrictions set forth herein with respect to ISOs, or to such other termination and cancellation provisions as the Committee may determine. The Committee may from time to time confer authority and responsibility on one or more of its own members and/or one or more officers of the Company to execute and deliver such instruments. The proper officers of the Company are authorized and directed to take any and all action necessary or advisable from time to time to carry out the terms of such instruments. 13. Adjustments. Upon the occurrence of any of the following events, an optionee's rights with respect to Options granted to him hereunder shall be adjusted as hereinafter provided, unless otherwise specifically provided in the written agreement between the optionee and the Company relating to such Option: A. Stock Dividends and Stock Splits. If the shares of Common Stock shall be subdivided or combined into a greater or smaller number of shares or if the Company shall issue any shares of Common Stock as a stock dividend on its outstanding Common Stock, the number of shares of Common Stock deliverable upon the exercise of Options shall be appropriately increased or decreased proportionately, and appropriate adjustments shall be made in the purchase price per share to reflect such subdivision, combination or stock dividend. B. Consolidations or Mergers. If the Company is to be consolidated with or acquired by another entity in a merger, sale of all or substantially all of the Company's assets or otherwise (an "Acquisition"), the Committee or the board of directors of any entity assuming the obligations of the Company hereunder (the "Successor Board"), shall, as to outstanding Options, either (i) make appropriate provision for the continuation of such Options by substituting on an equitable basis for the shares then subject to such Options the consideration payable with respect to the outstanding shares of Common Stock in connection with the Acquisition; or (ii) upon written notice to the optionees, provide that all Options must be exercised, to the extent then exercisable, within a specified number of days of the date of such notice, at the end of which period the Options shall terminate; or (iii) terminate all Options in exchange for a cash payment equal to the excess of the fair market value of the shares subject to such Options (to the extent then exercisable) over the exercise price thereof. -7- C. Recapitalization or Reorganization. In the event of a recapitalization or reorganization of the Company (other than a transaction described in subparagraph B above) pursuant to which securities of the Company or of another corporation are issued with respect to the outstanding shares of Common Stock, an optionee upon exercising an Option shall be entitled to receive for the purchase price paid upon such exercise the securities he would have received if he had exercised his Option prior to such recapitalization or reorganization. D. Modification of ISOs. Notwithstanding the foregoing, any adjustments made pursuant to subparagraphs A, B or C with respect to ISOs shall be made only after the Committee, after consulting with counsel for the Company, determines whether such adjustments would constitute a "modification" of such ISOs (as that term is defined in Section 424 of the Code) or would cause any adverse tax consequences for the holders of such ISOs. If the Committee determines that such adjustments made with respect to ISOs would constitute a modification of such ISOs, it may refrain from making such adjustments. E. Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, each Option will terminate immediately prior to the consummation of such proposed action or at such other time and subject to such other conditions as shall be determined by the Committee. F. Issuances of Securities. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares subject to Options. No adjustments shall be made for dividends paid in cash or in property other than securities of the Company. G. Fractional Shares. No fractional shares shall be issued under the Plan and the optionee shall receive from the Company cash in lieu of such fractional shares. H. Adjustments. Upon the happening of any of the events described in subparagraphs A, B or C above, the class and aggregate number of shares set forth in paragraph 4 hereof that are subject to Stock Rights which previously have been or subsequently may be granted under the Plan shall also be appropriately adjusted to reflect the events described in such subparagraphs. The Committee or the Successor Board shall determine the specific adjustments to be made under this paragraph 13 and, subject to paragraph 2, its determination shall be conclusive. If any person or entity owning restricted Common Stock obtained by exercise of a Stock Right made hereunder receives shares or securities or cash in connection with a corporate transaction described in subparagraphs A, B or C above as a result of owning such restricted Common Stock, such shares or securities or cash shall be subject to all of the conditions and restrictions applicable to the restricted Common Stock with respect to which such shares or securities or cash were issued, unless otherwise determined by the Committee or the Successor Board. -8- 14. Means of Exercising Stock Rights. A Stock Right (or any part or installment thereof) shall be exercised by giving written notice to the Company at its principal office address. Such notice shall identify the Stock Right being exercised and specify the number of shares as to which such Stock Right is being exercised, accompanied by full payment of the purchase price therefor (a) in United States dollars in cash or by check, (b) at the discretion of the Committee, through delivery or withholding from the Stock Right exercise of shares of Common Stock having a fair market value equal as of the date of the exercise to the cash exercise price of the Stock Right, (c) at the discretion of the Committee, by delivery of the grantee's personal recourse note bearing interest payable not less than annually at no less than 100% of the lowest applicable Federal rate, as defined in Section 1274(d) of the Code, (d) at the discretion of the Committee and consistent with applicable law, through the delivery of an assignment to the Company of a sufficient amount of the proceeds from the sale of the Common Stock acquired upon exercise of the Stock Right and an authorization to the broker or selling agent to pay that amount to the Company, which sale shall be at the participant's direction at the time of exercise, or (e) at the discretion of the Committee, by any combination of (a), (b), (c) and (d) above. If the Committee exercises its discretion to permit payment of the exercise price of an ISO by means of the methods set forth in clauses (b), (c), (d) or (e) of the preceding sentence, such discretion shall be exercised in writing at the time of the grant of the ISO in question. Notwithstanding the foregoing, no employee may pay any part of the exercise price hereof by delivering shares of Common Stock to the Company unless such Common Stock has been owned by such employee free of any substantial risk of forfeiture for at least six months. The holder of a Stock Right shall not have the rights of a shareholder with respect to the shares covered by his Stock Right until the date of issuance of a stock certificate to him for such shares. Except as expressly provided above in paragraph 13 with respect to changes in capitalization and stock dividends, no adjustment shall be made for dividends or similar rights for which the record date is before the date such stock certificate is issued. 15. Term and Amendment of Plan. This Plan was adopted by the Board of Directors and Stockholders of the Company on March 31, 1992. The Plan shall expire at the end of the day on March 27, 2002 (except as to Options outstanding on that date). The Board may terminate or amend the Plan in any respect at any time, except that, without the approval of the stockholders obtained within 12 months before or after the Board adopts a resolution authorizing any of the following actions: (a) the total number of shares that may be issued under the Plan may not be increased materially (except by adjustment pursuant to paragraph 13); (b) the benefits accruing to participants under the Plan may not be materially increased; (c) the requirements as to eligibility for participation in the Plan may not be materially modified; (d) the provisions of paragraph 3 regarding eligibility for grants of ISOs may not be modified; (e) the provisions of paragraph 6(B) regarding the exercise price at which shares may be offered pursuant to ISOs may not be modified (except by adjustment pursuant to paragraph 13); (f) the expiration date of the Plan may not be extended; and (g) the Board may not take any action which would cause the Plan to fail to comply with Rule 16b-3. Except as otherwise provided in this paragraph 15, in no event may action of the Board or stockholders alter or impair the rights of a grantee, without his consent, under any Stock Right previously granted to him. -9- 16. Conversion of ISOs into Non-Qualified Options; Termination of ISOs. The Committee, at the written request of any optionee, may in its discretion take such actions as may be necessary to convert such optionee's ISOs (or any installments or portions of installments thereof) that have not been exercised on the date of conversion into Non-Qualified Options at any time prior to the expiration of such ISOs, regardless of whether the optionee is an employee of the Company or a Related Corporation at the time of such conversion. Such actions may include, but not be limited to, extending the exercise period or reducing the exercise price of the appropriate installments of such ISOs. At the time of such conversion, the Committee (with the consent of the optionee) may impose such conditions on the exercise of the resulting Non-Qualified Options as the Committee in its discretion may determine, provided that such conditions shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed to give any optionee the right to have such optionee's ISOs converted into Non-Qualified Options, and no such conversion shall occur until and unless the Committee takes appropriate action. The Committee, with the consent of the optionee, may also terminate any portion of any ISO that has not been exercised at the time of such termination. 17. Application Of Funds. The proceeds received by the Company from the sale of shares pursuant to Options granted and Purchases authorized under the Plan shall be used for general corporate purposes. 18. Governmental Regulation. The Company's obligation to sell and deliver shares of the Common Stock under this Plan is subject to the approval of any governmental authority required in connection with the authorization, issuance or sale of such shares. 19. Withholding of Additional Income Taxes. Upon the exercise of a Non-Qualified Option, the grant of an Award, the making of a Purchase of Common Stock for less than its fair market value, the making of a Disqualifying Disposition (as defined in paragraph 20) or the vesting of restricted Common Stock acquired on the exercise of a Stock Right hereunder, the Company, in accordance with Section 3402(a) of the Code, may require the optionee, Award recipient or purchaser to pay additional withholding taxes in respect of the amount that is considered compensation includible in such person's gross income. The Committee in its discretion may condition (i) the exercise of an Option, (ii) the grant of an Award, (iii) the making of a Purchase of Common Stock for less than its fair market value, or (iv) the vesting of restricted Common Stock acquired by exercising a Stock Right, on the grantee's payment of such additional withholding taxes. Payment of such additional withholding taxes shall be in United States dollars in cash or by check and/or at the discretion of the Committee, through the delivery of previously held shares of common stock or withholding from the Stock Right exercise of shares of Common Stock having a fair market value equal as of the date of exercise to the amount of such withholding taxes. 20. Notice to Company of Disqualifying Disposition. Each employee who receives an ISO must agree to notify the Company in writing immediately after the employee makes a Disqualifying Disposition of any Common Stock acquired pursuant to the exercise of an ISO. A Disqualifying Disposition is any disposition (including any sale) of such Common Stock before the later of (a) two years after the date the employee was granted the ISO, or (b) one year after -10- the date the employee acquired Common Stock by exercising the ISO. If the employee has died before such stock is sold, these holding period requirements do not apply and no Disqualifying Disposition can occur thereafter. 21. Governing Law; Construction. The validity and construction of the Plan and the instruments evidencing Stock Rights shall be governed by the laws of the State of Delaware, or the laws of any jurisdiction in which the Company or its successors in interest may be organized. In construing this Plan, the singular shall include the plural and the masculine gender shall include the feminine and neuter, unless the context otherwise requires. Register of Amendments to Plan
Paragraph No. Date of Stockholder and Change Board Approval Approval - - ----------------- -------------- -------------- 3. Limit to 600,000 January 11, 1994 March 10, 1994 the number of shares of Common Stock that may be issued to any participant under the Plan 4. Increase number January 11, 1994 March 10, 1994 of shares under Plan from 800,000 to 2,300,000 4. Increase number of February 23, 1995 May 1, 1995 shares under Plan from 2,300,000 to 2,900,500 14. Only allow payment March 29, 1995 N/A of exercise price by delivery of shares of Common Stock after shares have been owned by employee for at least six months 4. Increase number of February 8, 1996 May 6, 1996 shares under Plan from 2,900,500 to 3,585,500
EX-4.2 3 1992 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN EXHIBIT 4.2 (As Amended, March 11, 1996) PERSEPTIVE BIOSYSTEMS, INC. 1992 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN 1. Purpose. This Non-Qualified Stock Option Plan, to be known as the 1992 Non-Employee Director Stock Option Plan (hereinafter, this "Plan") is intended to promote the interests of PerSeptive Biosystems, Inc. (hereinafter, the "Company") by providing an inducement to obtain and retain the services of qualified persons who are not employees or officers of the Company to serve as members of its Board of Directors (the "Board"). 2. Available Shares. The total number of shares of Common Stock, par value $.01 per share, of the Company (the "Common Stock"), for which options may be granted under this Plan shall not exceed 200,000 shares, subject to adjustment in accordance with paragraph 10 of this Plan; provided, however, that such number of shares shall not be subject to adjustment by reason of the four for one stock split in the form of a stock dividend declared by the Board of Directors of the Company at a meeting on March 27, 1992. Shares subject to this Plan are authorized but unissued shares or shares that were once issued and subsequently reacquired by the Company. If any options granted under this Plan are surrendered before exercise or lapse without exercise (and without being used to pay the exercise price or tax withholding), in whole or in part, the shares reserved therefor shall continue to be available under this Plan. 3. Administration. This Plan shall be administered by the Board or by a committee appointed by the Board (the "Committee"). In the event the Board fails to appoint or refrains from appointing a Committee, the Board shall have all power and authority to administer this Plan. In such event, the word "Committee" wherever used herein shall be deemed to mean the Board. The Committee shall, subject to the provisions of the Plan, have the power to construe this Plan, to determine all questions hereunder, and to adopt and amend such rules and regulations for the administration of this Plan as it may deem desirable. No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to this Plan or any option granted under it. 4. Automatic Grant of Options. Subject to the availability of shares under this Plan, (a) each person who is a member of the Board on June 1, 1992 and who is not an employee or officer of the Company on such date shall be automatically granted on June 1, 1992, without further action by the Board, an option (an "Initial Option") to purchase 6,000 shares of the Common Stock; (b) each such person who continues to serve as a member of the Board on each successive anniversary of June 1, 1992 during the term of this Plan and who is not an employee or officer of the Company on such date shall be automatically granted on each such date, without further action of the Board, an option (an "Annual Option") to purchase 7,500 shares of the Common Stock; and (c) with respect to a person who is first elected as a member of the Board after June 1, 1992 during the term of this Plan and who is not an employee or officer of the 1 -2- Company on the date of such election shall be automatically granted an Initial Option to purchase 10,000 shares of the Common Stock on the date of his or her first election as a member of the Board, and each such person who continues to serve as a member of the Board on each successive anniversary of such date during the term of this Plan and who is not an employee or officer of the Company on such date shall be automatically granted on each such date an Annual Option to purchase 7,500 shares of Common Stock. The options to be granted under this paragraph 4 shall be the only options ever to be granted at any time to such member under this Plan. The number of shares covered by options granted under this paragraph 4 shall be subject to adjustment in accordance with the provisions of paragraph 10 of this Plan. Except for the specific options referred to above, no other options shall be granted under this Plan. 5. Option Price. The purchase price of the stock covered by an option granted pursuant to this Plan shall be 100% of the fair market value of such shares on the day the option is granted. The option price will be subject to adjustment in accordance with the provisions of paragraph 10 of this Plan. For purposes of this Plan, if, at the time an option is granted under the Plan, the Company's Common Stock is publicly traded, "fair market value" shall be determined as of the last business day for which the prices or quotes discussed in this sentence are available prior to the date such option is granted and shall mean (i) the average (on that date) of the high and low prices of the Common Stock on the principal national securities exchange on which the Common Stock is traded, if the Common Stock is then traded on a national securities exchange; or (ii) the last reported sale price (on that date) of the Common Stock on the Nasdaq National Market, if the Common Stock is not then traded on a national securities exchange; or (iii) the closing bid price (or average of bid prices) last quoted (on that date) by an established quotation service for over- the-counter securities, if the Common Stock is not reported on the Nasdaq National Market. 6. Period of Option. Unless sooner terminated in accordance with the provisions of paragraph 8 of this Plan, an option granted hereunder shall expire on the date which is ten (10) years after the date of grant of the option. 7. Vesting of Shares and Non-Transferability of Options. (a) Vesting. Options granted under this Plan shall not be exercisable until they become vested. (i) Initial Options granted under this Plan shall vest in the optionee and thus become exercisable, in accordance with the following schedule provided that the optionee has continuously served as a member of the Board through such vesting date: -3-
Percentage of Initial Option Shares for which Initial Option Will be Exercisable Date of Vesting - - ---------------------------- --------------- 0 Less than one year from the date of grant 25% One year from the date of grant 50% Two years from the date of grant 75% Three years from the date of grant 100% Four years from the date of grant
(ii) Annual Options granted under this Plan shall vest in the optionee and thus become exercisable, in accordance with the following schedule provided that the optionee has continuously served as a member of the Board through such vesting date:
Percentage of Annual Option Shares for which Annual Option Will be Exercisable Date of Vesting - - ---------------------------- --------------- 0 Less than one year from the date of grant 33 1/3% One year from the date of grant 66 2/3% Two years from the date of grant 100% Three years from the date of grant
(iii) The number of shares as to which options may be exercised shall be cumulative, so that once the option shall become exercisable as to any shares it shall continue to be exercisable as to said shares, until expiration or termination of the option as provided in this Plan. (b) Legend on Certificates. The certificates representing such shares shall carry such appropriate legend, and such written instructions shall be given to the Company's transfer agent, as may be deemed necessary or advisable by counsel to the Company in order to comply with the requirements of the Securities Act of 1933 or any state securities laws. (c) Non-transferability. Any option granted pursuant to this Plan shall not be assignable or transferable other than by will or the laws of descent and distribution and shall be exercisable during the optionee's lifetime only by him or her. -4- 8. Termination of Option Rights. (a) In the event an optionee ceases to be a member of the Board for any reason other than death or permanent disability, any then unexercised portion of options granted to such optionee shall, to the extent not then vested, immediately terminate and become void; any portion of an option which is then vested but has not been exercised at the time the optionee so ceases to be a member of the Board may be exercised, to the extent it is then vested, by the optionee within 90 days of the date the optionee ceased to be a member of the Board; and all options shall terminate after such 90 days have expired. (b) In the event that an optionee ceases to be a member of the Board by reason of his or her death or permanent disability, any option granted to such optionee shall be immediately and automatically accelerated and become fully vested and all unexercised options shall be exercisable by the optionee (or by the optionee's personal representative, heir or legatee, in the event of death) until the scheduled expiration date of the option. 9. Exercise of Option. Subject to the terms and conditions of this Plan and the option agreements, an option granted hereunder shall, to the extent then exercisable, be exercisable in whole or in part by giving written notice to the Company by mail or in person addressed to PerSeptive Biosystems, Inc., 500 Old Connecticut Path, Framingham, Massachusetts 01701, at its principal executive offices, stating the number of shares with respect to which the option is being exercised, accompanied by payment in full for such shares, which payment may be (a) in whole or in part in shares of the Common Stock of the Company already owned by the person or persons exercising the option or shares subject to the option being exercised (subject to such restrictions and guidelines as the Board may adopt from time to time), valued at fair market value determined in accordance with the provisions of paragraph 5 or (b) at the discretion of the Committee, and consistent with applicable law, through the delivery of an assignment to the Company of a sufficient amount of the proceeds from the sale of the Common Stock acquired upon exercise of the option and an authorization to the broker or selling agent to pay that amount to the Company, which sale shall be at the participant's direction at the time of exercise; provided, however, that there shall be no such exercise at any one time as to fewer than one hundred (100) shares or all of the remaining shares then purchasable by the person or persons exercising the option, if fewer than one hundred (100) shares. The Company's transfer agent shall, on behalf of the Company, prepare a certificate or certificates representing such shares acquired pursuant to exercise of the option, shall register the optionee as the owner of such shares on the books of the Company and shall cause the fully executed certificate(s) representing such shares to be delivered to the optionee as soon as practicable after payment of the option price in full. The holder of an option shall not have any rights of a stockholder with respect to the shares covered by the option, except to the extent that one or more certificates for such shares shall be delivered to him or her upon the due exercise of the option. 10. Adjustments Upon Changes in Capitalization and Other Matters. Upon the occurrence of any of the following events, an optionee's rights with respect to options granted to him or her hereunder shall be adjusted as hereinafter provided: -5- (a) Stock Dividends and Stock Splits. If the shares of Common Stock shall be subdivided or combined into a greater or smaller number of shares or if the Company shall issue any shares of Common Stock as a stock dividend on its outstanding Common Stock, the number of shares of Common Stock deliverable upon the exercise of options shall be appropriately increased or decreased proportionately, and appropriate adjustments shall be made in the purchase price per share to reflect such subdivision, combination or stock dividend. (b) Issuances of Securities. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares subject to options. No adjustments shall be made for dividends paid in cash or in property other than securities of the Company. (c) Adjustments. Upon the happening of any of the foregoing events, the class and aggregate number of shares set forth in paragraphs 2 and 4 of this Plan that are subject to options which previously have been or subsequently may be granted under this Plan shall also be appropriately adjusted to reflect such events. The Board shall determine the specific adjustments to be made under this paragraph 10 and its determination shall be conclusive. 11. Restrictions on Issuance of Shares. Notwithstanding the provisions of paragraphs 4 and 9 of this Plan, the Company shall have no obligation to deliver any certificate or certificates upon exercise of an option until one of the following conditions shall be satisfied: (i) The shares with respect to which the option has been exercised are at the time of the issue of such shares effectively registered under applicable Federal and state securities laws as now in force or hereafter amended; or (ii) Counsel for the Company shall have given an opinion that such shares are exempt from registration under Federal and state securities laws as now in force or hereafter amended; and the Company has complied with all applicable laws and regulations with respect thereto, including without limitation all regulations required by any stock exchange upon which the Company's outstanding Common Stock is then listed. 12. Representation of Optionee. If requested by the Company, the optionee shall deliver to the Company written representations and warranties upon exercise of the option that are necessary to show compliance with Federal and state securities laws, including representations and warranties to the effect that a purchase of shares under the option is made for investment and not with a view to their distribution (as that term is used in the Securities Act of 1933). 13. Option Agreement. Each option granted under the provisions of this Plan shall be evidenced by an option agreement, which agreement shall be duly executed and delivered on behalf of the Company and by the optionee to whom such option is granted. The option agreement shall contain such terms, provisions and conditions not inconsistent with this Plan as may be determined by the officer executing it. -6- 14. Termination and Amendment of Plan. Options may no longer be granted under this Plan after March 27, 2002, and this Plan shall terminate when all options granted or to be granted hereunder are no longer outstanding. The Board may at any time terminate this Plan or make such modification or amendment thereof as it deems advisable; provided, however, that the Board may not, without approval by the affirmative vote of the holders of a majority of the shares of Common Stock present in person or by proxy and entitled to vote at the meeting, (a) increase the maximum number of shares for which options may be granted under this Plan or the number of shares for which an option may be granted to any participating director hereunder, (b) change the provisions of this Plan regarding the termination of the options or the times when they may be exercised, (c) change the period during which any options may be granted or remain outstanding or the date on which this Plan shall terminate, (d) change the designation of the class of persons eligible to receive options, or otherwise change paragraph 4, (e) materially increase benefits accruing to option holders under this Plan, or (f) amend this Plan in any manner which would cause Rule 16b-3 to become inapplicable to this Plan; and provided further that the provisions of this Plan specified in Rule 16b-3(c)(2)(ii)(A) may not be amended more than once every six months, other than to comport with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the rules thereunder. Termination or any modification or amendment of this Plan shall not, without consent of a participant, affect his or her rights under an option previously granted to him or her. 15. By accepting options under the Plan, each optionee acknowledges that the Company may be required to withhold taxes in connection with the exercise of such options in respect of amounts considered to be compensation includible in the optionee's gross income. 16. Governing Law. The validity and construction of this Plan and the instruments evidencing options shall be governed by the laws of the State of Delaware, without giving effect to the principles of conflicts of law thereof. Date Approved by Board of Directors of the Company: March 27, 1992. Date approved by the Stockholders of the Company: March 30, 1992. -7- Register of Amendments to Plan
Paragraph No. Date of Stockholder and Change Board Approval Approval ------------- -------------- ------------------- 4. Increase to the annual March 11, 1996 May 6, 1996 grant under the Plan from 1,500 to 7,500 shares of Common Stock. 4. Insert as the third March 11, 1996 N/A sentence of paragraph 4 as follows: "The number of shares covered by options granted under this paragraph 4 shall be subject to adjustment in accordance with the provisions of paragraph 10 of this Plan." 5. Amend the last sentence of March 11, 1996 N/A paragraph 5 to correct the reference to the Nasdaq National Market 9. Amend the first sentence March 11, 1996 N/A of paragraph 9 to correct the Company's address. 10(c). Amend the first March 11, 1996 N/A sentence of paragraph 10(c) to read in its entirety as follows: "Upon the happening of any of the foregoing events, the class and aggregate number of shares set forth in paragraphs 2 and 4 of this Plan that are subject to options which previously have been or subsequently may be granted under this Plan shall also be appropriately adjusted to reflect such events."
EX-27 4 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Cash Flows and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS SEP-30-1996 JAN-01-1996 MAR-31-1996 10,938 13,006 20,856 2,266 21,475 66,393 36,231 5,593 134,757 40,079 27,230 0 27,023 170 31,889 134,757 48,532 48,532 27,271 32,108 4,837 0 1,422 (23,940) 100 (24,040) 0 0 0 (24,040) (1.72) (1.72)
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