SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT
TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

(Mark One)

For the fiscal year ended December 31, 2001

OR

For the transition period from                              to                             

Commission file number 0-19410

Sepracor Inc.
(Exact Name of Registrant as Specified in its Charter)

Registrant's telephone number, including area code: (508) 481-6700

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.10 par value
(Title of class)

        Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K. o

        The aggregate market value of voting common stock held by nonaffiliates of the registrant was approximately $1,664,504,000 based on the last reported sale price of the common stock on the NASDAQ consolidated transaction reporting system on March 13, 2002.

        Number of shares outstanding of the registrant's class of common stock as of March 13, 2002: 78,182,436 shares.

DOCUMENTS INCORPORATED BY REFERENCE

2001 Annual Report to Stockholders—Part II
Proxy Statement for the 2002 Annual Meeting of Stockholders—Part III

Cautionary Statement Regarding Forward-Looking Statements

        This annual report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 concerning our business, operations and financial condition, including statements with respect to the safety, efficacy and potential benefits of our products under development, expectations with respect to development and commercialization of our product candidates, the timing of the submission, acceptance and approval of regulatory filings, the scope of patent protection with respect to these product candidates and our products and information with respect to the other plans and strategies for our business and the business of our subsidiaries. All statements other than statements of historical facts included in this annual report on Form 10-K regarding our strategy, future operations, timetables for product testing, regulatory approvals and commercializations, financial position, costs, prospects, plans and objectives of management are forward-looking statements. When used in this annual report on Form 10-K the words "expect", "anticipate", "intend", "plan", "believe", "seek", "estimate", and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Because these forward-looking statements involve risks and uncertainties, actual results could differ materially from those expressed or implied by these forward-looking statements for a number of important reasons, including those discussed under "Factors Affecting Future Operating Results", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this annual report on Form 10-K.

        You should read these statements carefully because they discuss our expectations about our future performance, contain projections of our future operating results or our future financial condition, or state other "forward-looking" information. You should be aware that the occurrence of any of the events described under "Factors Affecting Future Operating Results" and elsewhere in this annual report on Form 10-K could substantially harm our business, results of operations and financial condition and that upon the occurrence of any of these events, the trading price of our common stock could decline.

        We cannot guarantee any future results, levels of activity, performance or achievements. The forward-looking statements contained in this annual report on Form 10-K represent our expectations as of the date of this annual report on Form 10-K and should not be relied upon as representing our expectations as of any other date. Subsequent events and developments will cause our expectations to change. However, while we may elect to update these forward-looking statements, we specifically disclaim any obligation to do so, even if our expectations change.

PART I

Item 1. Business.

The Company

        Sepracor Inc. is a research-based pharmaceutical company dedicated to treating and preventing human disease through the discovery, development and commercialization of innovative pharmaceutical compounds including product candidates directed toward serving unmet medical needs. Our proprietary compounds are either:

        -    single-isomer or active metabolite forms of existing drugs, which we refer to as improved chemical entities, or ICEs, or

        -    new chemical entity compounds, which we refer to as NCEs, which are unrelated to currently marketed products.

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        Our drug development program has yielded an extensive portfolio of pharmaceutical compounds intended to treat a broad range of indications. We are concentrating our product development efforts in three major therapeutic areas:

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respiratory;



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urology and gastroenterology; and



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central nervous system disorders.

        In our isomer and metabolite development program, we identify existing drugs that might, in single-isomer or active metabolite forms, provide significant advances over existing therapies within the indications of the parent compound or in new indications. We then develop isomers or metabolites that may offer benefits over both the parent drugs and competitive compounds, such as reduced side effects, improved therapeutic efficacy, effectiveness for new indications or improved dosage forms.

        NCE development typically encompasses a more traditional approach to drug development. In this program, we are seeking to discover novel compounds unrelated to existing commercial compounds but which have the potential to provide benefits over existing treatments or provide new therapies for diseases lacking effective treatment.

Background

Chiral Compounds

        Approximately 500 currently available drugs are chiral compounds. Chiral compounds frequently exist as mixtures of mirror-image molecules known as isomers. Although these isomers are identical in chemical composition, their three-dimensional structures differ and, as a result, often interact differently with cell receptors in a living organism. This interaction between the drug and the receptor either stimulates or inhibits a biological function of the receptor and thereby initiates the therapeutic effect. In some cases, only one of the isomers is the desired active ingredient while the other isomer is inactive or may cause undesirable side effects. When a chiral compound contains equal amounts of both isomers, it is a racemic mixture. These two isomers are generally referred to as (S)-isomers (left) and (R)-isomers (right). Typically, in our product development process, we purify racemic mixtures containing two isomers into compounds containing only one isomer.

Active Metabolites

        A metabolite is a compound resulting from the chemical modification of a drug after it is administered. Like the different isomers of a chiral drug, the activity of metabolites and the isomers of metabolites may differ from the activity of the parent compound depending upon their interaction with specific receptors or by manifesting differences in absorption, excretion, metabolism or distribution within the body. These changes in activity may result in a compound that demonstrates improved safety or efficacy as compared to the parent compound.

Recent Developments

        SOLTARA.    On March 7, 2002, the United States Food and Drug Administration, or FDA, issued a "not approvable" letter for our new drug application, or NDA, for SOLTARA™ brand tecastemizole 15 mg and 30 mg capsules. A "not-approvable" letter is issued if the FDA believes that the application contains insufficient information for an approval action.

        The FDA identified three issues that are not adequately addressed in our NDA in light of certain aspects of tecastemizole's pharmacokinetics and potential for accumulation in tissue. Two of the issues pertained to observations from safety studies in animals that were not observed in humans: phospholipidosis, an adaptive storage response to drug administration, and cardiomyopathy, a

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pathologic condition of the heart muscle. A third issue concerned the need for additional assurance of the absence of any potential for QTc prolongation, which is an effect on electrical impulse conduction in the heart.

        The FDA has expressed the concern that, as a result of tecastemizole's long terminal elimination phase in both normal and cardiac-compromised patients, a review of the kinetic data in humans suggests that our safety evaluations were not of sufficient duration to provide adequate safety data at tissue steady-state.

        Due to SOLTARA's extended elimination phase, the FDA also concluded that additional evaluation of the concentration of the drug in tissue after prolonged exposure were needed to quantify the potential for tecastemizole accumulation in target organs. We have requested a meeting with the FDA to discuss the requirements for resolution of the issues identified by the FDA concerning the NDA.

        We are unable to predict when, if ever, we will be able to commence sales of SOLTARA. However, we believe that if we were to receive FDA approval, sales would not commence until at least mid-2003.

Current Revenue Sources

        In May 1999, we commercially introduced XOPENEX® (levalbuterol HCl), a single isomer of the bronchodilator albuterol, for the treatment and prevention of bronchospasm in patients with obstructive airway disease, such as asthma. Our revenues from sales of XOPENEX have grown from $14.1 million in 1999 to $55.1 million in 2000 and $122.2 million in 2001.

        We earned royalties in 2001 on sales of ALLEGRA® (fexofenadine HCl), a non-sedating antihistamine, and on sales of XYZAL™/XUSAL® (levocetirizine), an antihistamine sold outside the United States. In December 2001, Schering Plough Corporation, referred to in this report as Schering, announced that CLARINEX® (desloratadine) 5 mg tablets had received marketing clearance from the FDA. Schering commercially launched CLARINEX in 2002, and we are now entitled to earn royalties on sales of CLARINEX.

Self-Marketed Products and Product Candidates

Respiratory—Asthma

        XOPENEX (levalbuterol HCl).    In May 1999, we commercially introduced levalbuterol HCl, which we market under the name XOPENEX, for the treatment of reversible bronchospasm, or asthma. We currently market XOPENEX inhalation solution for nebulizer use in dosage strengths of 0.63 mg and 1.25 mg. XOPENEX is the first pharmaceutical product that we developed and commercialized.

        In January 2002, the FDA approved XOPENEX for the treatment or prevention of bronchospasm in children six to eleven years old. We began marketing XOPENEX for use in a nebulizer at dosage strengths of 0.31 mg and 0.63 mg for pediatric patients in March 2002.

        We are developing additional delivery formulations for XOPENEX. Currently, we are conducting large-scale Phase III studies for XOPENEX in a hydrofluoroalkane, or HFA, metered dose inhaler, or MDI, in children, adolescents and adults. In January 2002, we announced a scale-up and manufacturing collaboration with 3M Drug Delivery Systems, referred to in this report as 3M, for a XOPENEX HFA MDI. The collaboration combines XOPENEX with 3M's expertise in manufacturing MDIs, the device most commonly used by patients for the treatment of asthma and chronic obstructive pulmonary disease, or COPD, using HFA technology.

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        We sell XOPENEX in the United States through our direct sales force and through a co-promotion agreement with Ross Products Division of Abbott Laboratories. Abbott's Ross Products Division provides coverage for marketing of XOPENEX to pediatricians in the United States through its sales force of over 500 professionals. The Ross Products Division coverage supplements our approximately 480 person direct sales force, approximately 250 of whom were hired in February 2002, that markets XOPENEX to hospitals, pulmonologists, allergists and primary care physicians. All sales are for our account and Abbott receives a commission on sales into the pediatric market. The agreement is for a term of six years but can be terminated earlier by Abbott if we do not achieve specified development or sales objectives.

        (R,R)-Formoterol.    (R,R)-formoterol is the single-isomer of formoterol, which is marketed under the brand names FORADIL and ATOCK. FORADIL is marketed in Canada and Europe by Novartis, and ATOCK is marketed in Japan by Yamanouchi Pharmaceuticals. (R,R)-formoterol inhalation solution is our pharmaceutical candidate for the treatment of bronchoconstriction caused by asthma or COPD. Clinical studies indicate that (R,R)-formoterol has the potential to provide rapid onset of relief as well as long duration of action. In September 2001, we began Phase III studies of (R,R)-formoterol inhalation solution for the treatment of bronchospasm in patients with obstructive airway disease.

        In our Phase II program for obstructive airway disease, including asthma and COPD, (R,R)-formoterol exhibited a rapid onset of action comparable to the short-acting bronchodilator, VENTOLIN, as well as a duration of action of up to 24 hours in all studies. In a Phase II 340-patient, multi-dose asthma trial, (R,R)-formoterol, at a range of doses tested, significantly improved lung function (p<0.001 versus placebo). These changes, measured as forced expiratory volume in one second, or FEV1, increases from baseline, ranged from 24 to 27 percent. In these studies (R,R)-formoterol had a duration of action of up to 24 hours with a side effect profile comparable to other beta-agonists. Currently marketed long-acting beta-agonists require twice-a-day dosing and are not currently available as an inhalation solution. If successfully developed and approved, we intend to market (R,R)-formoterol through our direct sales force.

Respiratory—Allergies

        SOLTARA (tecastemizole).    In March 2001, we submitted an NDA to the FDA for SOLTARA brand tecastemizole, formerly known as norastemizole, 15 mg and 30 mg capsules for the treatment of allergic rhinitis. We announced in May 2001 that the FDA accepted and filed the NDA for review. The NDA contained data from seven large-scale allergic rhinitis studies, more than 30 smaller clinical studies and 200 preclinical studies. Our clinical studies included patients with seasonal and perennial allergic rhinitis. In these studies, over 3,700 subjects were treated with SOLTARA at doses ranging from 2 mg to 300 mg. In addition to SOLTARA capsules, we are developing a SOLTARA pseudoephedrine combination product for the treatment of allergic rhinitis, and SOLTARA in a syrup and a rapidly dissolving tablet form. We anticipate selling SOLTARA, if approved, through our direct sales force.

        On March 7, 2002, the FDA issued a "not approvable" letter for the NDA for SOLTARA™ brand tecastemizole 15 mg and 30 mg capsules. We have requested a meeting with the FDA to discuss requirements for the resolution of the issues identified by the FDA. We are unable to predict when, if ever, we will be able to commence sales of SOLTARA. However, we believe that if we were to receive FDA approval, sales would not commence until at least mid-2003.

Central Nervous System—Sleeping Disorders

        Eszopiclone.    In October 1999, we entered into an agreement with Rhone-Poulenc Rorer SA, referred to in this report as RPR, a unit of Rhone-Poulenc SA, now Aventis, under which we exclusively licensed RPR's preclinical, clinical and post-marketing surveillance data package relating to

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zopiclone and its isomers and metabolites, to develop, make, use and sell eszopiclone, formerly known as (S)-zopiclone and esopiclone, in the United States. Zopiclone is marketed by Aventis under the brand names of IMOVANE and AMOBAN, and is available in approximately 80 countries worldwide and has never been marketed in the United States. We have completed 19 clinical studies, including three pivotal Phase III studies, of eszopiclone, for the treatment of chronic and transient insomnia, or sleep disorders. In these studies more than 2,000 subjects were treated and the drug was successful in achieving the targeted endpoints of hypnotic efficacy and safety. In response to issues raised by the FDA regarding completeness of our NDA for eszopiclone, we are conducting additional preclinical studies to support use of RPR's preclinical data package, including carcinogenicity studies. Assuming favorable results from the ongoing studies, we anticipate submitting an NDA for eszopiclone to the FDA, in 2002, which, if approved, we would market under the name ESTORRA.

Central Nervous System—Psychiatry/Neurology

        (R)-Sibutramine metabolite.    The (R)-sibutramine metabolite is a single isomer metabolite of sibutramine. Sibutramine is marketed under the brand name MERIDIA by Knoll Pharmaceuticals Co., a division of BASF AG, for the treatment of obesity. We are currently conducting large scale, Phase II studies of the (R)-sibutramine metabolite for the treatment of depression and attention deficit hyperactivity disorder, or ADHD. The (R)-sibutramine metabolite has been shown in preclinical studies to have potent activity at all three monoaminergic reuptake sites, which include serotonin, norepinephrine and dopamine. We believe this unique triple mechanism of action may provide a broader spectrum of therapy than other currently marketed antidepressants. Initial Phase I studies have indicated that the drug is bioavailable and well tolerated.

Central Nervous System—Anxiety

        SEP174559.    SEP174559 is a single isomer of an active metabolite of zopiclone. In 2001, we submitted an IND to the FDA for SEP174559. We have initiated a Phase I clinical study of SEP174559 for the treatment of acute and chronic anxiety. Preclinical data suggests that SEP174559 has the potential to provide a rapid onset of action with less sedation than currently marketed anxiolytics for acute anxiety.

Other—Hypertension

        (S)-Amlodipine.    In 2001, we submitted an investigational new drug application, or IND, to the FDA for (S)-amlodipine. We have initiated a Phase I clinical study of (S)-amlodipine, an isomer of amlodipine, for the treatment of hypertension. Amlodipine is marketed by Pfizer Inc. as NORVASC and is the leading calcium antagonist used for the treatment of hypertension and angina. Preclinical models have indicated that (S)-amlodipine could be effective for the treatment of hypertension and may provide significantly less peripheral edema, which is swelling of the legs and ankles, than amlodipine.

Urology

        (S)-Oxybutynin.    (S)-Oxybutynin is a single isomer of oxybutynin. Oxybutynin is marketed by Alza under the brand name DITROPAN® for the treatment of urge urinary incontinence. We are studying (S)-oxybutynin for the treatment of overactive bladder. Phase II clinical studies that we conducted suggest that (S)-oxybutynin may provide relief for symptoms of urge and frequency urinary incontinence with reduced side effects, such as dry mouth, as compared to the parent compound.

        In June 2001, we began a Phase III study of (S)-oxybutynin in a sustained-release formulation for the treatment of overactive bladder. This study is expected to include approximately 850 patients at 70 sites throughout the United States. In a previously completed, large-scale Phase IIB study, (S)-

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oxybutynin, administered at 120 mg three times a day, or TID, resulted in significant improvements in daily micturition symptoms, and an improved tolerability profile, specifically dry mouth, compared with immediate release DITROPAN at 5 mg TID. Earlier in 2001, we successfully completed a pharmacokinetic and pharmacodynamic analysis of (S)-oxybutynin. Based on this analysis, the sustained release formulation is designed to provide a more constant level of drug therapy and should permit once-a-day dosing with less peak to trough variability and an improved therapeutic profile.

        (S)-Sibutramine metabolite.    The (S)-sibutramine metabolite is a single isomer of a metabolite of sibutramine. Sibutramine is marketed under the brand name MERIDIA by Knoll Pharmaceutical Co. for the treatment of obesity. We are currently conducting Phase II studies of (S)-sibutramine metabolite for the treatment of male sexual dysfunction. Preclinical models have shown the (S)-sibutramine metabolite to be a potent dopamine and norepinephrine reuptake inhibitor with the potential to improve erectile and ejaculatory dysfunction. We also plan to study the (S)-sibutramine metabolite for the treatment of female sexual dysfunction.

Other Product Candidates

        Our other product candidates include: (S)-doxazosin, (S)-lansoprazole and (-) pantroprazole. However, we are not currently conducting preclinical or clinical trials for these product candidates.

Product Candidate Priorities in 2002

        In 2002, we will focus the majority of our resources on advancing those product candidates which are closest to NDA submission. These include:

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SOLTARA (tecastemizole)—Pending the outcome of an upcoming meeting with the FDA surrounding the recent "not-approvable" letter;



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ESTORRA (eszopiclone)—We anticipate, pending the outcome of Phase III clinical trials, advancing from Phase III clinical trials to an NDA filing;



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(R,R)-Formoterol—We expect to continue Phase III clinical trials;



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(S)-Oxybutinin—We expect to continue Phase III clinical trials;



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XOPENEX—MDI—We expect to continue Phase III clinical trials;



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(S)-Amlodipine—We expect to continue Phase I clinical studies and, pending the outcome of these studies, anticipate moving into Phase II clinical studies.

Partnered Products and Product Candidates

        Aventis for Fexofenadine.    In July 1993, we licensed to Hoechst Marion Roussel, Inc., now Aventis, and referred to in this report as Aventis, our U.S. patent rights covering fexofenadine. In October 1996, Aventis introduced ALLEGRA (fexofenadine hydrochloride). In 1999, we amended our agreement with Aventis. Pursuant to the 1999 amendment, we assigned to Aventis our U.S. patent relating to fexofenadine and licensed to Aventis certain U.S. patent applications relating to fexofenadine. Under the terms of a separate agreement, Aventis obtained an exclusive license to our fexofenadine patents that had been the subject of litigation in Europe, and various other patent oppositions between the two companies outside the United States. Since March 1, 1999, we have been entitled to receive royalties on fexofenadine product sales in countries where we have patents related to fexofenadine. In the first quarter of 2000, Aventis received approval from the FDA to market a new dosage form of ALLEGRA in the United States. We have been entitled to receive royalties on any fexofenadine sales in the United States since Aventis's composition of matter patent in expired February 2001. We are currently receiving royalties from Aventis for sales of ALLEGRA in the United States, Japan, Canada, Australia

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and in certain European Union, or EU, member states. We will be entitled to receive royalties on sales in additional countries where we hold patents related to fexofenadine.

        Schering-Plough Corporation for Desloratadine.    In December 1997, we licensed to Schering-Plough Corporation, referred to in this report as Schering, worldwide rights to develop and market desloratadine, an active-metabolite of loratadine. Loratadine is marketed by Schering as CLARITIN, a leading nonsedating antihistamine. In the fourth quarter 2000, Schering announced three new NDA submissions for desloratadine. In January 2001, Schering announced that the European Commission of the EU granted marketing authorization for desloratadine as a nonsedating treatment of seasonal allergic rhinitis, or SAR, in adults and children 12 years of age and older. Desloratadine is marketed in the EU by Schering under the brand names AERIUS™ and NEOCLARITYN™. This marketing authorization is valid in all 15 EU member states. Schering has announced that it is also seeking marketing approval in Europe for other indications. On January 19, 2001, Schering received an approvable letter from the FDA for desloratadine. On February 15, 2001, Schering announced that the FDA had issued reports citing deficiencies concerning Schering's compliance with current Good Manufacturing Processes, or GMPs, and that the FDA had advised Schering that GMP deficiencies must be resolved prior to the FDA granting approval of desloratadine. In December 2001, Schering announced that CLARINEX brand desloratadine 5 mg tablets had received marketing clearance from the FDA for the treatment of SAR in adults and children 12 years of age and older. In February 2002, Schering announced that the FDA had approved CLARINEX tablets for the treatment of chronic idiopathic urticaria (CIU), which is hives of unknown cause, in adults and children 12 years of age and older. Under the license agreement with Schering, we are entitled to receive royalties on sales of all formulations of desloratadine upon product launch in countries in which we hold patents.

        UCB for Levocetirizine.    In June 1999, we licensed to UCB Farchim SA, referred to in this report as UCB, all of our issued patents and patent applications covering levocetirizine, a single isomer of UCB's antihistamine ZYRTEC, to develop, market and sell levocetirizine as a nonsedating antihistamine worldwide, except in the United States and Japan. In January 2001, UCB announced that it obtained approval to market levocetirizine in Germany. In September 2001, UCB announced that the EU member states granted a positive opinion for levocetirizine for the treatment of symptoms of SAR, perennial allergic rhinitis and chronic idiopathic urticaria, or hives, in adults and children aged six years of age and older. UCB has marketed levocetirizine under the brand names XUSAL™ and XYZAL in Germany since February 2001, and in 4 other EU member state countries during the forth quarter of 2001. UCB has received regulatory approval in 9 other countries where will be entitled to earn royalties on sales upon launch, which is expected to be in 2002. Under the agreement, we are entitled to royalties on sales of all formulations of levocetirizine in countries where we have issued patents, and royalties will escalate upon achievement of sales volume milestones.

        Janssen Pharmaceutica for Ticalopride.    In July 1998, we entered into a development and license agreement with Janssen Pharmaceutica, N.V., a wholly-owned subsidiary of Johnson & Johnson, referred to in this report as Janssen, relating to ticalopride, formerly known as (+)-norcisapride. Ticalopride is an isomer of the active metabolite of cisapride. Cisapride is marketed by Janssen as PROPULSID for the treatment of nocturnal heartburn due to gastro esophageal reflux disease, commonly referred to as GERD. Under the terms of the agreement, Janssen has worldwide exclusive rights to develop and market products containing ticalopride. In the second quarter of 2001, we were notified by Janssen that it was suspending two Phase II trials to evaluate the efficacy and safety of ticalopride in subjects with GERD or gastroparesis pending further analysis of a small number of adverse events reported in patients with GERD and diabetic patients. We continue to work with Johnson & Johnson to assess the data from the suspended Phase II trials of ticalopride.

        Eli Lilly and (R)-Fluoxetine.    In December 1998, we announced an exclusive license agreement with Eli Lilly and Company, referred to in this report as Lilly, relating to development and

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commercialization of (R)-fluoxetine, an isomer of fluoxetine, which is marketed by Lilly as PROZAC®. On October 19, 2000, we announced that Lilly had terminated its exclusive license agreement with us regarding (R)-fluoxetine. Based on a review of the available clinical data, (R)-fluoxetine, at the highest dose tested, demonstrated a small but statistically significant increase in QTc interval, a heart wave abnormality. Based on this finding, the development timetable would need to be extended, and we believe an NDA submission for (R)-fluoxetine would be delayed by at least two years. Given the extended development timetable and an assessment of the competitive environment, we have elected not to pursue the development of (R)-fluoxetine at this time.

Drug Discovery

        We continue our research in discovering novel compounds in the areas of pain management and treatments for central nervous system, or CNS, disorders. In this program, we are seeking to discover novel compounds unrelated to existing commercial compounds which we believe may have the potential to provide benefits over existing treatments or address unmet medical needs.

        We have entered into partnerships that allow us access to novel molecular targets. For both known biological and new genomic-identified drug targets, we design relevant assays in high-throughput screening formats. We use combinatorial chemistry techniques to produce libraries of novel compounds for screening. When a lead is discovered, we design and synthesize focused libraries utilizing directed combinatorial techniques. By using this technology, we have identified a number of lead compounds applicable to the treatment of pain and CNS disorders, such as depression, ADHD, anxiety and schizophrenia.

        We are currently conducting research on a number of new drug candidates. Our early-stage lead compounds include SEP167864 for acute and chronic severe pain (parenteral/transdermal) and SEP174603, a potent analgesic, or pain reducer, which has, in preclinical models, shown less respiratory and CNS depression, constipation and nausea than leading opiate analgesic products. While further extensive studies and clinical work are required to assess the efficacy and safety profile of these compounds, we believe that one or more of our candidates may provide potent pain treatments for cancer patients, be well tolerated and also offer pharmacoeconomic advantages by reducing the length of time patients spend in the hospital after surgery.

Subsidiary/Related Party

BioSphere Medical, Inc.

        In 1994, we established and independently financed BioSepra Inc. as a subsidiary through an initial public offering of its common stock. From 1994 to 1999, the company operated as BioSepra Inc., developing proprietary microsphere beads used as chromatography media in the production of pharmaceuticals.

        In February 1999, BioSepra determined that it would refocus on embolotherapy, which is the occlusion of the blood supply to fibroids and vascular defects. BioSepra sold its chromatography business and acquired a 51% interest in French-based BioSphere Medical, S.A., referred to as BioSphere France, with an option to purchase the remaining 49% interest, and changed its corporate name to BioSphere Medical, Inc. The acquisition enabled BioSphere to gain ownership of product know-how and European regulatory approval of Embosphere® Microspheres.

        In July 2001, we sold 2,000,000 shares of our BioSphere common stock in a public offering in which BioSphere also sold 2,000,000 shares of its common stock at a price to the public of $11.00 per share. In August 2001, the underwriters exercised their over-allotment option to purchase an additional 600,000 shares of our BioSphere common stock at a price to the public of $11.00 per share. In connection with these sales, we received net proceeds, after offering costs, from the sales of

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approximately $26,526,000 and recognized a gain of approximately $23,034,000. Effective as of July 3, 2001, we began recording our investment in BioSphere under the equity method. We recorded $1,601,000 as our share of BioSphere losses under the equity method in 2001. At December 31, 2001, our ownership in BioSphere was approximately 25%.

HMSR, Inc. (formerly HemaSure Inc.)

        In 1994, we established and independently financed HemaSure Inc. as a subsidiary. Through two public offerings of HemaSure's common stock, HemaSure was initially a subsidiary, and ultimately became a related party of Sepracor. HemaSure has been applying its proprietary filtration technology to develop products to increase the safety of donated blood and to improve certain blood collection and transfusion procedures

        In February 2001, HemaSure signed an asset purchase agreement with Whatman plc. HemaSure stockholders approved the transaction at a special meeting of stockholders held in May 2001. In May 2001, HemaSure completed the sale of all of HemaSure's assets, except for cash, cash equivalents and marketable securities, subject to certain exceptions as defined in the agreement, to Whatman Bioscience Inc., a Massachusetts corporation and a subsidiary of Whatman plc. At December 31, 2001 our investment in HemaSure was recorded at zero and our ownership was approximately 23%. Following the sale, HemaSure changed it corporate name to HMSR, Inc.

        In November 2001, HMSR, Inc. announced that it had signed a definitive agreement to merge with Point Therapeutics, Inc. Following the merger, HMSR's current stockholders will own approximately 23% of the combined company. HMSR's stockholders voted to approve the merger at a stockholder meeting held in March 2002.

Investment in Versicor

        Versicor Inc. was formed as a majority-owned subsidiary of Sepracor in May 1995 to develop novel drug candidates principally for the treatment of infectious diseases.

        We consider our investment in Versicor as an available-for-sale security and as such have marked-to-market our investment at the December 31, 2001 market price of $20.25 per share, which resulted in us recording an unrealized gain of $22,889,000 as a separate component of stockholders' equity for the year ended December 31, 2001. At December 31, 2001, our ownership in Versicor was approximately 8%.

Research and Development

        Our research and development activities are primarily directed toward discovering and developing potentially improved versions of widely-prescribed drugs.

        Our total research and development expenses were $231,278,000, $170,759,000 and $122,400,000, for 2001, 2000 and 1999, respectively. Our spending during the past three years has centered on advancing our drug candidates through clinical trials with the majority of funds being expended on programs closest to NDA submission. Over the three year period ended December 31, 2001, our principal research and development programs were for development of levalbuterol (HCl), tecastemizole (formerly norastemizole), which we intend to market under the name SOLTARA, if approved, eszopiclone (formerly zopiclone and esopiclone), oxybutynin and formoterol. On March 7, 2002, the FDA issued a "not-approvable" letter for SOLTARA brand tecastemizole, 15 mg and 30 mg capsules, for the treatment of allergic rhinitis.

        Collaborative research and development revenues totaled $0, $3,573,000 and $2,390,000 in 2001, 2000 and 1999, respectively.

        In 2002, we expect research and development expenditures to increase significantly over 2001, as we seek to further develop our late stage portfolio of pharmaceuticals and drug candidates.

10

Marketing and Sales

        We market and sell our products through our direct and third party sales forces, arrangements with corporate marketing partners and out-licensing of product rights in exchange for royalties. We believe that corporate partnering arrangements allow us to use the partner's marketing expertise to market our drug candidates more quickly. We currently have agreements with Schering, Aventis, Janssen and UCB. In each of these agreements, we are dependent upon the efforts, including marketing and sales efforts of our partners, and these efforts may not be successful.

        We have established a direct sales force to market our single isomer of albuterol, XOPENEX, which we introduced in 1999. As of December 31, 2001, we had approximately 223 people in our sales force. Since December 31, 2001, we expanded our direct sales force to approximately 480.

        We have also established a contract sales arrangement with Abbott's Ross Products Division, which promotes XOPENEX to pediatricians in the United States through its sales force of over 500 professionals. All sales are for our account and Abbott receives a commission on sales to the pediatric market.

        As we continue to enter into co-promotion arrangements or market and sell additional products directly, we will need to significantly expand our direct sales force, which will require significant management and financial resources. Our business and future operating results will depend in significant part upon our ability to attract and retain skilled sales and marketing personnel. Competition for these personnel is intense, and we may not be successful in attracting or retaining personnel. We may not be successful in building a marketing staff or sales force, establishing a marketing staff or sales force may not be cost-effective and our sales and marketing efforts may not be successful.

        Our product is primarily sold to wholesalers and retail pharmacy chains. In the pharmaceutical industry there are a limited number of major wholesalers and retail chains and there is currently a great deal of consolidation among companies in the industry. Therefore, as is typical in the industry, a few customers make up a significant part of our overall revenue. Also our terms of sale typically allow for the return of unused product up to one year after product expiration.

        Royalty revenue received from Aventis for sales of ALLEGRA represented approximately 17% of our total revenues in 2001. Product sales of XOPENEX to McKesson, Cardinal Health and Bergen Brunswig represented approximately 17%, 15% and 12%, respectively, of our total revenues in 2001. No other customer accounted for more than 10% of our revenues in 2001.

        We currently distribute all of our XOPENEX product from CORD Logistics, a subsidiary of Cardinal Health, Inc., based near Nashville, Tennessee. If additional product candidates of ours become approved for sale, we will need to either distribute the drugs ourselves or distribute through third party vendors for the near future. Our expectation is to continue to distribute through third party vendors. These third party distributors may not ship product on a timely, consistent basis, which could adversely affect our sales and our reputation.

        In 2002, we expect marketing and sales expenditures to increase significantly over 2001 as a result of our increased sales force.

Manufacturing

        We prepare our drug compounds primarily at our laboratories in Marlborough, Massachusetts. We also own and operate a current GMP-compliant 39,000 square foot fine chemical manufacturing facility in Windsor, Nova Scotia, which we believe has sufficient capacity to support the production of our drugs in quantities required for our clinical trials. If additional product candidates of ours become approved for sale, we will need to either manufacture the drugs ourselves or license the manufacturing

11

and marketing rights to third parties. While we believe that we have the capability to scale up our manufacturing process to support the production in commercial quantities of certain of the drugs that we intend to market and sell directly, we must contract out to third party manufacturers the production of a substantial portion of those drugs. If SOLTARA brand tecastemizole is commercialized, for example, we will have its active pharmaceutical ingredient, or API, produced through one third-party manufacturer and we will have the API manufactured into a final packaged product by another third-party manufacturer.

        Automatic Liquid Packaging, which is a division of Cardinal Health, Inc., is currently the sole finished goods manufacturer of our product XOPENEX. If Automatic Liquid Packaging experiences delays or difficulties in producing, packaging or delivering XOPENEX, our XOPENEX sales and our reputation could be adversely affected. Furthermore, if we are required to change manufacturers, we will be required to verify that the new manufacturer maintains facilities and procedures that comply with all applicable regulations and guidelines. The delays associated with the verification of a new manufacturer could negatively affect our ability to produce XOPENEX in a timely manner or within budget. Prior to December 31, 2001, we were obligated to purchase from ChiRex Inc., a Delaware corporation, all of the pharmaceutical active ingredients, other than commercial quantities that we are capable of producing at our Nova Scotia manufacturing plant, for those drugs that we intend to directly market and sell, subject to certain pricing, supply and quality control conditions. This agreement expired as of December 31, 2001.

Competition

        Our principal competitors are generic drug companies that seek to market the racemic mixture of a compound following expiration of the innovator's composition-of-matter patent and pharmaceutical companies that develop new therapies to treat the disease indications that we are targeting. We expect that these companies will seek to compete against our products with lower pricing, which could adversely affect the prices we charge. In addition, any drug developed by us is likely to encounter competition from the original brand-name parent drug, potentially in a generic form, following expiration of the innovator's patent. Many competitors and potential competitors have substantially greater resources, manufacturing and marketing capabilities, research and development staff and production facilities than us.

        In the antihistamine market, if SOLTARA brand tecastemizole is approved, we will face intense competition from established products such as CLARITIN, CLARINEX, ALLEGRA and ZYRTEC®. These products are established and currently dominate the market share for prescription antihistamines. The marketing of antihistamine products appears to be driven by direct-to-consumer advertising and therefore is very costly. It will take a large amount of financial resources to launch a drug in this market. Additionally, there is uncertainty relating to possible changes in the market with much discussion about allergy products possibly being sold without a prescription, as discussed below under the heading "Government Regulation." Finally, this market has the strong possibility of drugs with large market share moving off patent and becoming generic drugs as early as the latter part of 2002, thus increasing the price competition among antihistamines, as discussed below under the heading "Government Regulation".

        In our ICE program, we expect to compete primarily by obtaining use patents on the single isomer or active metabolites of existing, widely-sold drugs and by demonstrating, through preclinical and clinical tests, that such single isomer or active metabolite compounds offer benefits over the parent compounds, such as reduced side effects, improved therapeutic efficacy, new indications or improved dosage forms. Any such patents obtained by us, if valid and enforceable, should exclude others from marketing the compound for the indications claimed in our issued use patents.

12

Government Regulation

        We, our collaboration partners and our customers are required to obtain the approval of the FDA and similar health authorities in foreign countries to test clinically and sell commercially pharmaceuticals and biopharmaceuticals for human use.

        Human therapeutics are generally subject to rigorous preclinical and clinical testing. The standard process required by the FDA before a drug may be marketed in the U.S. includes:

•

preclinical laboratory tests and animal studies of toxicity and, often, carcinogenicity;



•

submission to the FDA of an IND application, which must be accepted before human clinical trials may commence;



•

adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug for its intended indication;



•

submission to the FDA of an NDA; and



•

FDA approval of the NDA prior to any commercial sale or shipment of the drug.

In the past, we have attempted to shorten the regulatory approval process of our drug candidates by relying on preclinical and clinical toxicology data already on file with the FDA with respect to the parent drug.

        Typically, clinical evaluation involves a three-phase process. In Phase I, the initial introduction of the drug to humans, the drug is tested for safety, or adverse effects, dosage tolerance, absorption, distribution, metabolism and excretion. Phase II involves studies in a limited patient population to:

•

determine the efficacy of the drug for specific targeted indications;



•

determine dosage tolerance and optimal dosage; and



•

identify possible adverse effects and safety risks.

        When a compound is found to be effective and to have an acceptable safety profile in Phase II evaluations, Phase III trials are undertaken to evaluate further clinical efficacy and to test further for safety within an expanded patient population at geographically dispersed clinical study sites. The process of completing clinical testing, obtaining FDA regulatory approval and commencing commercial marketing is likely to take a number of years. We may not successfully complete Phase I, Phase II or Phase III testing within any specified time period, if at all, with respect to any of our products subject to this testing. Even if we successfully complete clinical testing and the FDA accepts an NDA for filing, the FDA may determine not to approve an NDA. Furthermore, the FDA may not accept our evidence that a particular product meets our claims of superiority.

        FDA regulations pertain not only to healthcare products, but also to the processes and production facilities used to produce such products. Although we have designed the required areas of our U.S. facility to conform to current good manufacturing practices, or GMP, the FDA will not review the facilities for compliance until we produce a product for which we are seeking FDA commercial approval. Environmental legislation provides for restrictions and prohibitions on releases or emissions of various substances produced in, and waste by-products from, our operations.

        The FDA also imposes requirements relating to the marketing of drug products after approval, including requirements relating to the advertising and promotion of drug products to buyers and the reporting to the FDA of adverse drug experiences known to companies holding approved applications. Our failure to adhere to these requirements could lead to regulatory action by the FDA. Information reported to the FDA in compliance with these requirements could cause the FDA to withdraw drug approval or to require modification of labeling, for example to add warnings or contraindications. The

13

FDA has the statutory authority to seek judicial remedies and sanctions and to take administrative corrective action for violation of these and other FDA requirements and standards.

        The cost of pharmaceutical products is continually being investigated and reviewed by various government agencies, legislative bodies and private organizations in the United States and throughout the world. In the United States, most states have enacted generic legislation permitting, or even requiring, a dispensing pharmacist to substitute a different manufacturer's generic version of a pharmaceutical product for the one prescribed. Federal and state government agencies continue to advance efforts to reduce costs of Medicare and Medicaid programs, including restrictions on the amounts that agencies will reimburse for the use of products. We also are required to pay certain statutorily defined rebates on Medicaid purchases for reimbursement on prescription drugs under state Medicaid plans. The Veterans Health Care Act of 1992 requires manufacturers to extend additional discounts on pharmaceutical products to various federal agencies, including the Department of Veteran Affairs, Department of Defense and other Public Health Service entities.

        We are also required by governmental regulatory agencies to pay substantial fees relating to the approval, manufacture and sale of proprietary prescription drugs.

        In May 2001, an advisory panel to the FDA recommended that the FDA allow certain popular allergy medications to be sold without a prescription. The FDA may or may not accept the recommendation of the advisory panel. At least one pharmaceutical company has submitted an application to the FDA seeking approval to sell these allergy medications without a prescription. If the FDA approves this or other applications, our business may be adversely affected because royalty revenues may be reduced and the market for prescription allergy drugs, may be adversely affected.

        We expect debate to continue during 2002 at the federal and state level over the availability and method of delivery and payment for pharmaceutical products. We believe that if certain legislation is enacted, it could have the effect of reducing prices or limiting price increases of pharmaceutical products.

        At this time it is not possible to predict the extent to which we, or the pharmaceutical industry in general, might be impacted by these issues discussed above.

Patents and Proprietary Technology

        We and our affiliates and subsidiaries have filed patent applications in the United States and selected other countries relating to compositions of, methods of making, and methods of single isomer or metabolite compounds, and chiral synthesis and separations. In addition, we have licensed from third parties certain rights under various patents and patent applications.

        To the extent that we invent or discover a new, useful and non-obvious invention and file a U.S. patent application for such invention, a composition or method-of-use patent may be issued. We have been issued U.S. patents on the use of single isomers or active metabolites of currently marketed drugs. We are currently pursuing a policy of aggressively seeking patent protection for the use of single-isomers and active metabolites of certain existing drugs.

        Many of the compounds that we are investigating or developing may be subject to patents held by third parties. There may be foreign equivalents to these third party patents, the scope and expiration of which may vary from country to country. Even if we are issued a patent for the use of a single isomer or active metabolite that is currently claimed by one or more third party patents, products based on any such patent issued to us may not be sold until all of such third party patents expire unless a license is obtained to such third party patents or such third party patents are determined to be invalid, unenforceable, or not infringed by a court of proper jurisdiction. In addition, there may be pending additional third party patent applications covering our drugs in development which, if issued, may preclude the sale of our drug.

14

Employees

        On March 1, 2002, we and our wholly-owned subsidiaries employed 930 persons. Of these 930 employees, 232 were primarily engaged in research, development and engineering activities, 38 were primarily engaged in manufacturing, 480 were engaged in direct sales and the remainder were primarily engaged in marketing, sales administration, finance and accounting and corporate administration.

Item 2. Properties.

        Our facilities are located in Marlborough, Massachusetts and Windsor, Nova Scotia. In Massachusetts, we lease a total of 143,195 square feet of space in four buildings, approximately 5,000 square feet of which is devoted to manufacturing operations and the remainder to research and development and administration. The four leases currently in effect extend to June 2002 for 21,000 square feet, June 2002 for 20,903 square feet, June 2007 for 32,477 square feet and June 2007 for 68,815 square feet. In Nova Scotia, our primary manufacturing location is a 39,000 square-foot fine chemical manufacturing facility located on a four-acre site in Windsor, Nova Scotia. We acquired the facility in March 1994. Production at the Nova Scotia facility began in February 1995.

        In January 2001, we signed a lease to occupy approximately 192,600 square feet of office and research and development space in a facility to be built in Marlborough, Massachusetts. The lease, which is contingent upon the completion of the building, will include an option for us to lease two additional buildings that will be constructed on the same site. We are financing the construction of the initial building through a loan to the developer of the site and will have a right to buy the entire site outright beginning in June 2002. Occupancy is expected to occur in June 2002. If we elect to purchase the site, we will be required to expend a significant amount of our cash. If we attempt to purchase the site with a third-party mortgage, we may not be successful in securing the mortgage, and, if we are successful, we will be adding additional debt to our balance sheet.

Item 3. Legal Proceedings.

        We are not currently party to any material legal proceedings.

Item 4. Submission of Matters to a Vote of Security Holders.

        No matters were submitted to a vote of our security holders, through solicitation of proxies or otherwise, during the last quarter of the year ended December 31, 2001.

EXECUTIVE OFFICERS OF THE REGISTRANT

        The following table sets forth the names, ages and positions of our current executive officers as of December 31, 2001.

15

        Mr. Barberich, a founder of Sepracor, has been a director of Sepracor and our Chief Executive Officer since our organization in 1984. Mr. Barberich also served as President of Sepracor from 1984 to October 1999. Prior to founding Sepracor, Mr. Barberich served in a number of executive and managerial capacities at Millipore Corporation, which he joined in 1973. Most recently, prior to founding Sepracor, Mr. Barberich served as Vice President and General Manager of Millipore's Medical Products Division and as General Manager of Millipore's Laboratory Products Division. Mr. Barberich is Chairman of the Board of Directors of HemaSure and is a director of BioSphere and Versicor.

        Mr. O'Shea has served as our President and Chief Operating Officer since October 1999. Prior to joining Sepracor, Mr. O'Shea was Senior Vice President of Sales and Marketing and Medical Affairs for Zeneca Pharmaceuticals, a business unit of Zeneca, Inc. Mr. O'Shea joined Zeneca in the U.K. in 1975 and held management positions in the U.K. and the U.S. in the areas of international sales and marketing.

        Mr. Southwell has served as our Executive Vice President, Chief Financial Officer since October 1995 and served as our Senior Vice President and Chief Financial Officer from July 1994 to October 1995. From August 1988 until July 1994, Mr. Southwell was associated with Lehman Brothers Inc., a securities firm, in various positions with the investment banking division, most recently in the position of Vice President. Mr. Southwell is a director of BioSphere.

        Dr. Rubin has served as our Executive Vice President, Drug Development and ICE Research of Sepracor since January 1999. He was our Senior Vice President, Drug Development from April 1996 until January 1999. He was formerly Vice President and Worldwide Director of Clinical Pharmacology for Glaxo-Wellcome, a pharmaceutical company, from 1993 until 1996 and Vice President, Immunology and Metabolic Disease for Abbott Laboratories, a pharmaceutical company, from 1987 until 1993. Dr. Rubin was responsible for early clinical development of Glaxo-Wellcome's entire portfolio. While at Abbott Laboratories, Dr. Rubin was responsible for the development of the 5-lipoxygenase inhibitor, zileuton. Dr. Rubin is a director of Endorex Corp.

        Mr. Scumaci has served as our Executive Vice President, Finance and Administration since February 2001 and as our Treasurer since March 1996. He served as our Senior Vice President, Finance and Administration from March 1996 to February 2001 and as our Vice President and Controller from March 1995 until March 1996. From 1987 to 1994, Mr. Scumaci was employed by Ares-Serono Group, a multinational pharmaceutical company, most recently as Vice President, Finance and Administration of North American Operations. Previously, he was associated with Revlon and Coopers & Lybrand in various finance and accounting capacities.

        Dr. Hauske has served as our Senior Vice President, Discovery since October 1995. Prior to joining Sepracor, from June 1994 to October 1995, Dr. Hauske was employed by Arris Pharmaceuticals, a pharmaceutical company, as Director of Combinatorial Chemistry and Receptor Chemistry. Before joining Arris Pharmaceuticals, Dr. Hauske worked for Pfizer Central Research in Groton, Connecticut. While, at Pfizer, Dr. Hauske was a member of the project management team that discovered Pfizer's azamacrolide antibacterial, Zithromax.

        Dr. Reedich has served as our Senior Vice President, Legal Affairs and Chief Patent Counsel since January 1999 and has served as Sepracor's Chief Patent Counsel since June 1995. From October 1987 to June 1995, he was employed by 3M Company ("3M"), most recently as patent counsel for 3M's Pharmaceuticals Division.

16

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

        Incorporated by reference from our 2001 Annual Report to Stockholders, which we refer to in this report as the "2001 Annual Report", under the headings "Supplemental Stockholder Information—Price Range of Common Stock" and "Supplemental Stockholder Information—Dividend Policy."

        On November 14, 2001, we sold $400 million in aggregate principal amount of 5.75% Convertible Subordinated Notes due 2006, which we refer to as the 5.75% Notes. The 5.75% Notes are convertible into shares of our common stock at a conversion price of $60.00 per share, subject to adjustment in certain circumstances. We may elect to automatically convert the 5.75% Notes on or prior to maturity under certain conditions. The offering was made through an initial purchaser to qualified institutional buyers under Rule No. 144A of the Securities Act of 1933, as amended.

        On December 27, 2001, we sold an additional $100 million in 5.75% Notes pursuant to exercise of the initial purchaser's over-allotment option granted by us in connection with the initial sale of the 5.75% Notes.

Item 6. Selected Financial Data.

        Incorporated by reference from our 2001 Annual Report under the heading "Sepracor Inc. Selected Financial Data."

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

        Incorporated by reference from our 2001 Annual Report under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Item 7A. Quantitative and Qualitative Disclosure about Market Risk.

        Incorporated by reference from our 2001 Annual Report under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Item 8. Financial Statements and Supplementary Data.

        The financial statements filed as part of this Annual Report on Form 10-K are incorporated by reference from our 2001 Annual Report under the heading "Consolidated Financial Statements" and the notes thereto and are listed under Item 14 below.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

        There have been no disagreements on accounting and financial disclosure matters.

PART III

Items 10-13.

        The information required for Part III in this Annual Report on Form 10-K is incorporated by reference from our definitive proxy statement for our 2002 Annual Meeting of Stockholders. Such information will be contained in the sections of such proxy statement captioned "Stock Ownership of Certain Beneficial Owners and Management," "Proposal 1—Election of Directors," "Board and Committee Meetings," "Compensation for Directors," "Compensation of Executive Officers," "Certain Relationships and Related Transactions," "Employment Agreements" and "Section 16(a) Beneficial Ownership Reporting Compliance." Information regarding our executive officers is also furnished in Part I of this Annual Report on Form 10-K under the heading "Executive Officers of the Registrant."

17

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a)

The following documents are included or incorporated by reference from the 2001 Annual Report.

1.

The following financial statements (and related notes) of the Company are incorporated by reference from the 2001 Annual Report:

2.

The schedule listed below and the Report of Independent Accountants on Financial Statement Schedule are filed as part of this Annual Report on Form 10-K:

        All other schedules are omitted as the information required is inapplicable or the information is presented in the consolidated financial statements or the related notes.

3.

The Exhibits listed in the Exhibit Index immediately preceding the Exhibits filed as a part of this Annual Report on Form 10-K.

(b)

The following current reports on Form 8-K were filed by Sepracor during the quarter ended December 31, 2001:

(1.)

Current Report on Form 8-K filed on November 13, 2001;

(2.)

Current Report on Form 8-K filed on December 26, 2001.

        The following trademarks are mentioned in this Annual Report on Form 10-K:

        Sepracor, ICE, XOPENEX, SOLTARA and ESTORRA are trademarks of Sepracor. BioSphere and Embosphere are trademarks of BioSphere. HemaSure is a trademark of HemaSure. This Annual Report on Form 10-K also contains trademarks of other companies.

18

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) 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.

Date: March 29, 2002

        Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

19

20

REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES

To the Board of Directors of Sepracor Inc.

        Our audits of the consolidated financial statements referred to in our report dated January 21, 2002, except as to the information in Note V for which the date is March 27, 2002 appearing on page 32 of the 2001 Annual Report to Stockholders of Sepracor Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, based upon our audits and the reports of other auditors, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Boston, Massachusetts
January 21, 2002, except as to the information in
Note V for which the date is March 27, 2002

21

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

(1)

Collections and bad debt write-offs.

Exhibit Index

22

23

(*)

Management contract or compensatory plan or arrangement filed as an exhibit to this Form pursuant to Item 14(c) of Form 10-K.

(+)

Confidential treatment granted as to certain portions.

(++)

Confidential treatment requested as to certain portions.

(1)

Incorporated herein by reference from the Registrant's Registration Statement on Form S-1 (File No. 33-41653).

(2)

Incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994.

(3)

Incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.

(4)

Incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 1996.

(5)

Incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997.

(6)

Incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.

(7)

Incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 1998.

(8)

Incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.

(9)

Incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999.

(10)

Incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 2000.

(11)

Incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.

(12)

Incorporated by reference from the Registrant's Registration Statement on Form S-3 (File No. 333-76502).

24

Item 1. Business.

Item 2. Properties.
Item 3. Legal Proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Item 6. Selected Financial Data.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 7A. Quantitative and Qualitative Disclosure about Market Risk.
Item 8. Financial Statements and Supplementary Data.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Items 10-13.

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

                                                                   EXHIBIT 10.25


================================================================================

                           SECOND AMENDED AND RESTATED

                           REVOLVING CREDIT AGREEMENT

                                      AMONG

                              FLEET NATIONAL BANK,

                                  SEPRACOR INC.

                                       AND

                             BIOSPHERE MEDICAL, INC.

                ------------------------------------------------

                          Dated as of December 22, 1999

================================================================================



                               TABLE OF CONTENTS


                                                                                                           PAGE
                                                                                                     
SECTION 1         DEFINITIONS................................................................................1

     1.1      Definitions....................................................................................1

     1.2      Accounting Terms...............................................................................9

     1.3      Multiple Borrowers.............................................................................9

SECTION 2             DESCRIPTION OF CREDIT.................................................................10

     2.1      The Revolving Loans...........................................................................10

     2.2      Fees..........................................................................................11

     2.3      Reduction of Revolving Commitment Amount/Biosphere Sublimit...................................11

     2.4      The Notes.....................................................................................11

     2.5      Letters of Credit.............................................................................12

     2.6      Capital Requirements..........................................................................12

     2.7      Payments and Prepayments of the Revolving Loans...............................................12

     2.8      Method of Payment.............................................................................13

     2.9      Overdue Payments..............................................................................13

     2.10     Holidays......................................................................................13

     2.11     Interest......................................................................................13

     2.12     Certain LIBOR Provisions......................................................................14

     2.13     Conditions for Basing Interest on the LIBOR Rate..............................................16

     2.14     Indemnification for Funding and Other Losses..................................................16

     2.15     Change in Applicable Laws, Regulations, etc...................................................16

     2.16     Taxes.........................................................................................17

SECTION 3         CONDITIONS OF LOANS.......................................................................17

     3.1      Conditions Precedent to Initial Revolving Loan................................................17

     3.2      Conditions Precedent to all Revolving Loans...................................................19

SECTION 4         REPRESENTATIONS AND WARRANTIES............................................................19

     4.1      Organization and Qualification................................................................20

     4.2      Corporate Authority...........................................................................20

     4.3      Valid Obligations.............................................................................20

     4.4      Consents or Approvals.........................................................................20

     4.5      Title to Properties; Absence of Encumbrances..................................................20

     4.6      Financial Statements..........................................................................20




                               TABLE OF CONTENTS



                                                                                                      
     4.7      Changes.......................................................................................21

     4.8      Defaults......................................................................................21

     4.9      Taxes.........................................................................................21

     4.10     Material Agreements...........................................................................21

     4.11     Material Licenses.............................................................................21

     4.12     Litigation....................................................................................21

     4.13     Use of Proceeds...............................................................................21

     4.14     Existing Indebtedness.........................................................................22

     4.15     Existing Investments..........................................................................22

     4.16     Subsidiaries..................................................................................22

     4.17     Investment Company Act........................................................................22

     4.18     Compliance with ERISA.........................................................................22

     4.19     FDA Compliance, Etc...........................................................................22

     4.20     Environmental Matters.........................................................................22


SECTION 5         AFFIRMATIVE COVENANTS.....................................................................24

     5.1      Financial Statements and other Reporting Requirements.........................................24

     5.2      Conduct of Business...........................................................................25

     5.3      Maintenance and Insurance.....................................................................26

     5.4      Taxes.........................................................................................26

     5.5      Inspection by the Bank........................................................................26

     5.6      Maintenance of Books and Records..............................................................27

     5.7      Maintenance of Accounts.......................................................................27

     5.8      [Reserved]....................................................................................27

     5.9      Minimum Liquidity Ratio.......................................................................27

     5.10     Minimum Tangible Capital Base.................................................................27

     5.11     Minimum Cash or Equivalents/Fixed Charge Coverage Ratio.......................................27

     5.12     Further Assurances............................................................................27


SECTION 6             NEGATIVE COVENANTS....................................................................27

     6.1      Indebtedness..................................................................................27

     6.2      Contingent Liabilities........................................................................28

     6.3      Sale and Leaseback............................................................................28

     6.4      Encumbrances..................................................................................28




                               TABLE OF CONTENTS



                                                                                                      
     6.5      Lines of Business.............................................................................29

     6.6      Merger; Consolidation; Sale or Lease of Assets................................................29

     6.7      Additional Stock Issuance.....................................................................30

     6.8      Restricted Payments...........................................................................30

     6.9      Transactions with Affiliates..................................................................30

     6.10     Investments...................................................................................31

     6.11     ERISA.........................................................................................31

     6.12     Observance of Subordination Provisions, etc...................................................31

     6.13     Restrictive Agreements........................................................................31

SECTION 7         DEFAULTS..................................................................................31

     7.1      Events of Default.............................................................................31

     7.2      Remedies......................................................................................33

SECTION 8         MISCELLANEOUS.............................................................................34

     8.1      Notices.......................................................................................34

     8.2      Expenses......................................................................................35

     8.3      Set-Off.......................................................................................35

     8.4      Term of Agreement.............................................................................36

     8.5      No Waivers....................................................................................36

     8.6      Governing Law; Jurisdiction...................................................................36

     8.7      Amendments....................................................................................36

     8.8      Binding Effect of Agreement; Assignments; Participations......................................36

     8.9      Currency Conversion...........................................................................37

     8.10     Counterparts..................................................................................37

     8.11     Partial Invalidity............................................................................38

     8.12     Captions......................................................................................38

     8.13     WAIVER OF JURY TRIAL..........................................................................38

     8.14     Entire Agreement..............................................................................38




                                TABLE OF CONTENTS



                             EXHIBITS AND SCHEDULES

                        
     Exhibit A-1           Sepracor Promissory Note
     Exhibit A-2           Biosphere Promissory Note
     Exhibit B             Compliance Certificate
     Exhibit C             Guaranty Agreement

     Schedule 4.10         Material Agreements
     Schedule 4.11         Material Licenses
     Schedule 4.12         Litigation
     Schedule 4.15         Investments
     Schedule 4.16         Subsidiaries
     Schedule 6.1          Indebtedness
     Schedule 6.2          Guaranties
     Schedule 6.4          Encumbrances




                           SECOND AMENDED AND RESTATED
                           REVOLVING CREDIT AGREEMENT

                          Dated as of December 22, 1999

     THIS SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT is made as of
December 22, 1999, by and among SEPRACOR INC., a Delaware corporation having its
chief executive office at 111 Locke Drive, Marlborough, Massachusetts 01752 (the
"BORROWER"), BIOSPHERE MEDICAL, INC., a Delaware corporation having its chief
executive office at 111 Locke Drive, Marlborough, Massachusetts 01752
("BIOSPHERE, collectively with the Borrower, the "CREDIT PARTIES") and FLEET
NATIONAL BANK (the "BANK"), having its office at One Federal Street, Boston,
Massachusetts 02110.

     This Agreement amends, restates and supersedes the Amended and Restated
Revolving Credit Agreement dated as of December 31, 1996 as amended to date (the
"PRIOR CREDIT AGREEMENT") by and among the Borrower, Sepracor Securities
Corporation and Fleet National Bank, pursuant to which the Bank agreed to
establish a Revolving Line of Credit and make Revolving Credit Loans (the "PRIOR
LOANS") to the Borrower.

     NOW, THEREFORE, the parties hereby agree as follows:

                                    SECTION 1

                                   DEFINITIONS

     1.1  DEFINITIONS

     All capitalized terms used in this Agreement or in the Notes or in any
certificate, report or other document made or delivered pursuant to this
Agreement (unless otherwise defined therein) shall have the meanings assigned to
them below:

     ACCOUNT AND ACCOUNT RECEIVABLE. Include all rights to payment for goods
sold or leased or for services rendered, all sums of money or other proceeds due
or becoming due thereon, all instruments pertaining thereto, all guaranties and
security therefor, and all goods giving rise thereto and the rights pertaining
to such goods, including the right of stoppage in transit, and all related
insurance.

     AFFILIATE. As applied to any Person, a spouse or relative of such Person,
any member, director or officer of such Person, any corporation, association,
firm or other entity of which such Person is a member, director or officer, and
any other Person directly or indirectly controlling, controlled by or under
direct or indirect common control with such Person.

     AGREEMENT. This Second Amended and Restated Revolving Credit Agreement, as
the same may be supplemented, amended or restated from time to time.

     ALTERNATIVE CURRENCY. The lawful currency of a foreign country which may be
established as an alternate currency by mutual agreement entered into between
the Bank and the



Credit Parties hereafter as confirmed in writing, so long as any such currency
is freely transferable, convertible into Dollars and traded on the inter-bank
currency deposits market in which the Bank customarily funds foreign currency
loans.

         ALTERNATIVE CURRENCY COMMITMENT. A commitment, to the extent mutually
agreed by the Bank and the Credit Parties, for (i) the exchange, for future
delivery, of an Alternative Currency into Dollars or Dollars into an Alternative
Currency or (ii) the purchase, for future delivery, of an Alternative Currency
with Dollars or Dollars with an Alternative Currency, in accordance with the
Bank's prevailing customs and practices.

     ALTERNATIVE CURRENCY EQUIVALENT. The amount in Alternative Currency of
Dollars at the quoted spot rate at which the Bank's principal office in the
United States offers to exchange such Alternative Currency for Dollars at 11:00
a.m. (Boston time) two (2) Business Days prior to the date on which such
equivalent is determined.

     AUTHORIZED OFFICER. The president, chief financial officer or senior vice
president finance and administration of the Borrower.

     AVAILABLE AGGREGATE REVOLVING COMMITMENT. The excess, if any, of (1) the
Revolving Commitment Amount MINUS (2) the LC Exposure.

     BANK. See Preamble.

     BIOSPHERE. See Preamble.

     BIOSPHERE LOAN SUBLIMIT A sublimit of the Revolving Commitment Amount equal
to $2,000,000, as such amount may be reduced from time to time pursuant to
Section 2.3.

     BIOSPHERE LOANS. Revolving Loans made by the Bank to Biosphere.

     BIOSPHERE NOTE. The Promissory Note dated the date hereof made by Biosphere
payable to the order of the Bank in the original principal amount of $2,000,000.

     BORROWER. See Preamble.

     BUSINESS DAY. Any day other than a Saturday, Sunday or legal holiday on
which banks in Boston, Massachusetts are open for the conduct of a substantial
part of their commercial banking business.

     CANADIAN INDEBTEDNESS. The indebtedness of the Borrower's wholly-owned
Canadian subsidiary, Sepracor Canada Limited, to certain Canadian investors in
the maximum principal amount of 4,891,000 Canadian Dollars which is guaranteed
by the Borrower.

     CAPITAL EXPENDITURE. Any payment made directly or indirectly for the
purpose of acquiring or constructing fixed assets, real property or equipment
which in accordance with GAAP would be added as a debit to the fixed asset
account of the Person making such expenditure, including, without limitation,
amounts paid or payable under any conditional sale or other title retention
agreement or under any lease or other periodic payment arrangement which

                                       -2-


is of a nature that payment obligations of the lessee or obligor thereunder
would be required by GAAP to be capitalized and shown as liabilities on the
balance sheet of such lessee or obligor.

     CAPITAL LEASE. Any lease of property (real, personal or mixed) which, in
accordance with GAAP, should be capitalized on the lessee's balance sheet or for
which the amount of the asset and liability thereunder as if so capitalized
should be disclosed in a note to such balance sheet.

     CASH EQUIVALENT AMOUNT. The sum of the following, without duplication, none
of which may be subject to any Encumbrances except for Encumbrances in favor of
the Bank or any of its Affiliates: (1) cash held by the Borrower in the United
States and at the Bank, PLUS (2) Qualified Investments of the Borrower held in
the United States and Canada, PLUS (3) Net Outstanding Amount of Accounts of the
Borrower.

     CLOSING DATE. December 22, 1999

     CODE. The Internal Revenue Code of 1986 and the rules and regulations
thereunder, collectively, as the same may from time to time be supplemented or
amended and remain in effect.

     CONTROLLED GROUP. All trades or businesses (whether or not incorporated)
under common control that, together with the Credit Parties, are treated as a
single employer under Section 414(b) or 414(c) of the Code or Section 4001 of
ERISA.

     CORPORATE AFFILIATE. As applied to any Person, any corporation,
association, firm or other entity directly or indirectly controlling, controlled
by or under direct or indirect common control with such Person.

     CORPORATE SERVICES AGREEMENT. The Corporate Services Agreement between the
Borrower and each of its Subsidiaries, each as originally executed and delivered
to the Bank.

     CREDIT PARTIES. See Preamble.

     DEFAULT. Any event or condition that, with the giving of notice or lapse of
time, or both, would constitute an Event of Default.

     DOLLARS or $. The lawful currency of the United States of America.

     DOLLAR EQUIVALENT. The amount in Dollars of any Alternative Currency at the
quoted spot rate at which the Bank's principal office in the United States
offers to exchange Dollars for such Alternative Currency at 11:00 a.m. (Boston
time) two (2) Business Days prior to the date on which such equivalent is to be
determined.

     EBITDA. For any period, operating income for the Borrower and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP) for such period (calculated before taxes, Interest
Expense, depreciation, amortization, other non-cash income (other than
receivables arising in the ordinary course of business) or charges accrued for
such period) and (except to the extent received or paid in cash by the Borrower)
income or loss attributable to equity in Affiliates for such period, excluding
(i) any extraordinary and unusual

                                       -3-


gains or losses during such period, and (ii) the proceeds of insurance and asset
sales received by the Borrower or any of its Subsidiaries during such period.

     ENCUMBRANCES. See Section 6.4.

     ENVIRONMENTAL LAWS. Any and all applicable foreign, federal, state and
local environmental, health or safety statutes, laws, regulations, rules,
ordinances, policies and rules or common law (whether now existing or hereafter
enacted or promulgated), of all governmental agencies, bureaus or departments
which may now or hereafter have jurisdiction over the Borrower or any of its
Subsidiaries and all applicable judicial and administrative and regulatory
decrees, judgments and orders, including common law rulings and determinations,
relating to injury to, or the protection of, real or personal property or human
health or the environment, including, without limitation, all requirements
pertaining to reporting, licensing, permitting, investigation, remediation and
removal of emissions, discharges, releases or threatened releases of Hazardous
Materials, chemical substances, pollutants or contaminants whether solid, liquid
or gaseous in nature, into the environment or relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of such Hazardous Materials, chemical substances, pollutants or
contaminants.

     ERISA. The Employee Retirement Income Security Act of 1974 and the rules
and regulations thereunder, collectively, as the same may from time to time be
supplemented or amended and remain in effect.

     EVENT OF DEFAULT. Any event described in Section 8.1.

     FDA. See Section 4.19.

     FIXED CHARGE COVERAGE RATIO. As at any date, the ratio of (a) EBITDA for
the period of four fiscal quarters ending on or most recently ended prior to
such date to (b) the sum, for the Borrower and its Subsidiaries (determined on a
consolidated basis without duplication in accordance with GAAP) of (i) all
regularly scheduled payments of principal of any Indebtedness (including the
principal component of any payments in respect of Capital Leases) for such
period plus, (ii) all Interest Expense for such period, plus (iii) the aggregate
amount of all Non-Financed Capital Expenditures made during such period
(excluding payment of Capital Leases to the extent included in principal
payments or Interest Expense for such period).

     GAAP. Generally accepted accounting principles as defined by the United
States Financial Accounting Standards Board, as from time to time in effect.

     GUARANTIES. As applied to the Credit Parties and their Subsidiaries, all
guarantees, endorsements or other contingent or surety obligations with respect
to obligations of others whether or not reflected on the consolidated balance
sheet of the Credit Parties and their Subsidiaries, including any obligation to
furnish funds, directly or indirectly (whether by virtue of partnership
arrangements, by agreement to keep-well or otherwise), through the purchase of
goods, supplies or services, or by way of stock purchase, capital contribution,
advance or loan, or to enter into a contract for any of the foregoing, for the
purpose of payment of obligations of any other Person or entity.

                                       -4-


     GUARANTY AGREEMENT. The Guaranty Agreement executed and delivered by the
Borrower on the date hereof in favor of the Bank guarantying the Biosphere
Loans.

     HAZARDOUS MATERIAL. Any substance (i) the presence of which requires or may
hereafter require notification, investigation or remediation under any
Environmental Law; (ii) which is or becomes defined as a "hazardous waste",
"hazardous material" or "hazardous substance" or "controlled industrial waste"
or "pollutant" or "contaminant" under any present or future Environmental Law or
amendments thereto including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601
ET SEQ.) and any applicable local statutes and the regulations promulgated
thereunder; (iii) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes
regulated by any governmental authority, agency, department, commission, board,
agency or instrumentality of any foreign country, the United States, any state
of the United States, or any political subdivision thereof to the extent any of
the foregoing has or had jurisdiction over the Borrower; or (iv) without
limitation, which contains gasoline, diesel fuel or other petroleum products,
asbestos or polychlorinated biphenyls ("PCB's").

     INDEBTEDNESS. As applied to the Credit Parties and their Subsidiaries, (i)
any and all obligations for borrowed money or other extensions of credit whether
or not secured or unsecured, absolute or contingent, including, without
limitation, Capital Leases, unmatured reimbursement obligations with respect to
letters of credit or guarantees issued for the account of or on behalf of the
Credit Parties and their Subsidiaries and all obligations representing the
deferred purchase price of property, other than accounts payable arising in the
ordinary course of business, (ii) all obligations evidenced by bonds, notes,
debentures or other similar instruments, (iii) all obligations secured by any
mortgage, pledge, security interest or other lien on property owned or acquired
by the Credit Parties or any Subsidiary of a Credit Party whether or not the
obligations secured thereby shall have been assumed, (iv) that portion of all
obligations arising under Capital Leases that is required to be capitalized on
the consolidated balance sheet of the Credit Parties and their Subsidiaries, (v)
all Guaranties, and (vi) all obligations that are immediately due and payable
out of the proceeds of or production from property now or hereafter owned or
acquired by the Credit Parties or any Subsidiary of a Credit Party.

     INTEREST EXPENSE. For any period, the sum for the Borrower and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) all interest paid or payable during
such period by the Borrower and its Subsidiaries in respect of Indebtedness for
borrowed money plus (b) all fees, including Letter of Credit fees and expenses,
incurred hereunder during such period.

     INVESTMENT. As applied to the Borrower and its Subsidiaries, the purchase
or acquisition of any share of capital stock, partnership interest, evidence of
indebtedness or other equity security of any other Person or entity, any loan,
advance or extension of credit to, or contribution to the capital of, any other
Person or entity, any real estate held for sale or investment, any commodities
futures contracts held other than in connection with bona fide hedging
transactions, any other investment in any other Person or entity, and the making
of any commitment or acquisition of any option to make an Investment.

                                       -5-


     LC EXPOSURE. At any time, the sum of (a) the aggregate undrawn amount of
all outstanding Letters of Credit at such time PLUS (b) the aggregate amount of
all payments made by the Bank pursuant to Letters of Credit which have not yet
been reimbursed by or on behalf of the Credit Parties.

     LETTERS OF CREDIT. Letters of credit previously and hereafter issued by the
Bank for the account of a Credit Party in accordance with the provisions of
Section 2.5 hereof, or drafts accepted under any agreement for banker's
acceptances entered into by a Credit Party with the Bank.

     LOAN ACCOUNT. The account on the books of the Bank in which will be
recorded Revolving Loans made by the Bank to the Credit Parties pursuant to this
Agreement, payments made on such Revolving Loans and other appropriate debits
and credits as provided by this Agreement.

     LOAN DOCUMENTS. See Section 7.2.

     MATERIAL LICENSES. See Section 4.11.

     MONEY MARKETS. See Section 8.10.

     NET OUTSTANDING AMOUNT OF ACCOUNTS. As of any date, the net amount of
Accounts Receivable of the Borrower outstanding on such date after (a)
eliminating from the aggregate amount of outstanding Accounts (i) such Accounts
past due under the original terms of sale more than sixty (60) days, (ii) any
Account owed by any account debtor whose principal place of business or chief
executive office is not within the United States or the District of Columbia
("FOREIGN ACCOUNT DEBTORS"), (iii) such Accounts due from Affiliates or
Subsidiaries of the Borrower, (iv) such Accounts for services not yet rendered
or goods not yet delivered, and (v) such Accounts representing obligations in
respect of any joint venture interest owned by the Borrower and in respect of
royalties and license fees payable to the Borrower by any such joint venture or
any joint venture therein, and (b) deducting from the aggregate face amount of
the remaining Accounts Receivable of the Borrower (i) net offsets from accounts
owing from account debtors, other than foreign account debtors, which maintain
both receivable and payable balances with the Borrower, (ii) the aggregate
amount of outstanding claims asserted by account debtors, other than foreign
account debtors, against the Borrower and (iii) all payments, adjustments, and
credits applicable thereto and all amounts due thereon considered by the Bank to
be difficult to collect or uncollectible by reason of return, rejection,
repossession, loss or damage of or to the merchandise giving rise thereto, a
merchandise or other dispute, insolvency of the account debtor or any other
reason, all as determined by the Bank in its sole and reasonable discretion,
which determination shall be final and binding upon the Borrower.

     NON-FINANCED CAPITAL EXPENDITURES. For any period, all Capital Expenditures
made by the Borrower and its Subsidiaries during such period that have not been
funded, directly or indirectly, with the proceeds of purchase money financing
(including, without limitations, Capital Leases) other than the proceeds of
Revolving Loans.

     NOTES. Collectively, the Sepracor Note and the Biosphere Note.

                                       -6-


     NOTICE OF BORROWING. See Section 2.1(b).

     OBLIGATIONS. Any and all obligations of the Credit Parties to the Bank of
every kind and description (i) hereunder and under the Notes and (ii) under
Alternative Currency Commitments and under any and all documents pertaining
thereto whether direct or indirect, absolute or contingent, primary or
secondary, due or to become due, now existing or hereafter arising, regardless
of how they arise or by what agreement or instrument, if any, and including
obligations to perform acts and refrain from taking action as well as
obligations to pay money.

     ORIGINAL CURRENCY. See Section 8.10.

     PBGC. The Pension Benefit Guaranty Corporation or any entity succeeding to
any or all of its functions under ERISA.

     PERMITTED ENCUMBRANCES. See Section 6.4.

     PERSON. A corporation, an association, a partnership, a limited liability
company or partnership, a joint venture, an organization, a business, an
individual, a government or political subdivision thereof or a governmental
agency.

     PLAN. At any time, an employee pension or other benefit plan that is
subject to Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by the Credit Parties or
any member of the Controlled Group for employees of the Credit Parties or any
member of the Controlled Group or (ii) if such Plan is established, maintained
pursuant to a collective bargaining agreement or any other arrangement under
which more than one employer makes contributions and to which the Credit Parties
or any member of the Controlled Group is then making or accruing an obligation
to make contributions or has within the preceding five Plan years made
contributions.

     PRIME RATE. The rate of interest announced from time to time by the Bank at
its office in Boston, Massachusetts as its prime rate.

     PRIOR CREDIT AGREEMENT. See Preamble.

     PRIOR LOANS. See Preamble.

     QUALIFIED INVESTMENTS. As applied to the Borrower, Investments in (i)
notes, bonds or other obligations of the United States of America or any agency
thereof that as to principal and interest constitute direct obligations of or
are guaranteed by the United States of America; (ii) certificates of deposit or
other deposit instruments or accounts of banks or trust companies organized
under the laws of the United States or any state thereof that have capital and
surplus of at least $100,000,000, (iii) commercial paper issued by companies
organized under the laws of the United States or any state thereof and that is
rated not less than prime-two or A-2 or their equivalents by Moody's Investors
Service, Inc. or Standard & Poor's Corporation, respectively, or their
successors, (iv) mutual or closed end funds that invest solely in Investments
described in clauses (i) through (iii) of this definition and (v) any repurchase
agreement secured by any one or more of the foregoing.

                                       -7-


     RESTRICTED PAYMENTS. (a) Any dividend or other distribution, direct or
indirect, on or on account of any shares of any class of stock of any Credit
Party now or hereafter outstanding and (b) any redemption, purchase or other
acquisition, direct or indirect, of any shares of any class of stock of Credit
Party now or hereafter outstanding or of any warrants or rights to purchase any
such stock (including without limitation the repurchase of any such stock or
warrant or any refund of the purchase price thereof in connection with the
exercise by the holder thereof of any right of rescission or similar remedies
with respect thereto) and (c) any payment of principal of, premium, if any, or
interest on, or otherwise in respect of any Subordinated Indebtedness.

     REVOLVING COMMITMENT AMOUNT. Twenty-five Million Dollars ($25,000,000) or
any lesser amount, including zero, resulting from a termination or reduction of
such amount in accordance with Section 2.3 or Section 7.2.

     REVOLVING CREDIT PERIOD. The period beginning on the date hereof and
extending through and including the Revolving Credit Termination Date.

     REVOLVING CREDIT TERMINATION DATE. December 31, 2001 or such earlier date
on which the commitment to make Revolving Loans is terminated or the Revolving
Commitment Amount is reduced to zero in accordance with the terms of this
Agreement.

     REVOLVING LOANS. Loans made pursuant to Section 2.1(a) that utilize the
Revolving Commitment Amount including, without limitation, all Biosphere Loans.

     SECOND CURRENCY. See Section 8.10.

     SEPRACOR NOTE. The Promissory Note dated the date hereof made by the
Borrower payable to the order of the Bank in the original principal amount of
$25,000,000.

     SUBORDINATED INDEBTEDNESS. (a) the existing Indebtedness of the Credit
Parties which is designated as "Subordinated Indebtedness" in SCHEDULE 6.1
attached hereto, and (b) any other Indebtedness of the Credit Parties consented
to in writing by the Bank which matures in its entirety later than the Notes and
by its terms (or by the terms of the instrument under which it is outstanding
and to which appropriate reference is made in the instrument evidencing such
Subordinated Indebtedness) is made subordinate and junior in right of payment to
the Notes and to the Credit Parties' other obligations to the Bank hereunder by
provisions reasonably satisfactory in form and substance to the Bank and its
counsel.

     SUBORDINATED NOTES. The Borrower's (i) $165,000,000 6 1/4% Convertible
Subordinated Debentures due 2005 issued by the Borrower pursuant to an Indenture
dated February 5, 1998 from the Borrower to Chase Manhattan Bank, and (ii)
$300,000,000 7.00% Convertible Subordinated Debentures due 2005 issued pursuant
to an Indenture dated December 15, 1998 by the Borrower to Chase Manhattan Bank.

     SUBSIDIARY. Any corporation, association, limited liability company, joint
stock company, business trust or other similar organization of which 50% or more
of the ordinary voting power for the election of a majority of the members of
the board of directors or other governing body of such entity is held or
controlled by any Credit Party or their Subsidiaries; or any other such
organization the management of which is directly or indirectly controlled by any

                                       -8-


Credit Party or a Subsidiary of any Credit Party through the exercise of voting
power or otherwise; or any joint venture, whether incorporated or not, in which
any Credit Party has, at least, a 50% ownership interest.

     TANGIBLE CAPITAL BASE. At any date as of which the amount thereof shall be
determined, the stockholders' equity of the Borrower and its Subsidiaries
determined on a consolidated basis in accordance with GAAP PLUS the outstanding
principal amount of any Subordinated Indebtedness MINUS the sum of any amounts
attributable to (a) goodwill, (b) intangible items such as unamortized debt
discount and expense, patents, trade and service marks and names, copyrights and
research and development expenses except prepaid expenses, (c) all reserves not
already deducted from assets, (d) any write-up in the book value of assets
resulting from any revaluation thereof subsequent to the date of the financial
statements referred to in Section 4.6 and (e) any and all items included as
assets on the consolidated balance sheet of the Borrower and its Subsidiaries if
and to the extent such items consist of the equity in Subsidiaries or other
joint ventures holdings or similar Investments.

     TECHNOLOGY TRANSFER AGREEMENTS. The Technology Transfer and License
Agreements dated as of January 1, 1994 between the Borrower and each of its
Subsidiaries each as originally executed and delivered to the Bank.

     TOTAL LIABILITIES. Any and all liabilities of the Credit Parties and their
Subsidiaries on a consolidated basis determined in accordance with GAAP.

     U.S. SUBSIDIARY. With respect to any Person, each of such Person's
Subsidiaries organized, and having a principal place of business located in the
United States.

     VERSICOR. Versicor Inc., a Delaware corporation, a Subsidiary of the
Borrower and an Affiliate of Biosphere.

     1.2  ACCOUNTING TERMS. All terms of an accounting character shall have the
meanings assigned thereto by GAAP applied on a basis consistent with the
financial statements referred to in Section 4.6 of this Agreement, modified to
the extent, but only to the extent, that such meanings are specifically modified
herein.

     1.3  MULTIPLE BORROWERS. All Obligations are several (and not joint)
between the Borrower and Biosphere except that the Borrower is guarantying the
Biosphere Loans. All representations and covenants shall apply and be applied to
the Borrower (and not Biosphere). The Credit Parties hereby designate the
Borrower to act on behalf of the Credit Parties for all purposes under this
Agreement, including, without limitation, reduction of the Revolving Commitment
Amount and the Biosphere Sublimit. Notice when given to the Borrower shall be
sufficient notice to the Credit Parties. Any document delivered to the Borrower
shall be considered delivered to each of the Borrower and Biosphere. Any Event
of Default by the Borrower shall be an Event of Default by the Credit Parties.

                                       -9-


                                    SECTION 2

                              DESCRIPTION OF CREDIT

     2.1  THE REVOLVING LOANS.

          (a)  Upon the terms and subject to the conditions of this Agreement,
and in reliance upon the representations, warranties and covenants of the Credit
Parties made herein, the Bank agrees to make Revolving Loans to the Borrower and
Biosphere Loans to Biosphere, in each case in Dollars, pursuant to Notices of
Borrowing as delivered by the Credit Parties to the Bank from time to time, from
and after the Closing Date and during the Revolving Credit Period; PROVIDED,
that (1) the aggregate principal amount of Revolving Loans outstanding at any
time shall not exceed the Available Aggregate Revolving Commitment at such time,
(2) the sum of the aggregate principal amount of Biosphere Loans outstanding at
such time PLUS Biosphere LC Exposure shall not exceed the Biosphere Sublimit at
such time and (3) at the time a Credit Party requests a Revolving Loan or a
Letter of Credit and after giving effect to the making thereof there has not
occurred and is not continuing any Default or Event of Default. The Credit
Parties agree that it shall be an Event of Default if at any time the debit
balance of the Loan Account shall exceed the Available Aggregate Revolving
Commitment or the aggregate principal amount of Biosphere Loans plus Biosphere
LC Exposure exceeds the Biosphere Sublimit unless, in each case, the Credit
Parties shall, upon demand by the Bank, pay, within two (2) Business Days, cash
to the Bank to be credited to the Loan Account in such amount as shall be
necessary to eliminate any such the excess.

          (b)  Prior to 12:00 noon (Boston time) on the Revolving Loan request
date, (1) with respect to all Revolving Loans (except for Biosphere Loans), an
Authorized Officer and (2) with respect to Biosphere Loans, the Chief Financial
Officer of Biosphere and the Senior Vice President, Finance and Administration
of the Borrower, shall, subject to the notice requirements for LIBOR Loans as
set forth in Section 2.3(a), notify the Bank in writing or by telephone
confirmed by (i) telex, (ii) telecopy or (iii) other facsimile transmission, on
the same day as the telephonic request (the "NOTICE OF BORROWING"), of the
proposed date of borrowing and the principal amount requested. No Notice of
Borrowing shall be revocable by any Credit Party. No Notice of Borrowing for a
Biosphere Loan shall be effective unless the Bank shall have received, on or
prior to the date of such Notice of Borrowing, a certificate of the secretary of
Biosphere with respect to resolutions of the Board of Directors authorizing such
Biosphere Loan or granting authority to certain officers of Biosphere to request
Biosphere Loans pursuant to the terms hereof.

          (c)  The Bank shall enter the Revolving Loans as debits in the Loan
Account. The Bank shall also record in the Loan Account all payments made by the
Credit Parties on account of the Revolving Loans, and may also record therein,
in accordance with customary accounting practices, other debits and credits, and
all interest, fees, charges and expenses chargeable to the Credit Parties under
this Agreement. The debit balance of the Loan Account shall reflect the amount
of the Credit Parties' Obligations to the Bank from time to time by reason of
the Revolving Loans (including Biosphere Loans) and other appropriate charges
hereunder. Periodically, the Bank shall render a statement of account showing as
of its date the debit balance of the Loan Account which, unless within thirty
(30) days of such date notice to the

                                      -10-


contrary is received by the Bank from the Credit Parties, absent manifest error,
shall be considered correct and accepted by each of the Credit Parties and
conclusively binding upon both Credit Parties.

          (d)  Subject to the terms and conditions of this Agreement, the Bank
shall make each Revolving Loan on the effective date specified therefor by
crediting the amount of such Revolving Loan to the applicable Credit Party's
demand deposit account with the Bank.

     2.2  FEES. The Borrower shall pay to the Bank during the Revolving Credit
Period a commitment fee computed at the rate of one quarter of one percent
(0.25%) per annum on the average daily amount of the unborrowed portion of the
Revolving Commitment Amount during each quarter or portion thereof; provided,
that LC Exposure shall be deemed borrowed. Commitment fees shall be payable
quarterly in arrears, on the first day of January, April, July and October of
each year beginning on April 1, 2000, and on the last day of the Revolving
Credit Period.

     2.3  REDUCTION OF REVOLVING COMMITMENT AMOUNT/BIOSPHERE SUBLIMIT. The
Borrower may from time to time by written notice delivered to the Bank by the
Borrower at least five Business Days prior to the date of the requested
reduction or termination, reduce by integral multiples of Five Hundred Thousand
Dollars ($500,000) any unborrowed portion of the Revolving Commitment Amount by
integral multiples of One Hundred Thousand Dollars ($100,000) any unborrowed
portion of the Biosphere Sublimit or, subject to the prior payment in full of
any Biosphere Loans, together with all interest and fees accrued thereon,
terminate the Biosphere Sublimit; provided that if the Borrower shall cease to
own directly at least 51% of the outstanding capital stock of Biosphere, then
the Biosphere Sublimit shall be terminated automatically, and all Biosphere
Loans, together with all interest and fees accrued thereon, shall be immediately
due and payable in full. No reduction of the Revolving Commitment Amount or the
Biosphere Sublimit shall be subject to reinstatement.

     2.4  THE NOTES.

          (a)  The Revolving Loans (except the Biosphere Loans) shall be
evidenced by the Sepracor Note substantially in the form of EXHIBIT A-1 hereto
and the Biosphere Loans shall be evidenced by the Biosphere Note, substantially
in the form of EXHIBIT A-2 hereto, each of which is payable to the order of the
Bank and with a final maturity on the Revolving Credit Termination Date. The
Notes shall be dated on or before the date of the first Revolving Loan and shall
have the blanks therein appropriately completed.

          (b)  The Bank shall, and is hereby irrevocably authorized (but not
required) by the Credit Parties to, enter on the schedule forming a part of each
Note or otherwise in its records appropriate notations evidencing the date and
the amount of each Revolving Loan, the interest rate applicable thereto and the
date and amount of each payment of principal made by the applicable Credit Party
with respect thereto; and in the absence of manifest error, such notations shall
constitute conclusive evidence thereof. The Bank is hereby irrevocably
authorized by the Credit Parties to attach to and make a part of each Note a
continuation of any such schedule as and when required. No failure on the part
of the Bank to make any notation as provided in this

                                      -11-


subsection (b) shall in any way affect any Revolving Loan or Biosphere Loan or
the rights or obligations of the Bank or any Credit Party with respect thereto.

     2.5  LETTERS OF CREDIT. Upon the request of a Credit Party (and if
Biosphere, subject to the requirements of Section 2.1(b)(2)), the Bank shall
issue such Letters of Credit as such Credit Party may request, PROVIDED that
such Letters of Credit shall not be issued unless and until such Credit Party
has completed and executed such application as the Bank may require from time to
time and such other agreements evidencing Letters of Credit as the Bank shall
request from time to time (consistent with the Bank's usual practice), and
PROVIDED FURTHER that, each Letter of Credit shall be subject to customary fees
relating to issuance, negotiation, settlement, amendment and other similar fees
and charges as agreed by the Bank and such Credit Party. All Letters of Credit
shall expire no later than five (5) Business Days prior to the Revolving Credit
Termination Date. Letters of Credit issued hereunder shall constitute
utilization of the Revolving Commitment Amount and the Biosphere Sublimit, as
applicable.

     2.6  CAPITAL REQUIREMENTS. If after the date hereof, the Bank shall have
determined that the adoption or implementation of any applicable law, rule or
regulation regarding capital requirements for banks or bank holding companies,
or any change therein (including, without limitation, any change according to a
prescribed schedule of increasing requirements, whether or not known on the date
hereof), or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Bank with any
request or directive of such entity regarding capital adequacy (whether or not
having the force of law) has the effect of reducing the return on the Bank's
capital to a level below that which the Bank could have achieved (taking into
consideration the Bank's policies with respect to capital adequacy immediately
before such adoption, implementation, change or compliance and assuming that the
Bank's capital was fully utilized prior to such adoption, implementation, change
or compliance) but for such adoption, implementation, change or compliance as a
consequence of its Commitment to make Revolving Loans hereunder by any amount
deemed by the Bank to be material, the Credit Parties shall pay to the Bank as
an additional fee from time to time on demand such amount as the Bank shall have
determined to be necessary to compensate it for such reduction. The
determination by the Bank of such amount, if done on the basis of any reasonable
averaging and attribution methods, shall in the absence of manifest error be
conclusive, and at the Borrower's request, the Bank shall demonstrate the basis
of such determination.

     2.7  PAYMENTS AND PREPAYMENTS OF THE REVOLVING LOANS. On at least two (2)
Banking Days prior written notice to the Bank with respect to Revolving Loans
subject to an exercised LIBOR Option and on at least one (1) Banking Day prior
written notice to the Bank with respect to all other Revolving Loans, the Credit
Parties may, at their option, prepay the Notes in whole at any time or in part
from time to time without penalty or premium; PROVIDED, that any prepayment of
any LIBOR Portion shall be made together with the applicable LIBOR Premium. Any
interest accrued on the amounts so prepaid to the date of such payment must be
paid at the time of any such payment. No prepayment of the Revolving Loans shall
affect the Revolving Commitment Amount or the Biosphere Sublimit or impair any
Credit Party's right to borrow as set forth in Section 2.1. On the Revolving
Credit Termination Date, the Borrower shall repay all outstanding Revolving
Loans and the Sepracor Note, and Biosphere shall repay all outstanding

                                      -12-


Biosphere Loans and the Biosphere Note together with all unpaid interest thereon
and all fees and other amounts due hereunder with respect to the Revolving
Loans.

     2.8  METHOD OF PAYMENT. All payments and prepayments of principal and all
payments of interest shall be made by the Credit Parties to the Bank at One
Federal Street, Boston, Massachusetts 02110 in immediately available funds, on
or before 11:00 a.m. on the due date thereof, free and clear of, and without any
deduction or withholding for, any taxes or other payments. The Bank may, and
each Credit Party hereby authorizes the Bank to, debit the amount of any payment
not made by such time to the demand deposit account of such Credit Party with
the Bank.

     2.9  OVERDUE PAYMENTS.

          (a)  Upon the occurrence and during the continuance of an Event of
Default, interest on the outstanding principal amount of the Notes and (to the
extent permitted by law) on accrued but unpaid interest shall thereafter be
payable on demand at a rate per annum equal to two percent (2%) above the
interest rate otherwise in effect with respect to such Revolving Loans. Upon the
cure of an Event of Default and the payment of interest at the default rate
through the date of such cure, the interest rate shall revert to that provided
for in Section 2.10.

          (b)  If a payment of principal or interest hereunder is not made in
full within 10 days of date when due, the applicable Credit Party will pay to
the Bank a late fee equal to three percent (3%) of the amount of such payment.
Nothing in the preceding sentence shall affect the Bank's right to exercise any
of its rights or remedies, including those provided in Section 7.2, if an Event
of Default has occurred.

     2.10 HOLIDAYS. If any payment required by this Agreement becomes due on a
day that is not a Business Day such payment may be made on the next succeeding
Business Day, and such extension shall be included in computing interest in
connection with such payment.

     2.11 INTEREST. Each Note shall bear interest on the unpaid principal amount
thereof until paid in full at the rate or rates per annum determined (on the
basis of the actual number of days elapsed over a 360-day year) and payable as
follows:

          (a)  The rate of interest for any portion of the outstanding principal
amount of the Revolving Loans which is not then subject to an exercised LIBOR
Option under Section 2.12 of this Agreement shall be computed at the Prime Rate.

          (b)  The rate for any LIBOR Portion of the Revolving Loans shall be
computed at a rate equal to three-quarters percent (0.75%) above the applicable
LIBOR Rate.

          (c) Interest on each Note shall be payable monthly in arrears on the
first Business Day of each month, commencing on January 1, 2000 and, in
addition, interest on any LIBOR Portion of the Revolving Loans in respect of any
LIBOR Period shall also be payable on the last day of such LIBOR Period and on
the last day of the third month for each LIBOR Portion with a 180-day LIBOR
Period and at maturity (whether by acceleration or otherwise). The rate of
interest payable on any portion of the outstanding principal balance of any
Revolving

                                      -13-


Loan which is not then subject to a LIBOR Option shall take effect
simultaneously with the corresponding change in the Prime Rate.

     2.12 CERTAIN LIBOR PROVISIONS.

          (a)  LIBOR OPTION. Subject to the provisions of this Section 2, each
Credit Party shall have the right to have the interest on all or any portion of
the principal amount of any Revolving Loan based on a LIBOR Rate.

          (b)  CERTAIN DEFINITIONS. As used herein, the following terms have the
following respective meanings:

     BANKING DAY. (i) When used with respect to the LIBOR Option, a day on which
transactions may be effected in deposits of U.S. dollars in the London interbank
foreign currency deposits market and on which banks may conduct business in
London, England and Boston, Massachusetts and (ii) when used with respect to the
other provisions of this Agreement, any day excluding Saturday and Sunday and
excluding any other day which shall be in Boston, Massachusetts, a legal holiday
or a day on which banking institutions are authorized by law to close.

     BOARD. The Board of Governors of the Federal Reserve System of the United
States.

     LEGAL REQUIREMENT. Any requirement imposed upon the Bank by any law of the
United States of America or the United Kingdom or by any regulation, order,
interpretation, ruling or official directive (whether or not having the force of
law) of the Board, the Bank of England or any other board, central bank or
governmental or administrative agency, institution or authority of the United
States of America, the United Kingdom or any political subdivision of either
thereof.

     LIBOR OPTION. The option granted pursuant to this Section 2 to have the
interest on all or a portion of the principal amount of the Revolving Loans
based on a LIBOR Rate.

     LIBOR PERIOD. Any period, as provided below in this Section 2.12, of 30,
60, 90 or 180 days, commencing on any Banking Day; PROVIDED, however, that no
LIBOR Period with respect to any LIBOR Portion of any Revolving Loan shall
extend beyond the maturity date of the Notes. If any LIBOR Period so selected
would otherwise end on a date which is not a Banking Day, such LIBOR Period
shall instead end on the next preceding or succeeding Banking Day as determined
by the Bank in accordance with the then current banking practice in London. Each
determination by the Bank of any LIBOR Period shall, in the absence of manifest
error, be conclusive, and at any Credit Party's request the Bank shall
demonstrate the basis for such determination.

     LIBOR PORTION. That portion of the Revolving Loans specified in a LIBOR
Request, (i) which is not less than Five Hundred Thousand Dollars ($500,000),
(ii) which is an integral multiple of Ten Thousand Dollars ($10,000), (iii)
which does not exceed the outstanding balance of the Revolving Loan not already
subject to an exercised LIBOR Option, (iv) which, as of the date of the LIBOR
Request specifying such LIBOR Portion, has met the conditions for basing

                                      -14-


interest on the LIBOR Rate in Section 2.13 of this Agreement and (v) the LIBOR
Period of which has commenced and not terminated.

     LIBOR PREMIUM. With respect to the prepayment of any LIBOR Portion of any
Revolving Loan, whether voluntary or as a result of acceleration, an amount
equal to the product of (i) the excess, if any, of the rate of interest on the
principal amount so prepaid over the rate of interest on debt securities issued
by the Treasury of the United States of America on a date approximating the date
of payment of such principal amount and having a maturity date approximating the
last Banking Day of the applicable LIBOR Period, multiplied by (ii) the
principal amount so prepaid, multiplied by (iii) a fraction, the numerator of
which is the number of days remaining in the related LIBOR Period and the
denominator of which is 360.

     LIBOR RATE. With respect to any LIBOR Portion for the related LIBOR Period,
an interest rate per annum (rounded upwards, if necessary, to the next higher
1/8 of 1%) equal to the product of (a) the Base LIBOR Rate (as hereinafter
defined) and (b) Statutory Reserves. For purposes of this definition, the term
"BASE LIBOR RATE" shall mean the rate (rounded to the nearest 1/8 of 1% or, if
there is no nearest 1/8 of 1%, the next higher 1/8 of 1%) at which deposits of
U.S. dollars approximately equal in principal amount to the LIBOR Portion and
for a maturity equal to the applicable LIBOR Period are offered to the Bank in
the London interbank foreign currency deposits market at approximately 11:00
a.m., London time, two (2) Banking Days prior to the commencement of such LIBOR
Period, for delivery on the first day of such LIBOR Period. Each determination
by the Bank of any LIBOR Rate shall, in the absence of manifest error, be
conclusive, and at any Credit Party's request, the Bank shall demonstrate the
basis for such determination.

     LIBOR REQUEST. Notice in writing (or by telephonic communications confirmed
by telex, telecopy or other facsimile transmission on the same day as the
telephone request) from Biosphere with respect to Biosphere Loans or from the
Borrower with respect to all other Revolving Loans, to the Bank requesting that
interest on a LIBOR Portion be based on the LIBOR Rate, specifying: (i) the
first day of the LIBOR Period, (ii) the length of the LIBOR Period consistent
with the definition of that term and (iii) a dollar amount of the LIBOR Portion
consistent with the definition of that term.

     STATUTORY RESERVES. A fraction, the numerator of which is the number one
and the denominator of which is the number one minus the aggregate of the
maximum reserve percentages (including, without limitation, any marginal,
special, emergency or supplemental reserves), expressed as a decimal,
established by the Board and any other banking authority to which the Bank is
subject for Eurocurrency Liabilities (as defined in Regulation D of the Board).
Such reserve percentages shall include, without limitation, those imposed under
such Regulation D. LIBOR Portions of the Revolving Loans shall be deemed to
constitute Eurocurrency Liabilities and as such shall be deemed to be subject to
such reserve requirements without benefit of or credit for proration, exceptions
or offsets which may be available from time to time to the Bank under such
Regulation D. Statutory Reserves shall be adjusted automatically on and as of
the effective date of any change in any reserve percentage.

     TAX. In relation to any LIBOR Portion and the applicable LIBOR Rate, any
tax, levy, impost, duty, deduction, withholding or other charges of whatever
nature required by any Legal

                                      -15-


Requirement (i) to be paid by the Bank and/or (ii) to be withheld or deducted
from any payment otherwise required hereby to be made by any Credit Party to the
Bank, PROVIDED that the term "Tax" shall not include any taxes imposed upon the
net income of the Bank by the United States of America or any political
subdivision thereof (including state and local governmental authorities).

     2.13 CONDITIONS FOR BASING INTEREST ON THE LIBOR RATE. Upon the condition
that:

          (a)  The Bank shall have received a LIBOR Request from the Borrower or
Biosphere, as applicable, prior to noon at least two (2) Banking Days prior to
the first day of the LIBOR Period requested;

          (b)  There shall have occurred no change in applicable law which would
make it unlawful for the Bank to obtain deposits of U.S. dollars in the London
interbank foreign currency deposits market;

          (c)  As of the date of the LIBOR Request and the first day of the
LIBOR Period, there shall exist no Event of Default, nor any Default, which has
not been waived by the Bank;

          (d)  The Bank shall not have determined in good faith that it is
unable to determine the LIBOR Rate in respect of the requested LIBOR Period or
that it is unable to obtain deposits of U.S. dollars in the London interbank
foreign currency deposits market in the applicable amounts and for the requested
LIBOR Period; and

          (e)  As of the first date of the LIBOR Period specified in such LIBOR
Request, and after having given effect thereto, there shall be no more than an
aggregate of four (4) LIBOR Portions outstanding;

then interest on the LIBOR Portion requested during the LIBOR Period requested
will be at the applicable LIBOR Rate.

     2.14 INDEMNIFICATION FOR FUNDING AND OTHER LOSSES. Each LIBOR Request shall
be irrevocable and binding on the applicable Credit Party. Without limiting the
generality of Section 2.15, the Credit Parties shall indemnify the Bank against
any loss or expense incurred by the Bank as a result of any failure on the part
of any Credit Party to fulfill, on or before the date specified in any LIBOR
Request, the applicable conditions set forth in this Agreement, including,
without limitation, any loss (including loss of anticipated profits) or expense
incurred by reason of the liquidation or redeployment of deposits or other funds
acquired by the Bank to fund or maintain the requested LIBOR Portion when
interest on such LIBOR Portion, as a result of such failure on the part of the
Credit Parties, is not based on the applicable LIBOR for the requested LIBOR
Period. The Bank shall determine the amount of such loss or expense incurred by
it, and absent manifest error such determination shall be conclusive, and at any
Credit Party's request the Bank shall demonstrate the basis for such
determination.

     2.15 CHANGE IN APPLICABLE LAWS, REGULATIONS, ETC. If any Legal Requirement
shall make it unlawful for the Bank to fund through the purchase of U.S. dollar
deposits any LIBOR Portion, or otherwise to give effect to its obligations as
contemplated hereby, or shall impose on

                                      -16-


the Bank any costs based on or measured by the excess above a specified level of
the amount of a category of deposits or other liabilities of the Bank, which
includes deposits by reference to which the LIBOR Rate is determined as provided
herein or a category of extensions of credit or other assets of the Bank which
includes any LIBOR Portion, or shall impose on the Bank any restrictions on the
amount of such a category of liabilities or assets which the Bank may hold, (a)
the Bank may by notice thereof to the Credit Parties terminate the LIBOR Option,
(b) any LIBOR Portion subject thereto shall immediately bear interest thereafter
at the rate provided for in Section 2.10.(a), and (c) the Credit Parties shall
indemnify the Bank against any loss, penalty or expense incurred by the Bank by
reason of the liquidation or redeployment of deposits or other funds acquired by
the Bank to fund or maintain such LIBOR Portion, as provided in Section 2.14.

     2.16 TAXES. It is the understanding of the Credit Parties and the Bank that
the Bank shall receive payments of amounts of principal of and interest on the
Revolving Loans with respect to the LIBOR Portions from time to time subject to
a LIBOR Option free and clear of, and without deduction for, any Taxes. If (a)
the Bank shall be subject to any such Tax in respect of any such LIBOR Portion
or part thereof or (b) the Credit Parties shall be required to withhold or
deduct any such Tax from any such amount, and (c) such Tax shall not have
existed as of the date of the applicable LIBOR Request, the LIBOR applicable to
such LIBOR Portion shall be adjusted by the Bank to reflect all additional costs
incurred by the Bank in connection with the payment by the Bank or the
withholding by the Credit Parties of such Tax and the Credit Parties shall
provide the Bank with a statement detailing the amount of any such Tax actually
paid by the Credit Parties. Determination by the Bank of the amount of such
costs shall, in the absence of manifest error, be conclusive, and at any Credit
Party's request, the Bank shall demonstrate the basis of such determination. If
after any such adjustment, any part of any Tax paid by any Bank is subsequently
recovered by the Bank, the Bank shall reimburse the Credit Parties to the extent
of the amount so recovered. A certificate of an officer of the Bank setting
forth the amount of such recovery and the basis therefor shall, in the absence
of manifest error, be conclusive.

                                    SECTION 3

                               CONDITIONS OF LOANS

     3.1  CONDITIONS PRECEDENT TO INITIAL REVOLVING LOAN. The obligation of the
Bank to make its initial Revolving Loans, to issue Letters of Credit is subject
to the condition precedent that the Bank shall have received, in form and
substance satisfactory to the Bank and its counsel, the following:

          (a)  this Agreement, duly executed by the Credit Parties;

          (b)  the Sepracor Note, duly executed by the Borrower;

          (c)  the Biosphere Note, duly executed by Biosphere;

          (d)  the Guaranty Agreement duly executed by the Borrower;

                                      -17-


          (e)  a certificate of the Secretary or an Assistant Secretary of the
Borrower with respect to resolutions of its Board of Directors authorizing the
execution and delivery of this Agreement, the Notes, and identifying the
officer(s) authorized to execute, deliver and take all other actions required
under this Agreement, and providing specimen signatures of such officers;

          (f)  a certificate signed by an Authorized Officer, certifying that
the conditions of Section 3.2.(b) have been fulfilled;

          (g)  the certificate of incorporation of the Borrower and all
amendments and supplements thereto, filed in the office of the Secretary of
State of the State of Delaware, each certified by said Secretary of State as
being a true and correct copy thereof;

          (h)  the bylaws of the Borrower and all amendments and supplements
thereto, certified by the Secretary or an Assistant Secretary as being a true
and correct copy thereof;

          (i)  a certificate of the Secretary of State of the State of Delaware,
as to legal existence and good corporate standing of the Borrower in such state
and listing all documents on file in the office of said Secretary of State;

          (j)  a certificate of the Secretary or an Assistant Secretary of
Biosphere with respect to resolutions of the Board of Directors authorizing the
execution and delivery of this Agreement, the Biosphere Note, and identifying
the officer(s) authorized to execute, deliver and take all other actions
required under this Agreement, and providing specimen signatures of such
officers;

          (k)  a certificate signed by a principal officer of Biosphere,
certifying that the conditions of Section 3.2.(b) have been fulfilled;

          (l)  the certificate of incorporation of Biosphere and all amendments
and supplements thereto, filed in the office of the Secretary of State of the
State of Delaware, each certified by said Secretary of State as being a true and
correct copy thereof;

          (m)  the bylaws of Biosphere and all amendments and supplements
thereto, certified by the Secretary or an Assistant Secretary as being a true
and correct copy thereof;

          (n)  a certificate of the Secretary of State of the State of Delaware,
as to legal existence and good corporate standing of Biosphere in such state and
listing all documents on file in the office of said Secretary of State;

          (o)  Lien searches against each Credit Party in all appropriate state
filing offices and in the United States Patent and Trademark Office and the
United States Copyright Office;

          (p)  if necessary, UCC-3 Termination Statements and other appropriate
lien discharge documentation terminating all liens except those consisting of
Permitted Encumbrances.

                                      -18-


          (q)  a certificate signed by an Authorized Officer, certifying that
there has been no material adverse change in the condition (financial or
otherwise), operations, properties, assets, liabilities or earnings of the
Credit Parties since the date of its most recent financial statement;

          (r)  an opinion addressed to it from Hale and Dorr LLP, counsel to the
Credit Parties, in form and substance satisfactory to the Bank and its counsel;
and

          (s)  such other documents, and completion of such other matters, as
counsel for the Bank may deem reasonably necessary or appropriate.

     Notwithstanding the foregoing, the obligations of the Bank to make
Revolving Loans or Biosphere Loans or issue Letters of Credit hereunder shall
not become effective unless each of the foregoing conditions is satisfied (or
waived) at or prior to 12:00 p.m. on January 7, 2000 (and in the event such
conditions are not so satisfied or waived, the Revolving Commitment Amount (and
the Biosphere Sublimit) shall terminate).

     3.2  CONDITIONS PRECEDENT TO ALL REVOLVING LOANS. The obligation of the
Bank to make each Revolving Loan, including the initial Revolving Loan, or
continue or convert the Revolving Loans to loans of another type, is further
subject to the following conditions:

          (a)  timely receipt by the Bank of a Notice of Borrowing as provided
in Section 2.1;

          (b)  the representations and warranties contained in Section 4 shall
be true and accurate in all material respects on and as of the date of such
Notice of Borrowing and on the effective date of the making, continuation or
conversion of each Revolving Loan as though made at and as of each such date
(except to the extent that such representations and warranties expressly relate
to an earlier date), and no Default or Event of Default shall have occurred and
be continuing, or would result from such Revolving Loan;

          (c)  the resolutions referred to in Sections 3.1.(d) and 3.1(i) shall
remain in full force and effect; and

          (d)  no change shall have occurred in any law or regulation or
interpretation thereof that, in the opinion of counsel for the Bank, would make
it illegal or against the policy of any governmental agency or authority for the
Bank to make Revolving Loans hereunder.

     The making of each Revolving Loan shall be deemed to be a representation
and warranty by the Credit Parties on the date of the making, continuation or
conversion of such Revolving Loan as to the accuracy of the facts referred to in
subsection (b) of this Section 3.2.

                                    SECTION 4

                         REPRESENTATIONS AND WARRANTIES

     In order to induce the Bank to enter into this Agreement and to make the
Revolving Loans hereunder, issue Letters of Credit, the Borrower represents and
warrants to the Bank that:

                                      -19-


     4.1  ORGANIZATION AND QUALIFICATION. Each of the Credit Parties and their
Subsidiaries (a) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, (b) has all
requisite corporate power to own its property and conduct its business as now
conducted and as presently contemplated and (c) is duly qualified and in good
standing as a foreign corporation and is duly authorized to do business in each
jurisdiction where the nature of its properties or business requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the financial condition, operations, properties or
business.

     4.2  CORPORATE AUTHORITY. The execution, delivery and performance of this
Agreement, the Notes, and the transactions contemplated hereby are within the
corporate power and authority of the Credit Parties, as applicable, and the
execution, delivery and performance of the Notes are within the corporate power
and authority of the Credit Parties, as applicable, and have been authorized by
all necessary corporate proceedings, and do not and will not (a) require any
consent or approval of the stockholders of the Credit Parties, (b) contravene
any provision of the charter documents or by-laws of the Credit Parties or any
law, rule or regulation applicable to any Credit Party, (c) contravene any
provision of, or constitute an event of default or event that, but for the
requirement that time elapse or notice be given, or both, would constitute an
event of default under, any other agreement, instrument, order or undertaking
binding on any Credit Party, or (d) result in or require the imposition of any
Encumbrance on any of the properties, assets or rights of any Credit Party.

     4.3  VALID OBLIGATIONS. This Agreement, the Notes, and all of their
respective terms and provisions are the legal, valid and binding obligations of
the Credit Parties, as applicable, each enforceable in accordance with their
respective terms except as limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting the enforcement of creditors' rights
generally, and except as the remedy of specific performance or of injunctive
relief is subject to the discretion of the court before which any proceeding
therefor may be brought.

     4.4  CONSENTS OR APPROVALS. The execution, delivery and performance of this
Agreement, the Notes, and the transactions contemplated herein do not require
any approval or consent of, or filing or registration with, any governmental or
other agency or authority, or any other party.

     4.5  TITLE TO PROPERTIES; ABSENCE OF ENCUMBRANCES. Each of the Credit
Parties and their Subsidiaries has good and marketable title to all of the
properties, assets and rights of every name and nature now purported to be owned
by it, including, without limitation, such properties, assets and rights as are
reflected in the financial statements referred to in Section 4.6 (except such
properties, assets or rights as have been disposed of in the ordinary course of
business since the date thereof), free from all Encumbrances except Permitted
Encumbrances hereto, and, except as so disclosed, free from all defects of title
that might materially adversely affect such properties, assets or rights, taken
as a whole.

     4.6  FINANCIAL STATEMENTS. The Borrower has furnished the Bank the
consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries as of December 31, 1998, and the related consolidated and
consolidating statements of income, changes in stockholders' equity and cash
flow for the fiscal year then ended, and related footnotes, audited and
certified by

                                      -20-


PriceWaterhouseCoopers. The Borrower has also furnished the foregoing unaudited
financial statements to the Bank for the nine-month period ending September 30,
1999 and financial projections for the 1999 fiscal year prepared by the
Borrower. All such financial statements, except for such projections, were
prepared in accordance with GAAP applied on a consistent basis throughout the
periods specified and present fairly the financial position of the Borrower and
its Subsidiaries as of such date and the results of the operations of the
Borrower and its Subsidiaries for such period. The projections were prepared in
good faith and based on assumptions which were reasonable when made. There are
no liabilities, contingent or otherwise, not disclosed in such financial
statements that involve a material amount.

     4.7  CHANGES. Since the date of the financial statements for the
three-month period ending September 30, 1999 referred to in Section 4.6, there
have been no changes in the assets, liabilities, financial condition, business
or prospects of the Borrower or any of its Subsidiaries other than changes in
the ordinary course of business, the effect of which has not, in the aggregate,
been materially adverse.

     4.8  DEFAULTS. As of the date hereof, no Default or Event of Default
exists.

     4.9  TAXES. The Borrower and each Subsidiary has filed all federal, state
and other tax returns required to be filed, and all taxes, assessments and other
governmental charges due from the Borrower and each Subsidiary have been fully
paid. The Borrower and each Subsidiary have established on their books reserves
adequate for the payment of all federal, state and other tax liabilities.

     4.10 MATERIAL AGREEMENTS. As of the Closing Date, SCHEDULE 4.10 hereto
accurately and completely lists all material leases, management, stockholder,
partnership, joint venture, stock redemption or retirement, employment
(including severance), non-competition and related agreements, if any, which are
presently in effect in connection with the conduct of business of the Borrower
and its Subsidiaries.

     4.11 MATERIAL LICENSES. As of the Closing Date, SCHEDULE 4.11 hereto
accurately and completely lists all material licenses and related agreements, if
any, which are presently in effect in connection with the conduct of business of
the Borrower and its Subsidiaries (the "MATERIAL LICENSES"), and all such
Material Licenses are in full force and effect.

     4.12 LITIGATION. Except as set forth in SCHEDULE 4.12 hereto, there is no
litigation, arbitration, proceeding or investigation pending, or, to the
knowledge of any Credit Party's or any Credit Party's Subsidiary's officers,
threatened, against any Credit Party or any such Subsidiary that, if adversely
determined, could result in a material judgment not fully covered by insurance,
could result in a forfeiture of all or any substantial part of the property of
the Credit Parties or their Subsidiaries, or could otherwise have a material
adverse effect on the assets, business or prospects of the Credit Parties or any
Subsidiary.

     4.13 USE OF PROCEEDS.

          (a)  The Credit Parties will not, directly or indirectly, use any part
of the proceeds of any of the Revolving Loans (i) for the purpose of making any
Restricted Payment which is prohibited by Section 6.8 hereof, (ii) for the
purpose of purchasing or carrying any

                                      -21-


margin stock within the meaning of Regulations U and X (12 C.F.R. Part 221 and
224) of the Board, or (iii) for any other purpose which would violate any
provision of any other applicable statute, regulation, order or restriction.

          (b)  The proceeds of the Revolving Loans shall be used exclusively for
the working capital purposes of the Credit Parties and for acquisitions
permitted hereunder.

     4.14 EXISTING INDEBTEDNESS. SCHEDULE 6.1 hereto accurately and completely
lists all existing Indebtedness of the Credit Parties and their Subsidiaries as
of the date hereof.

     4.15 EXISTING INVESTMENTS. SCHEDULE 4.15 hereto accurately and completely
lists the record owner, location and any relevant account numbers of all
depository and operating accounts and marketable securities owned by the Credit
Parties and their Subsidiaries as of the date hereof.

     4.16 SUBSIDIARIES. As of the date hereof, all the Subsidiaries of the
Credit Parties are listed in SCHEDULE 4.16 hereto. The Borrower or a Subsidiary
of the Borrower is the owner, free and clear of all liens and encumbrances,
except as expressly provided in such schedule, of all of the issued and
outstanding stock of each Subsidiary. All shares of such stock have been validly
issued and are fully paid and nonassessable, and no rights to subscribe to any
additional shares have been granted, and no options, warrants or similar rights
are outstanding.

     4.17 INVESTMENT COMPANY ACT. Neither Credit Party nor any of its
Subsidiaries is subject to regulation under the InvestmentCompany Act of 1940,
as amended.

     4.18 COMPLIANCE WITH ERISA. The Credit Parties and each member of the
Controlled Group have fulfilled their obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan and are in compliance
in all material respects with the applicable provisions of ERISA and the Code,
and have not incurred any liability to the PBGC or a Plan under Title IV of
ERISA; and no "prohibited transaction" or "reportable event" (as such terms are
defined in ERISA) has occurred with respect to any Plan.

     4.19 FDA COMPLIANCE, ETC. Without limiting the scope of Section 4.2, the
Credit Parties and their Subsidiaries are in compliance in all material respects
with all applicable foreign and federal and state laws and regulations,
including all material rules, regulations and administrative orders of the
United States Food and Drug Administration (the "FDA") and of foreign
authorities with jurisdiction over the Credit Parties and their Subsidiaries.
The Credit Parties and their Subsidiaries are in compliance in all material
respects with all of the applicable provisions of the Food, Drug and Cosmetic
Act, as amended.

     4.20 ENVIRONMENTAL MATTERS.

          (a)  The Credit Parties and their Subsidiaries have obtained all
permits, licenses and other authorizations which are required under all
Environmental Laws, except to the extent failure to have any such permit,
license or authorization would not have a material adverse effect on the
business, financial condition or operations of the Credit Parties and their
Subsidiaries. The Credit Parties and their Subsidiaries are in compliance with
the terms and conditions of all such permits, licenses and authorizations, and
are also in compliance with all

                                      -22-


other limitations, restrictions, conditions,standards, prohibitions,
requirements, obligations, schedules and timetables contained in any applicable
Environmental Law or in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, except to the extent failure to comply would not have a material
adverse effect on the business, financial condition or operations of the Credit
Parties and their Subsidiaries.

          (b)  No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or
threatened by any governmental or other entity with respect to any alleged
failure by the Credit Parties or any of its Subsidiaries, which could materially
adversely affect the properties, business, prospects, operating results or
condition (financial or otherwise) of the Credit Parties, to have any permit,
license or authorization required in connection with the conduct of its business
or with respect to any Environmental Laws, including, without limitation,
Environmental Laws relating to the generation, treatment, storage, recycling,
transportation, disposal or release of any Hazardous Materials.

          (c)  To the best of each Credit Party's knowledge no oral or written
notification of a release of a Hazardous Material, which could materially
adversely affect the properties, business, prospects, operating results or
condition (financial or otherwise) of any Credit Party, has been filed by or on
behalf of any Credit Party or any Subsidiary of a Credit Party and no property
now or previously owned, leased or used by any Credit Party or any Subsidiary of
a Credit Party is listed or proposed for listing on the National Priorities List
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, or on any similar state list of sites requiring
investigation or clean-up.

          (d)  There are no liens or encumbrances arising under or pursuant to
any Environmental Laws on any of the real property or properties owned, leased
or used by any Credit Party or any Subsidiary of a Credit Party and no
governmental actions have been taken or are in process which could subject any
of such properties to such liens or encumbrances or, as a result of which any
Credit Party or any Subsidiary of a Credit Party would be required to place any
notice or restriction relating to the presence of Hazardous Materials at any
property owned by it in any deed to such property.

          (e)  Neither any Credit Party nor any Subsidiary of a Credit Party
nor, to the best knowledge of any Credit Party, any previous owner, tenant,
occupant or user of any property owned, leased or used by any Credit Party or
any Subsidiary of a Credit Party (i) engaged in or permitted any operations or
activities upon or any use or occupancy of such property, or any portion
thereof, for the purpose of or in any way involving the handling, manufacture,
treatment, storage, use, generation, release, discharge, refining, dumping or
disposal (whether legal or illegal, accidental or intentional) of any Hazardous
Materials on, under, in or about such property, except to the extent commonly
used in day-to-day operations of such property and in such case only in
compliance with all Environmental Laws, or (ii) transported any Hazardous
Materials to, from or across such property except to the extent commonly used in
day-to-day operations of such property and, in such case, in compliance with,
all Environmental Laws, except, in the case of both clause (i) and clause (ii)
above, where so doing would not have a material adverse affect on the business,
prospects, operating results or condition (financial or

                                      -23-


otherwise) of any Credit Party; nor to the best knowledge of any Credit Party
have any Hazardous Materials migrated from other properties upon, about or
beneath such property, nor, to the best knowledge of any Credit Party, are any
Hazardous Materials presently constructed, deposited, stored or otherwise
located on, under, in or about such property except to the extent commonly used
in day-to-day operations of such property and, in such case, in compliance with,
all Environmental Laws.

                                   SECTION 5

                              AFFIRMATIVE COVENANTS

     So long as the Bank has any commitment to lend hereunder, issue Letters of
Credit or any Revolving Loan or other Obligation hereunder remains outstanding,
the Borrower covenants as follows:

     5.1  Financial Statements and other Reporting Requirements. The Credit
Parties shall furnish to the Bank:

          (a)  as soon as available to each Credit Party and its Subsidiaries,
but in any event within 90 days after the end of each of fiscal year, the
consolidated and consolidating balance sheet of each Credit Party and its
Subsidiaries as of the end of, and the related consolidated and consolidating
statement of income, changes in stockholders' equity and cash flow for, such
year, audited and certified by PriceWaterhouseCoopers (or other independent
nationally recognized certified public accountants reasonably acceptable to the
Bank) in the case of such consolidated statements, and certified by an
Authorized Officer in the case of such consolidating statements; and,
concurrently with such financial statements, a copy of said certified public
accountants' management report and a written statement by such accountants that,
in the making of the audit necessary for their report and opinion upon such
financial statements they have obtained no knowledge of any Default or Event of
Default or, if in the opinion of such accountants any such Default or Event of
Default exists, they shall disclose in such written statement the nature and
status thereof;

          (b)  as soon as available to the Borrower, but in any event within 45
days after the end of each fiscal quarter, the consolidated and consolidating
balance sheets of the Borrower and its Subsidiaries as of the end of, and the
related consolidated and consolidating statements of income for, the period then
ended, certified by an Authorized Officer but subject, however, to normal,
recurring year-end adjustments;

          (c)  as soon as available to the Borrower, but in any event
concurrently with the delivery of each financial statement of the Borrower
pursuant to subsection 5.1.(a), a copy of each so-called management letter
submitted to the Borrower or any of its Subsidiaries by independent certified
public accountants in connection with each annual audit of the books of the
Borrower and its Subsidiaries by such accountants or in connection with any
interim audit thereof pertaining to any phase of the business of the Borrower or
any such Subsidiary;

          (d)  concurrently with the delivery of each financial statement of the
Borrower pursuant to subsections 5.1.(a) and 5.1.(b) and at any time reasonably
requested by the Bank, a

                                      -24-


completed compliance certificate substantially in the form of EXHIBIT C hereto
signed on behalf of the Borrower by an Authorized Officer;

          (e)  as soon as available to the Borrower and its Subsidiaries, but in
any event within 90 days after the end of each fiscal year, projections for the
Borrower and its consolidated Subsidiaries on a consolidating and consolidated
basis for the current fiscal year, including projected balance sheets, income
statements, cash flow statements and such other statements as the Bank may
reasonably request and in form and substance satisfactory to the Bank, all
prepared in good faith and based on assumptions which were reasonable when made;

          (f)  if and when the Borrower gives or is required to give notice to
the PBGC of any "Reportable Event" (as defined in Section 4043 of ERISA) with
respect to any Plan that might constitute grounds for a termination of such Plan
under Title IV of ERISA, or knows that any member of the Controlled Group or the
plan administrator of any Plan has given or is required to give notice of any
such Reportable Event, a copy of the notice of such Reportable Event given or
required to be given to the PBGC;

          (g)  immediately upon becoming aware of the existence of any condition
or event that constitutes a Default or Event of Default, written notice thereof
specifying the nature and duration thereof and the action being or proposed to
be taken with respect thereto;

          (h)  promptly upon becoming aware of any litigation or of any
investigative proceedings by a governmental agency or authority commenced or
threatened against the Borrower or any of its Subsidiaries of which it has
notice, the outcome of which would or might have a materially adverse effect on
the assets, business or prospects of the Borrower or the Borrower and its
Subsidiaries on a consolidated basis, written notice thereof and the action
being or proposed to be taken with respect thereto;

          (i)  promptly upon becoming aware of any investigative proceedings
by a governmental agency or authority commenced or threatened against the
Borrower or any of its Subsidiaries regarding any potential violation of
Environmental Laws or any spill, release, discharge or disposal of any Hazardous
Material, written notice thereof and the action being or proposed to be taken
with respect thereto; and

          (j)  promptly after the same become available, (i) copies of all proxy
statements and annual, quarterly and interim reports (excluding reports in
respect of the beneficial ownership of officers, directors and certain other
shareholders on Forms 3, 4 and 5 promulgated under the Securities Exchange Act
of 1934, as amended) as the Borrower shall send to shareholders or as the
Borrower may file with the Securities and Exchange Commission or any
governmental authority at any time having jurisdiction over the Borrower and
(ii) with respect to Biosphere, copies of all annual reports as Biosphere shall
send to shareholders; and

          (k)  from time to time, such other financial data and information
about the Borrower or its Subsidiaries including, without limitation, a current
aging of Accounts, as the Bank may reasonably request.

     5.2  CONDUCT OF BUSINESS. Each of the Borrower and its Subsidiaries shall:

                                      -25-


          (a)  duly observe and comply in all material respects with all
applicable laws and valid requirements of any governmental authorities relative
to its corporate existence, rights and franchises, to the conduct of its
business and to its property and assets (including, without limitation, the
Food, Drug and Cosmetic Act, and all regulations promulgated by the FDA, all
Environmental Laws and ERISA), and shall maintain and keep in full force and
effect all licenses and permits necessary in any material respect to the proper
conduct of its business;

          (b)  maintain its corporate existence; and

          (c)  with respect to the Borrower, maintain its business in developing
and commercializing improved chemical entities and related products and services
and transacting related business; and with respect to Biosphere, maintain its
business in developing and commercializing its business related to
intracorporeal and "on-line" extracorporeal therapies.

     5.3  MAINTENANCE AND INSURANCE. Each of the Credit Parties and their
Subsidiaries shall maintain and keep its properties in good repair, working
order and condition, and from time to time make all needful improvements thereto
so that its business may be properly and advantageously conducted at all times.
The Credit Parties will maintain or cause to be maintained on all insurable
properties now or hereafter owned by the Credit Parties insurance against loss
or damage by fire or other casualty to the extent customary with respect to like
properties of companies conducting similar businesses and will maintain or cause
to be maintained, products liability, public liability and workmen's
compensation insurance insuring the Credit Parties to the extent customary with
respect to companies conducting similar businesses and, upon request, will
furnish to the Bank satisfactory evidence of the same.

     5.4  TAXES. The Credit Parties shall pay or cause to be paid all taxes,
assessments or governmental charges on or against it or any Subsidiary of a
Credit Party or their properties on or prior to the time when they become due;
PROVIDED that this covenant shall not apply to any tax, assessment or charge
that is being contested in good faith by appropriate proceedings and with
respect to which adequate reserves have been established and are being
maintained in accordance with GAAP.

     5.5  INSPECTION BY THE BANK. Each Credit Party shall permit the Bank or its
designees, at any reasonable time, and upon reasonable notice (or if a Default
or Event of Default shall have occurred and is continuing, at any time and
without prior notice), to (i) visit and inspect the properties of each Credit
Party and its Subsidiaries, (ii) examine and make copies of and take abstracts
from the books and records of each Credit Party and its Subsidiaries and (iii)
discuss the affairs, finances and accounts of each Credit Party and its
Subsidiaries with their appropriate officers, employees and accountants. In
handling such information the Bank shall exercise the same degree of care that
it exercises with respect to its own proprietary information of the same types
to maintain the confidentiality of any non-public information thereby received
or received pursuant to Section 5 except that disclosure of such information may
be made (i) to the subsidiaries or affiliates of the Bank in connection with
their present or prospective business relations with any Credit Party and its
Subsidiaries if such subsidiaries agree in advance to be bound by the same
confidentiality provisions of the Bank as set forth in this Section 5.5, (ii) to
prospective transferees or purchasers of an interest in the Revolving Loans if
they agree in advance to be bound by the same confidentiality obligations of the
Bank as set forth in this

                                      -26-


Section 5.5, (iii) as required by law, regulation, rule or order, subpoena,
judicial order or similar order and (iv) as may be required in connection with
the examination, audit or similar investigation of the Bank.

     5.6  MAINTENANCE OF BOOKS AND RECORDS. Each Credit Party and its
Subsidiaries shall keep adequate books and records of account, in which true and
complete entries will be made reflecting all of its business and financial
transactions, and such entries will be made in accordance with GAAP consistently
applied and applicable law.

     5.7  MAINTENANCE OF ACCOUNTS. The Credit Parties and each of their U.S.
Subsidiaries will maintain its principal depository and operating accounts with
the Bank at all times (except for Versicor which may maintain its principal
depository and operating accounts in California so long as its principal place
of business is located in California) and shall maintain in such accounts
sufficient funds to make all principal and interest payments when due.

     5.8  [RESERVED].

     5.9  MINIMUM LIQUIDITY RATIO. At the end of each fiscal quarter, the Cash
Equivalent Amount of the Borrower shall be equal to or greater than 150% of its
Total Liabilities.

     5.10 MINIMUM TANGIBLE CAPITAL BASE. The Borrower shall maintain at all
times a Tangible Capital Base of not less than $50,000,000.

     5.11 MINIMUM CASH OR EQUIVALENTS/FIXED CHARGE COVERAGE RATIO. The Borrower
shall maintain at all times (a) a Cash Equivalent Amount of not less than
$50,000,000 or (b) a Fixed Charge Coverage Ratio of not less than 1.50 to 1.00.

     5.12 FURTHER ASSURANCES. At any time and from time to time the Credit
Parties shall, and shall cause each of their Subsidiaries to, execute and
deliver such further instruments and take such further action as may reasonably
be requested by the Bank to effect the purposes of this Agreement and the Note.

                                   SECTION 6

                               NEGATIVE COVENANTS

     So long as the Bank has any commitment to lend hereunder, issue Letters of
Credit or any Revolving Loan or other Obligation hereunder remains outstanding,
the Borrower covenants as follows:

     6.1  INDEBTEDNESS. Neither the Borrower nor any of its Subsidiaries shall
create, incur, assume, guarantee or be or remain liable with respect to any
Indebtedness other than the following:

          (a)  Indebtedness of the Borrower or any of its Subsidiaries
(including Biosphere) to the Bank or any of its Affiliates;

                                      -27-


          (b)  Indebtedness existing as of the date hereof and disclosed in
SCHEDULE 6.1 hereto and Guaranties disclosed on SCHEDULE 6.2 hereto and any
refinancing of such Indebtedness in amounts not exceeding the principal amount
thereof and on terms (including without limitation any subordination terms
applicable thereto) which are substantially the same as the terms of the
refinanced Indebtedness;

          (c)  Indebtedness of the Borrower to or from its Subsidiaries in the
aggregate principal amount outstanding at any time not in excess of $20,000,000;
PROVIDED that no Default shall exist and be continuing or caused thereby at the
time of incurrence of such Indebtedness;

          (d)  Indebtedness secured by Permitted Encumbrances under Section
6.2(c);

          (e)  Indebtedness not in excess of 4,891,000 Canadian Dollars in
respect of Sepracor Canada Limited's obligation with respect to the Canadian
Indebtedness and the Borrower's guaranty of the Canadian Indebtedness and any
refinancing of such Indebtedness in amounts not exceeding the principal amount
thereof and on terms which are substantially the same terms as the terms of the
refinanced indebtedness;

          (f)  Indebtedness in respect of Capital Leases and purchase money
financing for tangible property used in the Borrower's business in the aggregate
principal amount outstanding at any time not in excess of $15,000,000 LESS, with
respect to Biosphere, any indebtedness in respect of Capital Leases and purchase
money financing for tangible property used in their businesses; and

     6.2  CONTINGENT LIABILITIES. Neither the Borrower nor any of its
Subsidiaries shall create, incur, assume or remain liable with respect to any
Guaranties other than the following:

          (a)  Guaranties in favor of the Bank or any of its Affiliates; and

          (b)  Guaranties disclosed in SCHEDULE 6.2 hereto or in the financial
statements referred to in Section 4.6.

     6.3  SALE AND LEASEBACK. Neither the Borrower nor any of its Subsidiaries
shall enter into any arrangement, directly or indirectly, whereby it shall sell
or transfer any property owned by it in order to lease such property or lease
other property that the Borrower or any such Subsidiary intends to use for
substantially the same purpose as the property being sold or transferred.

     6.4  ENCUMBRANCES. Neither the Borrower nor any of its Subsidiaries shall
create, incur, assume or suffer to exist any mortgage, pledge, security
interest, lien or other charge or encumbrance, including the lien or retained
security title of a conditional vendor upon or with respect to any of its
property or assets ("ENCUMBRANCES"), or assign or otherwise convey any right to
receive income, including the sale or discount of accounts receivable with or
without recourse, except the following ("PERMITTED ENCUMBRANCES"):

          (a)  Encumbrances in favor of the Bank or any of its Affiliates;

                                      -28-


          (b)  Encumbrances existing as of the date hereof and disclosed in
SCHEDULE 6.4 hereto and securing any refinancing of Indebtedness PROVIDED that
such refinancing is permitted pursuant to Section 6.1(b);

          (c)  Encumbrances for purchase money obligations or Capital Leases
permitted pursuant to Section 6.1(d); PROVIDED that such Encumbrances shall not
attach to property and assets of the Borrower or any Subsidiary not purchased
with the proceeds of such purchase money obligations;

          (d)  liens for taxes, fees, assessments and other governmental charges
to the extent that payment of the same may be postponed or is not required in
accordance with the provisions of Section 5.4; and

          (e)  landlords' and lessors' liens in respect of rent not in default
or liens in respect of pledges or deposits under workmen's compensation,
unemployment insurance, social security laws, or similar legislation (other than
ERISA) or in connection with appeal and similar bonds incidental to litigation;
mechanics', laborers' and materialmen's and similar liens, if the obligations
secured by such liens are not then delinquent; liens securing the performance of
bids, tenders, contracts (other than for the payment of money); and statutory
obligations incidental to the conduct of its business and that do not in the
aggregate materially detract from the value of its property or materially impair
the use thereof in the operation of its business.

     6.5  LINES OF BUSINESS. Neither the Borrower nor any Subsidiary will engage
in any line of business if as a result thereof the business of the Borrower and
its Subsidiaries taken as a whole would be materially different from what it was
on the date hereof.

     6.6  MERGER; CONSOLIDATION; SALE OR LEASE OF ASSETS. Neither the Borrower
nor any of its Subsidiaries shall, without the prior written consent of the
Bank, sell, lease or otherwise dispose of assets or properties, other than sales
or leases of inventory in the ordinary course of business; or liquidate, merge
or consolidate into or with any other Person or entity, PROVIDED that any
Subsidiary of a Credit Party may merge or consolidate into or with (i) the
Borrower if no Default or Event of Default has occurred and is continuing or
would result from such merger and if the Borrower is the surviving company or
(ii) any other wholly-owned Subsidiary of the Borrower.

     Notwithstanding the foregoing provisions of this section, the Borrower or
any Subsidiary may acquire (whether by way of purchase of assets or stock, by
merger or consolidation or otherwise) all or substantially all of the assets
located in or capital stock of any Person engaged primarily in the same line of
business as the Borrower or any Subsidiaries; PROVIDED that (a) no Default shall
exist at the time of such acquisition or shall be caused thereby in the
foreseeable future and (b) after giving effect to such acquisition the Borrower
shall be in compliance with all the provisions of Sections 5.9 through 5.11 and
the Borrower shall have delivered to the Bank a Compliance Certificate
demonstrating such compliance on a pro forma basis.

     Notwithstanding any provision of this Agreement to the contrary, the Credit
Parties may license and exploit any rights to their intellectual property,
including, without limitation, all

                                      -29-


patents, patent applications, trademarks, service marks, and tradenames, in
arms-length transactions for fair market value, without the consent of the Bank.

     6.7  ADDITIONAL STOCK ISSUANCE. The Borrower shall not permit any of its
Subsidiaries to issue any additional shares of such Subsidiary's capital stock
or other equity securities, any options therefor or any securities convertible
thereto other than to the Borrower; PROVIDED, that such Subsidiaries may issue
additional shares of its capital stock if after any such issuance the Borrower
or such Subsidiary has 50% or more of the ordinary voting power for the election
of a majority of the members of the board of directors or other governing body
of such entity or the Borrower or such Subsidiary has, at least, a 50% ownership
interest.

     6.8  RESTRICTED PAYMENTS. Neither the Borrower nor its Subsidiaries will
directly or indirectly declare, order, pay or make any Restricted Payment or set
aside any sum or property therefore if at the time of such proposed action or
immediately after giving effect thereto, any condition or event shall exist
which constitutes a Default or an Event of Default and unless such Restricted
Payment is expressly permitted by this Section 6.8; provided that nothing herein
shall be deemed to prohibit the making of any dividend or distribution by any
Subsidiary to a Credit Party.

     Subject to the foregoing, the Borrower may (a) make any scheduled payment
of principal or interest on Subordinated Notes issued and outstanding on the
date of this Agreement in accordance with the subordination provisions for such
subordinated notes, (b) make payments under any Corporate Services Agreement,
(c) make distributions of shares of its capital stock as stock splits or stock
dividends, and (d) make any other Restricted Payment in addition to those
referred to in the previous clause; PROVIDED, that in the last event the
Borrower shall have received the prior written consent of the Bank to such
proposed Restricted Payment.

     The amount involved in any Restricted Payment declared, ordered, paid, made
or set apart in property shall be deemed to be the greater of the fair market
value thereof at the time of such distribution or payment (or the date of such
transaction, as the case may be), as determined in good faith by the Borrower,
or the net book value thereof on the books of the Borrower as at such time.

     6.9  TRANSACTIONS WITH AFFILIATES. Except for the Borrower's Subsidiaries
on the date hereof so long as they remain Subsidiaries of the Borrower, the
Credit Parties will not, and will not permit any Corporate Affiliate to,
directly or indirectly, enter into any lease or other transaction with any
shareholder or with any Affiliate of the Borrower or such shareholder, on terms
that are less favorable to the Borrower or such Subsidiary than those which
might be obtained at the time from Persons who are not a shareholder or an
Affiliate. Notwithstanding the preceding sentence, the Borrower may (1) sublease
its facilities to Biosphere, Versicor and Hemasure; (2) enter into and perform
the Corporate Services Agreements, the Technology Transfer Agreements and the
Cross License Agreement, (3) enter into an amended and restated cross license
agreement replacing the Cross License Agreement if such amended and restated
agreement is in form and substance acceptable to the Bank and its counsel and
(4) engage in transactions expressly permitted by Sections 6.1, 6.6 and 6.7.

                                      -30-


     6.10 INVESTMENTS. Neither the Credit Parties nor any of their Subsidiaries
shall make or maintain any Investments other than (i) existing and additional
Investments in Subsidiaries on the date hereof so long as they remain
Subsidiaries of Sepracor, (ii) Qualified Investments and (iii) acquisitions
permitted under Section 6.6 and (iv) Investments consisting of foreign deposit
accounts used for ordinary course working capital purposes of the Credit Parties
or their Subsidiaries; PROVIDED, that the aggregate balance of foreign deposit
accounts of the Borrower and its Subsidiaries shall not at any time exceed
$10,000,000.

     6.11 ERISA. Neither the Credit Parties nor any member of the Controlled
Group shall permit any Plan maintained by it to (i) engage in any "prohibited
transaction" (as defined in Section 4975 of the Code, (ii) incur any
"accumulated funding deficiency" (as defined in Section 302 of ERISA) whether or
not waived, or (iii) terminate any Plan in a manner that could result in the
imposition of a lien or encumbrance on the assets of the Credit Parties or any
of their Subsidiaries pursuant to Section 4068 of ERISA.

     6.12 OBSERVANCE OF SUBORDINATION PROVISIONS, ETC. The Credit Parties will
not make, or cause or permit to be made, any payments in respect of any
Subordinated Indebtedness in contravention of the subordination and other
payment provisions contained in the evidence of such Subordinated Indebtedness
or in contravention of any written agreement pertaining thereto, nor will the
Credit Parties (a) amend, modify or change in any manner any of such
subordination or other payment provisions without the prior written consent of
the Bank or (b) amend, modify or change in any manner adverse to the interests
of the Bank any of the other provisions set forth in the agreements under which
such Subordinated Indebtedness is outstanding or contained in the evidence of
such Subordinated or other Indebtedness.

     6.13 RESTRICTIVE AGREEMENTS. No Credit Party will directly or indirectly,
enter into, incur or permit to exist any agreement or other arrangement that
prohibits, restricts or imposes any condition upon the ability of any Credit
Party to create, incur or permit to exist any Lien upon any of its property or
assets; PROVIDED that (i) the foregoing shall not apply to restrictions and
conditions imposed by law or by this Agreement, (ii) the foregoing shall not
apply to restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement if such restrictions or conditions
apply only to the property or assets securing such Indebtedness and (iii) the
foregoing shall not apply to customary provisions in leases and other contracts
restricting the assignment thereof.

                                   SECTION 7

                                    DEFAULTS

     7.1  EVENTS OF DEFAULT. There shall be an Event of Default hereunder if any
of the following events occurs:

          (a)  the Credit Parties shall fail to pay when due (i) any amount of
principal of any Revolving Loans, or (ii) any amount of interest thereon; or

          (b)  the Credit Parties shall fail to pay within three (3) days after
receipt of notice from the Bank any fees or expenses payable hereunder or under
any Note; or

                                      -31-


          (c)  the Credit Parties shall fail to perform any term, covenant or
agreement contained in Sections 5 (except Section 5.3) or 6; or

          (d)  the Credit Parties shall fail to perform any term, covenant or
agreement (other than those referred to above in this Section 7.1) contained in
this Agreement and such default shall continue for twenty (20) days; or

          (e)  any representation or warranty of any Credit Party made in this
Agreement or in the Notes, or any Credit Parties in any other documents or
agreements executed in connection with the transactions contemplated by this
Agreement or in any certificate delivered hereunder shall prove to have been
false in any material respect upon the date when made or deemed to have been
made; or

          (f)  the failure to pay at maturity, or within any applicable period
of grace, any obligations of the Borrower in excess of One Million Dollars
($1,000,000) in the aggregate for borrowed monies or advances, or for the use of
real or personal property, or fail to observe or perform any term, covenant or
agreement evidencing or securing such obligations, the result of which failure
is to permit the holder or holders of such indebtedness to cause such
indebtedness to become due prior to its stated maturity upon delivery of
required notice, if any; or

          (g)  the Borrower shall default in any payment due on any Indebtedness
in respect of borrowed money, any Capital Lease or the deferred purchase price
of property with an outstanding principal amount in excess of One Million
Dollars ($1,000,000) and such default shall continue for more than the period of
grace, if any, specified therein and shall not have been waived pursuant
thereto; or

          (h)  the Borrower or any Subsidiary of the Borrower shall (i) apply
for or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee, liquidator or similar official of itself or of all
or a substantial part of its property, (ii) be generally not paying its debts as
such debts become due, (iii) make a general assignment for the benefit of its
creditors, (iv) commence a voluntary case under the Federal Bankruptcy Code (as
now or hereafter in effect), (v) take any action or commence any case or
proceeding, as debtor, under any law relating to bankruptcy, insolvency,
reorganization, winding-up or composition or adjustment of debts, or any other
law providing for the relief of debtors, (vi) fail to contest in a timely or
appropriate manner, or acquiesce in writing to, any petition filed against it in
an involuntary case under the Federal Bankruptcy Code or other law, (vii) take
any action under the laws of its jurisdiction of incorporation or organization
similar to any of the foregoing, or (viii) take any corporate action for the
purpose of effecting any of the foregoing; or

          (i)  a proceeding or case shall be commenced, without the application
or consent of the Borrower or any Subsidiary of the Borrower in any court of
competent jurisdiction, seeking (i) the liquidation, reorganization,
dissolution, winding up, or composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of it or
of all or any substantial part of its assets, or (iii) similar relief in respect
of it, under any law relating to bankruptcy, insolvency, reorganization,
winding-up or composition or adjustment of debts or any other law providing for
the relief of debtors, and such proceeding or case shall continue undismissed,
or unstayed and in effect, for a period of 60 days; or an order

                                      -32-


for relief shall be entered in an involuntary case under the Federal Bankruptcy
Code, against the Borrower or any Subsidiary of the Borrower; or action under
the laws of the jurisdiction of incorporation or organization of the Borrower or
any Subsidiary of the Borrower similar to any of the foregoing shall be taken
with respect to the Borrower or any Subsidiary of the Borrower and shall
continue unstayed and in effect for any period of 60 days; or

          (j)  a judgment or order for the payment of money shall be entered
against the Borrower by any court, or a warrant of attachment or execution or
similar process shall be issued or levied against property of the Borrower, that
in the aggregate exceeds One Million Dollars ($1,000,000) in value and such
judgment, order, warrant or process shall continue undischarged or unstayed for
45 days; or

          (k)  the Borrower or any member of the Controlled Group shall fail to
pay when due an amount or amounts aggregating in excess of One Hundred Thousand
Dollars ($100,000) that it shall have become liable to pay to the PBGC or to a
Plan under Title IV of ERISA; or notice of intent to terminate a Plan or Plans
shall be filed under Title IV of ERISA by the Borrower, any member of the
Controlled Group, any plan administrator or any combination of the foregoing; or
the PBGC shall institute proceedings under Title IV of ERISA to terminate or to
cause a trustee to be appointed to administer any such Plan or Plans or a
proceeding shall be instituted by a fiduciary of any such Plan or Plans against
the Borrower and such proceedings shall not have been dismissed within 30 days
thereafter; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any such Plan or Plans must be
terminated; or

          (l)  any Person or "group" (within the meaning of Section 13(d) and
14(d)(2) of the Securities and Exchange Act of 1934, as amended) shall
beneficially own or control in excess of 50% of the issued and outstanding
shares of the capital stock of the Borrower having ordinary voting power to
elect a majority of the board of directors of the Borrower; or

          (m)  the termination, expiration or non-renewal of any license or
other Material Agreement which termination, expiration or non-renewal has a
material adverse effect on the existing business or prospects of the Borrower.

     7.2  REMEDIES. Upon the occurrence of an Event of Default described in
Sections 7.1.(h) and 7.1.(i), immediately and automatically, and upon the
occurrence of any other Event of Default, at any time thereafter while such
Event of Default is continuing, at the Bank's option and upon the Bank's
declaration:

          (a)  the Bank's commitment to make any further Revolving Loans
hereunder or to issue Letters of Credit, generally, shall terminate;

          (b)  the unpaid principal amount of the Revolving Loans together with
accrued interest and all other Obligations hereunder shall become immediately
due and payable, including the unpaid principal amount of any Revolving Loan
subject to an exercised LIBOR Option together with accrued interest thereon and
the related LIBOR Premium in the same manner as though the Credit Parties had
exercised their right to prepayment pursuant to Section

                                      -33-


2.7 of this Agreement, without presentment, demand, protest or further notice of
any kind, all of which are hereby expressly waived; and

          (c)  the Bank may exercise any and all rights it has under this
Agreement, the Notes or any other documents or agreements executed in connection
herewith, or at law or in equity, and proceed to protect and enforce the Bank's
rights by any action at law, in equity or other appropriate proceeding.

          (d)  Upon the occurrence of any Event of Default and at any time
thereafter (unless such Event of Default shall theretofore have been remedied),
at the Bank's option: (i) the Bank shall thereupon be relieved of all of its
obligations to make any Revolving Loans hereunder; (ii) the unpaid principal
amount of the Notes together with accrued interest thereon and all other
Obligations shall become immediately due and payable without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived;
and (iii) the Bank may exercise any and all rights it has under this Agreement,
the Notes, or any other documents or agreements executed in connection with the
transactions contemplated by this Agreement (the "LOAN DOCUMENTS"), or by law or
equity, and proceed to protect and enforce the Bank's rights by any action at
law, suit in equity or other appropriate proceeding, whether for specific
performance or for an injunction against a violation of any covenant contained
herein or in any Loan Document or in aid of the exercise of any power granted
hereby or thereby or by law.

                                   SECTION 8

                                  MISCELLANEOUS

     8.1  NOTICES. Unless otherwise specified herein, all notices hereunder to
any party hereto shall be in writing and shall be deemed to have been given when
delivered by hand, or three (3) days after being properly deposited in the mails
certified, return receipt requested, or when sent by electronic facsimile
transmission, or when delivered to the telegraph company or overnight courier,
the next business day following addressed to such party at its address indicated
below:

                                      -34-


     If to the Credit Parties, at

          Sepracor Inc.
          111 Locke Drive
          Marlborough, Massachusetts 01752
          Attention: Robert F. Scumaci
          Senior Vice President Finance and Administration
          Tel. No.: 508-481-6700
          Fax No.: 508-357-7494

     If to the Bank, at

          Fleet National Bank
          100 Federal Street
          Boston, Massachusetts 02110
          Attention: Kimberly A. Martone
          Senior Vice President
          Tel. No.: 617-434-5316
          Fax No.: 617-434-2473

or at any other address specified by such party in writing.

     8.2  EXPENSES. The Credit Parties will pay on demand all expenses of the
Bank in connection with the preparation, waiver or amendment of this Agreement,
the Notes, or other documents executed in connection therewith, or the
administration, default or collection of the Revolving Loans or other
Obligations or in connection with the Bank's exercise, preservation or
enforcement of any of its rights, remedies or options thereunder, including,
without limitation, reasonable fees and disbursements of outside legal counsel
or accounting, consulting, brokerage or other similar professional fees or
expenses, and any fees or expenses associated with any travel or other costs
relating to any appraisals or examinations conducted in connection with the
Obligations and the amount of all such expenses shall, until paid, bear interest
at the rate applicable to principal hereunder for Revolving Loans not subject to
a LIBOR Option (including any default rate).

     8.3  SET-OFF. Regardless of other means of obtaining repayment of the
Obligations, any deposits, balances or other sums credited by or due from the
head office of the Bank or any of its branch offices to the Credit Parties may,
at any time and from time to time after the occurrence of an Event of Default
hereunder, without notice to the Credit Parties or compliance with any other
condition precedent now or hereafter imposed by statute, rule of law, or
otherwise (all of which are hereby expressly waived) be set off, appropriated,
and applied by the Bank against any and all Obligations of the Credit Parties to
the Bank or any of its affiliates in such manner as the head office of the Bank
or any of its branch offices in their sole discretion may determine, and the
Credit Parties each hereby grant the Bank a continuing security interest in such
deposits, balances or other sums for the payment and performance of all such
obligations.

                                      -35-


     8.4  TERM OF AGREEMENT. This Agreement shall continue in force and effect
so long as the Bank has any commitment to make Revolving Loans hereunder or any
Revolving Loan or any Obligation hereunder shall be outstanding.

     8.5  NO WAIVERS. No failure or delay by the Bank in exercising any right,
power or privilege hereunder or under the Note or under any other documents or
agreements executed in connection herewith shall operate as a waiver thereof;
nor shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein and in the Notes provided are cumulative and not
exclusive of any rights or remedies otherwise provided by agreement or law.

     8.6  GOVERNING LAW; JURISDICTION. This Agreement and the Notes shall be
deemed to be contracts made under seal and shall be construed in accordance with
and governed by the laws of Massachusetts (without giving effect to any
conflicts of laws provisions contained therein). The Credit Parties, to the
extent that they may lawfully do so, hereby consent to the jurisdiction of the
courts of the Commonwealth of Massachusetts and the United States District Court
for the District of Massachusetts, as well as to the jurisdiction of all courts
to which an appeal may be taken from such courts, for the purpose of any suit,
action or other proceeding arising out of any of its obligations hereunder or
with respect to the transactions contemplated hereby, and expressly waives any
and all objections it may have as to venue in any such courts. The Credit
Parties further agree that a summons and complaint commencing an action or
proceeding in any of such courts shall be properly served and shall confer
personal jurisdiction if served personally or by certified mail to it at its
address provided in Section 8.1 of this Agreement or as otherwise provided under
the laws of the Commonwealth of Massachusetts.

     8.7  AMENDMENTS. Neither this Agreement nor the Notes nor any provision of
this Agreement or thereof may be amended, waived, discharged or terminated
except by a written instrument signed by the Bank and, in the case of
amendments, by the Credit Parties.

     8.8  BINDING EFFECT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS.

          (a)  This Agreement shall be binding upon and inure to the benefit of
the Credit Parties and the Bank and their respective successors and assigns;
PROVIDED that the Credit Parties may not assign or transfer their rights or
obligations hereunder.

          (b)  ASSIGNMENTS BY THE BANK. From and after the date hereof, the Bank
may at any time assign all, or a proportionate part of all, of its rights,
interests and duties with respect to the Revolving Commitment Amount and the
Notes (1) to any one or more of its Affiliates without the consent or approval
of the Credit Parties or (2) to one or more banks or other financial
institutions with the consent of the Credit Parties which consent shall not be
unreasonably withheld (each assignee under clauses (1) and (2), an "Assignee"),
in each case on such terms, as between the Bank and each of its Assignees, as
the Bank may think fit, and such Assignee shall assume such rights, interests
and duties pursuant to an instrument executed by such Assignee and the Bank, and
for this purpose the Bank may make available to each of its potential Assignees
such information relating to the Credit Parties, this Agreement and the
transactions contemplated hereby as the Bank may think necessary or desirable,
which information shall be held by each potential Assignee strictly in
confidence. Upon execution and

                                      -36-


delivery of such an instrument and payment by such Assignee to the Bank of an
amount equal to the purchase price agreed between the Bank and such Assignee,
such Assignee shall be a Bank party to this Agreement and shall have all the
rights, interests and duties of a Bank with a Revolving Commitment Amount and
Revolving Loan as set forth in such instrument of assumption, and the Bank shall
be released from its obligations hereunder to a corresponding extent, and no
further consent or action by any party shall be required. Upon the consummation
of any assignment pursuant to this paragraph (b), the Bank and the Credit
Parties shall make appropriate arrangements so that, if required, a new Note or
Notes are issued to the Assignee.

          (c)  PARTICIPATIONS BY THE BANK. From and after the date hereof, the
Bank shall be at liberty to offer the participations in the Revolving Commitment
Amount and the Notes to one or more banks or other financial institutions on
such terms as the Bank may think fit, and for this purpose the Bank may make
available to each of its potential participants such information relating to the
Credit Parties, this Agreement and the transactions contemplated hereby as the
Bank may think necessary or desirable, which information shall be held by each
potential participant strictly in confidence; PROVIDED, that the Bank shall not
offer any participations to foreign banks or financial institutions without the
prior written consent of the Credit Parties; PROVIDED FURTHER, that the Bank
shall retain the sole right to consent to amendments to, or waivers of, the
provisions of this Agreement and the Notes and the sole right and responsibility
to enforce the obligations of the Credit Parties hereunder and under the Notes;
PROVIDED FURTHER, that the Bank may agree with each of its participants that the
Bank will not agree, without the consent of the participant, to any amendment or
waiver of any provision of this Agreement which would increase or otherwise
change such Revolving Commitment Amount or reduce the principal of or rate of
interest on the Revolving Loans subject to such participation, or postpone the
date fixed for any payment of principal or of interest on any Revolving Loans.

     8.9  CURRENCY CONVERSION. If, for the purpose of obtaining or enforcing
judgment in any court or for any other purpose hereunder it is necessary to
convert an amount due hereunder in the currency in which it is due (the
"ORIGINAL CURRENCY") into another currency (the "SECOND CURRENCY") the rate of
exchange applied shall be that at which, in accordance with normal banking
procedures, the Bank could purchase, in the United States money market or the
United States foreign exchange market (the "MONEY MARKETS"), as the case may be,
the Original Currency with the Second Currency on the Business Day on which
judgment is given or the amount is due. The Borrower agrees that its obligations
in respect of any amounts due from it to the Bank, in the Original Currency
hereunder shall, notwithstanding any judgment expressed or payment made in the
Second Currency, be discharged only to the extent that on the Business Day
following receipt of any sums so paid or adjudged to be due hereunder in the
Second Currency, the Bank may, in accordance with normal banking procedure
purchase, in the appropriate Money Market, the Original Currency with the amount
of the Second Currency so paid or so adjudged to be due; and if the amount of
the Original Currency so purchased is less than the amount originally due in the
Original Currency, the Borrower agrees as a separate obligation, and
notwithstanding any such payment or judgment to indemnify the Bank.

     8.10 COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures hereto and thereto were
upon the same instrument.

                                      -37-


     8.11 PARTIAL INVALIDITY. The invalidity or unenforceability of any one or
more phrases, clauses or sections of this Agreement shall not affect the
validity or enforceability of the remaining portions of it.

     8.12 CAPTIONS. The captions and headings of the various sections and
subsections of this Agreement are provided for convenience only and shall not be
construed to modify the meaning of such sections or subsections.

     8.13 WAIVER OF JURY TRIAL. THE BANK AND THE CREDIT PARTIES AGREE THAT
NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN ANY
LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON, OR ARISING OUT
OF, THIS AGREEMENT, ANY RELATED INSTRUMENTS, OR THE DEALINGS OR THE RELATIONSHIP
BETWEEN OR AMONG ANY OF THEM, OR (B) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH
ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE
PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE BANK AND THE
CREDIT PARTIES, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER
THE BANK NOR THE CREDIT PARTIES HAVE AGREED WITH OR REPRESENTED TO THE OTHER
THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL
INSTANCES.

     8.14 ENTIRE AGREEMENT. This Agreement, the Notes and the documents and
agreements executed in connection herewith constitute the final agreement of the
parties hereto and supersede any prior agreement or understanding, written or
oral, with respect to the matters contained herein and therein.

                                      -38-


     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the day and year first above written.

                                   SEPRACOR INC.

                                   By: /s/ Robert F. Scumaci
                                       ---------------------
                                       Name:  Robert F. Scumaci
                                       Title: Senior Vice President Finance and
                                       Administration

                                   BIOSPHERE MEDICAL, INC.

                                   By: /s/ Robert M. Palladino
                                       -----------------------
                                       Name:  Robert M. Palladino
                                       Title: Vice President and Chief Financial
                                       Officer

                                   FLEET NATIONAL BANK

                                   By: /s/ Kimberly A. Martone
                                       -----------------------
                                       Name:  Kimberly A. Martone
                                       Title: Senior Vice President

                                      -39-


                                                                     EXHIBIT A-1

                                     FORM OF

                                  SEPRACOR INC.
                                 PROMISSORY NOTE

                                                               December 22, 1999
$25,000,000                                                Boston, Massachusetts

     For value received, the undersigned hereby promises to pay to FLEET
NATIONAL BANK (the "BANK"), or order, at the head office of the Bank at One
Federal Street, Boston, Massachusetts 02110, the principal amount of TWENTY-FIVE
MILLION DOLLARS ($25,000,000) or such lesser amount as shall equal the principal
amount outstanding hereunder on December 31, 2001 or such earlier date as
provided in the Agreement (as defined below) in lawful money of the United
States of America and in immediately available funds, and to pay interest on the
unpaid principal balance hereof from time to time outstanding, at said office
and in like money and funds, for the period commencing on the date hereof until
paid in full, at the rates per annum and on the dates provided in the Agreement.

     Upon the occurrence and during the continuance of an Event of Default,
interest on the unpaid principal amount hereof and (to the extent permitted by
law) on unpaid interest shall thereafter be payable on demand at a rate per
annum equal to two percent (2%) above the interest rate otherwise in effect with
respect to such Revolving Loans. Upon the cure of an Event of Default and the
payment of interest at the default rate through the date of such cure, the
interest rate shall revert to that provided for in the Agreement.

     If the entire amount of any required principal and/or interest is not paid
in full within ten (10) days after the same is due, the undersigned shall pay to
the Bank a late fee equal to three percent (3%) of the required payment. Nothing
in the preceding sentence shall affect the Bank's rights to exercise any of its
rights and remedies provided in the Agreement (as defined below) if an Event of
Default (as defined in the Agreement) has occurred.

     This Note is issued pursuant to, and entitled to the benefits of, and is
subject to, the provisions of a certain Second Amended and Restated Revolving
Credit Agreement dated as of December 22, 1999, by and among the undersigned,
Biosphere Medical, Inc. and the Bank (herein, as the same may from time to time
be amended or extended, referred to as the "AGREEMENT"), but neither this
reference to the Agreement nor any provision thereof shall affect or impair the
absolute and unconditional obligation of the undersigned makers of this Note to
pay the principal of and interest on this Note as herein provided.

     In case an Event of Default (as defined in the Agreement) shall occur, the
aggregate unpaid principal of and accrued interest on this Note shall become or
may be declared to be due and payable in the manner and with the effect provided
in the Agreement.

     The undersigned may at its option prepay all or any part of the principal
of this Note before maturity upon the terms provided in the Agreement, and this
Note is subject to mandatory



prepayment in certain circumstances, which repayment shall in certain cases
require the payment of a premium and in certain cases not require the payment of
a premium.

     The undersigned makers hereby waive presentment, demand, notice of
dishonor, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note.

     This instrument shall have the effect of an instrument executed under seal
and shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts (without giving effect to any conflicts of laws
provisions contained therein).

                                   SEPRACOR INC.


                                   By:
                                       ----------------------------------------
                                       Name:  Robert F. Scumaci
                                       Title: Senior Vice President Finance and
                                       Administration

                                       -2-


                         SCHEDULE I TO PROMISSORY NOTE


                    AMOUNT OF
                    REVOLVING       INTEREST          AMOUNT        NOTATION
     DATE             LOAN            RATE             PAID          MADE BY
                                                        



                                       -3-


                                                                     EXHIBIT A-2

                                    FORM OF

                             BIOSPHERE MEDICAL, INC.
                                 PROMISSORY NOTE

                                                               December 22, 1999
$2,000,000                                                 Boston, Massachusetts


     For value received, the undersigned hereby promises to pay to FLEET
NATIONAL BANK (the "BANK"), or order, at the head office of the Bank at One
Federal Street, Boston, Massachusetts 02110, the principal amount of TWO MILLION
DOLLARS ($2,000,000) or such lesser amount as shall equal the principal amount
outstanding hereunder on December 31, 2001 or such earlier date as provided in
the Agreement (as defined below) in lawful money of the United States of America
and in immediately available funds, and to pay interest on the unpaid principal
balance hereof from time to time outstanding, at said office and in like money
and funds, for the period commencing on the date hereof until paid in full, at
the rates per annum and on the dates provided in the Agreement.

     Upon the occurrence and during the continuance of an Event of Default,
interest on the unpaid principal amount hereof and (to the extent permitted by
law) on unpaid interest shall thereafter be payable on demand at a rate per
annum equal to two percent (2%) above the interest rate otherwise in effect with
respect to such Revolving Loans. Upon the cure of an Event of Default and the
payment of interest at the default rate through the date of such cure, the
interest rate shall revert to that provided for in the Agreement.

     If the entire amount of any required principal and/or interest is not paid
in full within ten (10) days after the same is due, the undersigned shall pay to
the Bank a late fee equal to three percent (3%) of the required payment. Nothing
in the preceding sentence shall affect the Bank's rights to exercise any of its
rights and remedies provided in the Agreement (as defined below) if an Event of
Default (as defined in the Agreement) has occurred.

     This Note is issued pursuant to, and entitled to the benefits of, and is
subject to, the provisions of a certain Second Amended and Restated Revolving
Credit Agreement dated as of December 22, 1999, by and among Sepracor, the
undersigned and the Bank (herein, as the same may from time to time be amended
or extended, referred to as the "AGREEMENT"), but neither this reference to the
Agreement nor any provision thereof shall affect or impair the absolute and
unconditional obligation of the undersigned makers of this Note to pay the
principal of and interest on this Note as herein provided.

     In case an Event of Default (as defined in the Agreement) shall occur, the
aggregate unpaid principal of and accrued interest on this Note shall become or
may be declared to be due and payable in the manner and with the effect provided
in the Agreement.

     The undersigned may at its option prepay all or any part of the principal
of this Note before maturity upon the terms provided in the Agreement, and this
Note is subject to mandatory



prepayment in certain circumstances, which repayment shall in certain cases
require the payment of a premium and in certain cases not require the payment of
a premium.

     The undersigned makers hereby waive presentment, demand, notice of
dishonor, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note.

     This instrument shall have the effect of an instrument executed under seal
and shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts (without giving effect to any conflicts of laws
provisions contained therein).

                                   BIOSPHERE MEDICAL, INC.

                                   By:
                                       -----------------------------------------
                                       Name:  Robert M. Palladino
                                       Title: Vice President and Chief Financial
                                       Officer

                                       -2-


                          SCHEDULE I TO PROMISSORY NOTE



                    AMOUNT OF
                    REVOLVING       INTEREST          AMOUNT        NOTATION
     DATE             LOAN            RATE             PAID          MADE BY
                                                        



                                       -3-


                                                                       EXHIBIT B

                             COMPLIANCE CERTIFICATE

Fleet National Bank
100 Federal Street
Boston, Massachusetts 02110

Attention:    Kimberly A. Martone
              Senior Vice President

Re:  Sepracor Inc. Obligations under Second Amended and Restated Revolving
     Credit Agreement dated as of December 22, 1999

Ladies and Gentlemen:

     As required by Section 5.1(c) of the Second Amended and Restated Revolving
Credit Agreement dated as of December 22, 1999 (the "CREDIT AGREEMENT") by and
among Sepracor Inc. and Biosphere Medical, Inc. (collectively, the "CREDIT
PARTIES") and Fleet National Bank (the "BANK"), a review of the activities of
the Borrower for the fiscal year and/or fiscal quarter ending ___________, _____
(the "FISCAL PERIOD") has been made under my supervision to determine whether
the Credit Parties have performed and/or maintained all of their respective
obligations under the Credit Agreement. Based upon such review, I hereby certify
to you, as an Authorized Officer of the Borrower, that the Credit Parties have
performed and maintained all such obligations under the Credit Agreement, the
Notes and the Loan Documents for the Fiscal Period and, to the best of my
knowledge, no event has occurred that constitutes a Default or an Even of
Default as defined in the Credit Agreement. Other capitalized terms used herein
without definition have the same meanings as in the Credit Agreement.

     As required by Section [5.1(a)][5.1(b)] of the Credit Agreement financial
statements of the Credit Parties (the "FINANCIAL STATEMENTS") for the Fiscal
Period and other information required by such sections accompany this
certificate. The Financial Statements present fairly the financial position of
the Credit Parties as of the date thereof and the statements of operation of the
Credit Parties for the Fiscal Period covered thereby.

     I further certify to you, as an Authorized Officer of the Borrower, that
the figures set forth below accurately represent amounts required to be
calculated under the various provisions or covenants of the Credit Agreement
indicated, each as of the last day of the Fiscal Period unless otherwise
indicated.

Dated:
       ----------------------------    -----------------------------------------
                                       Title:




                                                                          
I.       SECTION 5.9 - MINIMUM LIQUIDITY RATIO

         A.    TOTAL LIABILITIES

                  (1) Total Liabilities                                      $

B.       MINIMUM CASH OR EQUIVALENTS

         QUALIFIED INVESTMENTS HELD IN THE U.S.
                  (2) Obligations of the United States of America held in    $
                        the U.S.

                  (3) Certificates of deposit, other deposit instruments,    $
                        bank accounts held in the U.S.

                  (4) Commercial Paper held in the U.S. (see definition of   $
                        Qualified Investments)

                  (5) Mutual/closed end funds that invest only in            $
                        investments set forth in clauses (2) through (4)

                  (6) Repurchase agreements secured by any one or more of    $
                        the foregoing held in the U.S.

                  (7) Qualified Investments: (sum of 2 through 6)            $

         NET OUTSTANDING AMOUNT OF BASE ACCOUNTS

                  (8) Base Accounts                                          $

                  (9) Ineligible as of ________________(1)

                       (i)   over 60 days from invoice date                  $

                       (ii)  Accounts outside of US                          $

                       (iii) Accounts due from Affiliates                    $


- ----------
(1) Ineligible calculated monthly

                                       -2-



                                                                          
                       (iv)  Prepayments                                     $

                       (v)   Uninvoiced Accounts                             $

                       (vi)  Joint venture accounts                          $

                  (10) Ineligible Accounts (sum of 16(i) through (v))        $

                  (11) Contra Account offsets                                $

                  (12) Net Outstanding Amount of Base Accounts (8 - 10 - 11) $

                  (13) CASH EQUIVALENT AMOUNT

                  (14) Unencumbered Cash held in the United States           $

                  (15) Qualified Investments (from (14))                     $

                  (16) Net Outstanding Amount of Base Accounts (from (19))   $

                  (17) Actual Cash Equivalent Amount (13 + 14 + 15)          $

         C.         LIQUIDITY RATIO

                    (14) Actual Liability Ratio (13 DIVIDED BY 1)                              %

         Required Minimum Liquidity Ratio:                                                  150%

II.      SECTION 5.10 - MINIMUM TANGIBLE CAPITAL BASE

                  (1) Stockholders' equity                                   $

                  (2) Subordinated Indebtedness                              $

                  (3) Goodwill                                               $

                  (4) Intangible items                                       $

                  (5) Reserves not already deducted from assets              $

                  (6) Write-ups from revaluations                            $



                                       -3-



                                                                         
                  (7) Equity in Subsidiaries or joint ventures               $

                  (8) Actual Tangible Capital Base                           $
                      (1 + 2) - (sum of 3 through 7)

Required Minimum Tangible Capital Base:                                      $   50,000,000

III.     A.       MINIMUM CASH OR EQUIVALENT (from I.B)                      $

                  Required Minimum Cash Equivalent                           $   50,000,000

         B.       FIXED CHANGE COVERAGE RATIO

                  EBITDA

                  (1)      Operating Income                                  $

                  (2)      Add Backs

                           (i)      Taxes                                    $

                           (ii)     Interest Expense                         $

                           (iii)    Depreciation/Amortization                $

                           (iv)     Non-Cash Income                          $

                           (v)      Losses from Equity in                    $
                                    Affiliates

                           (vi)     Extraordinary and Unusual                $
                                    Losses

                           (vii)    Total                                    $

                  (3)      Exclusions                                        $

                           (i)      Income from Equity in                    $
                                    Affiliates

                           (ii)     Extraordinary and Unusual                $
                                    Gains

                           (iii)    Proceeds of Insurance and                $
                                    asset sales

                           (iv)     Total


                                       -4-



                                                                          
                  (4)      EBITDA ((1) + (2) - (3))                          $

                           FIXED CHARGES

                           (i)      Interest Expense                         $

                           (ii)     Non-Financed Capital                     $
                                    Expenditures

                  (5)      Total Fixed Charges ((i) + (ii))                  $

                  (6)      Actual Fixed Charge Coverage                          ____:1
                           Ratio (4 DIVIDED BY 5)

                  Required Fixed Charge Coverage Ratio                           1.5 to 1


Dated:
      ------------------------,------         ---------------------------------
                                              Title:



                                                                       EXHIBIT C

                               GUARANTY AGREEMENT

     THIS AGREEMENT, dated as of December __, 1999, by SEPRACOR, INC., a
Delaware corporation (the "Guarantor"), to FLEET NATIONAL BANK (the "Secured
Party").

                               W I T N E S S E T H

     WHEREAS, Biosphere Medical, Inc., a Delaware corporation (the "Company"),
the Guarantor and the Secured Party have entered into a Second Amended and
Restated Revolving Credit Agreement dated as of the date hereof (as amended from
time to time, the "Credit Agreement") pursuant to which the Secured Party has
agreed, subject to the terms and conditions set forth therein, to make certain
revolving loans to the Company (collectively, the "Biosphere Loans"), such
Biosphere Loans to be evidenced by the Company's Promissory note in the original
principal amount of $2,000,000 payable to the order of the Secured Party (as
amended or supplemented from time to time, the "Note"); and

     WHERES, the Guarantor owns a majority of the outstanding capital stock of
the Company and the making of the Biosphere Loans will therefore be beneficial
to the Guarantor; and

     WHEREAS, the obligation of the Secured Party to make the Biosphere Loans is
subject to the condition, among others, that the Guarantor shall execute and
deliver this Guaranty Agreement;

     NOW, THEREFORE, in consideration of the willingness of the Secured Party to
make the Biosphere Loans to the Company, and for other good and valuable
consideration, receipt of which is hereby acknowledged by the Guarantor, the
Guarantor hereby agrees as follows:

     1.     GUARANTEED OBLIGATIONS. The Guarantor does hereby irrevocably and
unconditionally guarantee the due and punctual payment and performance by the
Company of the following obligations to the Secured Party (individually, a
"Guaranteed Obligation" and collectively the "Guaranteed Obligations"):

     (a)    Principal of and premium, if any, and interest on the Note; and

     (b)    Any and all other obligations of the Company to the Secured Party
under the Credit Agreement or under any agreement or instrument relating
thereto, all as amended from time to time.

     2.     DEMAND BY SECURED PARTY. Upon failure by the Company punctually to
pay or perform any Guaranteed Obligation when due, after the expiration of any
applicable grace period, the Secured Period may make demand upon the Guarantor
for the payment or performance of such Guaranteed Obligation and the Guarantor
binds and obliges itself to make such payment or performance forthwith upon such
demand.

     3.     Waiver of Demands, Notices, Diligence, etc. The Guarantor hereby
assents to all of the terms and conditions of the Guaranteed Obligations and
waives: (a) demand for the



payment of the principal of any Guaranteed Obligation or of any claim for
interest or any part of any thereof (other than the demand provided for in
Section 2 hereof); (b) notice of the occurrence of a default or an event of
default under any Guaranteed Obligation; (c) protest of the nonpayment of the
principal of any Guaranteed Obligation or of any claim for interest or any part
thereof: (d) notice of presentment, demand and protest; (e) notice of acceptance
of any guaranty herein provided for or of the terms and provisions thereof or
hereof by the Secured Party; (f) notice of any indulgences or extensions granted
to the Company or any successor to the Company or any person or party which
shall have assumed the obligations of the Company; (g) any requirement of
diligence or promptness on the part of the Secured Party in the enforcement of
any of its rights under the provisions of any Guaranteed Obligation or this
Guaranty Agreement; (h) any enforcement of any Guaranteed Obligation; (i) any
right which the Guarantor might have to require the Secured Party to proceed
against any other guarantor of the Guaranteed Obligations or to realize on any
collateral security therefor; and (j) any and all notices of every kind and
description which may be required to be given by an statute or rule of law in
any jurisdiction. The waivers set forth in this Section 3 shall be effective
notwithstanding the fact that the Company ceases to exist by reason of its
liquidation, merger, consolidation or otherwise.

     4.     Obligations of Guarantor Unconditional. The obligations of the
Guarantor under this Guaranty Agreement shall be unconditional, irrespective of
the validity, regularity or enforceability of any Guaranteed Obligation, and
shall not be affected by any action taken under any Guaranteed Obligation in the
exercise of any right or remedy therein conferred, or by any failure or omission
on the part of the Secured Party to enforce any right given thereunder or
hereunder or any remedy conferred thereby or hereby, or by any waiver of any
term, covenant, agreement or condition of any Guaranteed Obligation or this
Guaranty Agreement, or by any release of any security or any other guaranty at
any time existing for the benefit of any Guaranteed Obligation, or by the merger
or consolidation of the Company, or by sale, lease or transfer by the Company to
any person of any or all of its properties, or by any action of the Secured
Party granting indulgence or extension to, or waiving or acquiescing in any
default, the Company or any successor to the Company or any person or party
which shall have assumed its obligations, or by reason of any disability or
other defense of the Company or any successor to the Company, or by any
modification, alteration, or by any circumstance whatsoever (with or without
notice to or knowledge of the Guarantor) which may or might in any manner or to
any extent vary the risk of the Guarantor hereunder, it being the purpose and
intent of the Guarantor that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances and shall not be
discharged except by payment or performance as herein provided, and then only to
the extent of such payment or performance.

     5.     Subordination of Claims of Guarantor. Any claims against the Company
to which the Guarantor may be or become entitled (including, without limitation,
claims by subrogation or otherwise by reason of any payment or performance by
the Guarantor in satisfaction and discharge, in whole or in part, of its
obligations under this Guaranty Agreement) shall be and hereby are made subject
and subordinate to the prior payment or performance in full of the Guaranteed
Obligations.

     6.     Reinstatement. This Agreement shall continue to be effective, or be
reinstated, as the case may be, if at any time any amount received by the
Secured Party in respect of the

                                       -2-


Guaranteed Obligations is rescinded or must otherwise be restored by the Secured
Party upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Company or the Guarantor or upon the appointment of an
intervenor or conservator of, or trustee or similar official for, the Company or
the Guarantor or any substantial part of any of their respective properties, or
otherwise, all as though said payments had not been made.

     7.     Notices. Except as otherwise provided herein, all notices to the
Guarantor or the Secured Party shall be in writing and shall be deemed to have
been sufficiently given or served for all purposes hereof if personally
delivered or mailed by certified mail, return receipt requested, as follows:

     (a)    if to the Guarantor:

            Sepracor Inc.
            111 Locke Drive
            Marlborough, Massachusetts 01752
            Attention:      Robert F. Scumaci
                            Senior Vice President

            with a copy to:

            John D. Sigel, Esquire
            Hale & Dorr
            60 State Street
            Boston, Massachusetts 02109

     (b)    if to the Secured Party:

            Fleet National Bank
            100 Federal Street
            Mail Stop: MA BOS 01-08-06
            Boston, Massachusetts 02110
            Attention:      Kimberly A. Martone
                            Senior Vice President

            with a copy to:
            George Ticknor, Esquire
            Palmer & Dodge LLP
            One Beacon Street
            Boston, Massachusetts 02108

or at such other address as the party to whom such notice or demand is directed
may have designated in writing to the other party hereto. A notice shall be
deemed to have been given upon the earlier to occur of (i) three (3) days after
the date on which it is deposited in the U.S. mails or (ii) receipt by the party
to whom such notice is directed.

     8.     MISCELLANEOUS. This Guaranty Agreement shall inure to the benefit of
and be binding upon the Secured Party and the Guarantor and their respective
successors and assigns,

                                       -3-


and the term "Secured Party" shall be deemed to include any other holder or
holders of any of the Guaranteed Obligations. In case any provision in this
Guaranty Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby. This Guaranty Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument. The Guarantor agrees, as principal obligor and
not as guarantor, to pay to the Secured Party, all reasonable costs and expenses
(including court costs and reasonable attorneys' fees and disbursements)
incurred or expended by the Secured Party in connection with the enforcement of
this Guaranty Agreement.

     9.     GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL. This Guaranty
Agreement, including the validity hereof and the rights and obligations of the
parties hereunder, shall be construed in accordance with and governed by the
laws of the Commonwealth of Massachusetts. The Guarantor, to the extent that it
may lawfully do so, hereby consents to the jurisdiction of the courts of the
Commonwealth of Massachusetts and the United States District Court for the
District of Massachusetts, as well as to the jurisdiction of all courts to which
an appeal may be taken from such courts, for the purpose of any suit, action or
other proceeding arising out of any of its obligations hereunder or with respect
to the transactions contemplated hereby, and expressly waives any and all
objections it may have as to venue in any such courts. The Guarantor further
agrees that a summons and complaint commencing an action or proceeding in any of
such courts shall be properly served and shall confer personal jurisdiction if
served personally or by certified mail to it at its address provided in
Section 7 of this Guaranty Agreement or as otherwise provided under the law of
the Commonwealth of Massachusetts. The Guarantor irrevocably waives all right to
a trial by jury in any suit, action or other proceeding instituted by or against
it in respect of its obligations hereunder or the transactions contemplated
hereby.

     IN WITNESS WHEREOF, the parties have executed this Guaranty Agreement as a
sealed instrument as of the date first above written.

                                   SEPRACOR INC.
                                   By
                                      -------------------------------
                                         Name:  Robert F. Scumaci
                                         Title:  Senior Vice President

                                         The foregoing Guaranty Agreement
                                         is hereby accepted:

                                         FLEET NATIONAL BANK

                                       -4-


                                   By
                                      --------------------------------
                                         Name:  Kimberly A. Martone
                                         Title:  Senior Vice President

                                       -5-


                                                               February 14, 2000

Sepracor Inc. (the "Company")
111 Locke Drive
Marlborough, Massachusetts  19752

     Re:    $400,000,000 5.00% Convertible Subordinated Debentures due 2007
            (including up to an additional $60,000,000 of 5.00% Convertible
            Subordinated Debentures due 2007 which may be issued at the option
            of the initial purchaser thereof, the "Debentures") issued pursuant
            to a certain Indenture dated as of February 11, 2000 (the
            ("Indenture") by and between the Company and The Chase Manhattan
            Ban, as trustee (the "Trustee")

                           AMENDMENT NO. 1 AND CONSENT

Ladies and Gentlemen:

     Reference is made to that certain Second Amended and Restated Revolving
Credit and Security Agreement dated as of December 22, 1999 (the "Credit
Agreement") among Fleet National Bank (the "Bank"), Sepracor Inc. (the
"Company") and BioSphere Medical, Inc. ("BioSphere").

     The Company plans to issue the Debentures on or after February 14, 2000,
which Debentures shall be subordinated in right of payment to the amounts
payable pursuant to the Credit Agreement and the promissory note issued
thereunder and any other Obligations and to the obligations of the Company to
the Bank under (a) the Guaranty Agreement dated as of September 15, 1998 with
respect to certain loans to Hemasure Inc., (b) the Guaranty Agreement dated as
of December 22, 1999 with respect to certain loans to BioSphere (collectively
with the Guaranty Agreement described in clause (a), the "Guaranty Agreements")
by and between the Company and the Bank. Without the Bank's waiver pursuant to
this Consent and Amendment, Section 6.1 of the Credit Agreement would prohibit
the issuance by the Company of the Debentures and Section 6.8 would prohibit the
payment of principal or interest on the Debentures.

     The Company hereby covenants to the Bank that true and correct copies of
(i) the Confidential Offering Memorandum describing the issuance of the
Debentures and delivered to the purchasers thereof and (ii) the Indenture will
be promptly delivered to the Bank in the final and effective form.

     In reliance upon such representations and warranties and the subordination
provisions contained in the Indenture, and contingent thereon and upon receipt
by the Bank of a copy of this letter executed by the Company:

     (i)   the Bank, notwithstanding the provisions of Section 6.1 of the Credit
Agreement, the other Loan Documents, the Guaranty Agreements and the Put
Agreement, hereby consents to the issuance of the Debentures by the Company; and



     (ii)  the Bank and the Company agree that the Credit Agreement is amended
as follows:

           (a)  the definition of "Subordinated Notes" set forth in Section 1.1
     of the Credit Agreement is hereby deleted and replaced by the following:

                  SUBORDINATED NOTES. The Borrower's (i) $93,048,000 6 1/4%
            Convertible Subordinated Debentures due 2005 issued by the Borrower
            pursuant to an Indenture dated February 5, 1998 from the Borrower to
            The Chase Manhattan Bank, (ii) $300.000,000 7.00% Convertible
            Subordinated Debentures due 2005 issued pursuant to an Indenture
            dated December 15, 1998 by the Borrower to The Chase Manhattan Bank
            and (iii) $400,000,000 5,00% Convertible Subordinated Debentures due
            2007 issued pursuant to an Indenture dated February 11, 2000 by the
            Borrower to The Chase Manhattan Bank (plus up to an additional
            $60,000,000 of such 5.00% Convertible Subordinated Debentures which
            may be issued at the Option of the initial purchaser thereof).

           (b)  The second paragraph of Section 6.8 of the Credit Agreement is
     amended by deleting the following phrase on the second line, "issued and
     outstanding on the date of this Agreement".

     The Company hereby confirms that: (a) the representations and warranties of
the Company contained in Section 4 of the Credit Agreement are true on and as of
the date hereof as if made on such date (except to the extent that such
representations and warranties expressly relate to an earlier date); (b) the
Company is in compliance in all material respects with all of the terms and
provisions set forth in the Credit Agreement on its part to be observed or
performed thereunder; and (c) after giving effect to this Consent and Amendment,
no Event of Default specified in Section 8 of the Credit Agreement, nor any
event which with the giving of notice or expiration of any applicable grace
period or both would constitute such an Event of Default, shall have occurred
and be continuing.

     Except as expressly stated herein, this letter (i) does not amend or modify
either of the Credit Agreement, any Loan Documents, the Guaranty Agreements or
the Put Agreement and (ii) does not constitute a consent to any other actions or
the issuance of any Indebtedness except for the Debentures. All provisions of
the Credit Agreement (as amended hereby), the Loan Documents, the Guaranty
Agreement and the Put Agreement shall remain in full force and effect and,
except as expressly stated herein, nothing herein shall constitute a waiver of
any such provision.

                                       -2-


     Capitalized terms used herein which are defined in the Credit Agreement
have the same meanings herein as therein.

                                   Sincerely,

                                   FLEET NATIONAL BANK

                                   By: /s/ Thomas W. Davies
                                       -----------------------
                                       Name:  Thomas W. Davies
                                       Title: Senior Vice President


The foregoing is hereby
agreed to and accepted.

SEPRACOR INC.

By: /s/ Robert F. Scumaci
   -------------------------
   Name:  Robert F. Scumaci
   Title: Senior Vice President, Finance
          and Administration


                                       -3-


                                                                November 8, 2001

Sepracor Inc.
111 Locke Drive
Marlborough, Massachusetts  01752

     Re:    $400,000,000 5.75% Convertible Subordinated Notes with
            Auto-Conversion Provision due 2006 (SNAPs(SM)) (including up to an
            additional $100,000,000 of 5.75% Convertible Subordinated Notes with
            Auto-Conversion Provision due 2006 which may be issued at the option
            of the initial purchaser thereof,) (the "Notes") issued pursuant to
            a certain Indenture dated as of November 14, 2001 (the "Indenture")
            by and between the Company and The Chase Manhattan Bank, as trustee
            (the "Trustee")

                           AMENDMENT NO. 2 AND CONSENT

Ladies and Gentlemen:

     Reference is made to that certain Second Amended and Restated Revolving
Credit Agreement dated as of December 22, 1999, as amended on February 14, 2000
(the "Credit Agreement") among Fleet National Bank (the "Bank"), Sepracor Inc.
(the "Company") and BioSphere Medical, Inc. ("BioSphere").

     The Company plans to issue the Notes on or after November 14, 2001, which
Notes shall be subordinated in right of payment to the amounts payable pursuant
to the Credit Agreement and the promissory note issued thereunder and any other
Obligations. Without the Bank's waiver pursuant to this Consent and Amendment,
Section 6.1 of the Credit Agreement would prohibit the issuance by the Company
of the Notes and Section 6.8 would prohibit the payment of principal or interest
on the Notes.

     The Company hereby covenants to the Bank that true and correct copies of
(i) the Confidential Offering Circular describing the issuance of the Notes will
be delivered to the purchasers thereof and (ii) the Indenture will be promptly
delivered to the Bank in the final and effective form.

     In reliance upon such representations and warranties and the
subordination provisions contained in the Indenture, and contingent thereon
and upon receipt by the Bank of a copy of this letter executed by the Company:

     (i)   the Bank, notwithstanding the provisions of Section 6.1 of the Credit
Agreement, and the other Loan Documents, hereby consents to the issuance of the
Notes by the Company and waives any Event of Default which may occur under the
Credit Agreement as a result of such issuance by the Company;

     (ii)  the Bank, notwithstanding the provisions of Section 6.8 of the Credit
Agreement and the other Loan Documents, hereby consents to any payment by the
Company of principal of,



premium, if any, or interest on, or otherwise in respect of, the Notes, all as
pursuant to the provisions of the Indenture; and

     (iii) the Bank and the Company agree that the Credit Agreement is amended
as follows:

           (a)  the definition of "Subordinated Notes" set forth in Section 1.1
     of the Credit Agreement is hereby deleted in its entirety and replaced by
     the following:

                  SUBORDINATED NOTES. The Borrower's (i) $300,000,000 7.00%
            Convertible Subordinated Debentures due 2005 issued pursuant to an
            Indenture dated December 15, 1998 between the Borrower and The Chase
            Manhattan Bank, (ii) $460,000,000 5.00% Convertible Subordinated
            Debentures due 2007 issued pursuant to an Indenture dated February
            14, 2000 between the Borrower and The Chase Manhattan Bank and (iii)
            $400,000,000 5.75% Convertible Subordinated Notes with
            Auto-Conversion Provision due 2006 (SNAPs(SM)) issued pursuant to an
            Indenture dated November 14, 2001 between the Borrower and the Chase
            Manhattan Bank (plus up to an additional $100,000,000 of such 5.75%
            Convertible Subordinated Notes with Auto-Conversion Provision which
            may be issued at the option of the initial purchaser thereof).

     The Company hereby represents to the Bank that the Company owns
approximately 25% of the outstanding capital stock of BioSphere. Each of the
Company and BioSphere hereby acknowledge and agree that at such time when the
Company no longer owned at least 51% of the outstanding capital stock of
BioSphere (i) pursuant to Section 2.3 of the Credit Agreement the BioSphere
Sublimit was automatically terminated and all BioSphere Loans were required to
be paid in full and (ii) the Bank has no obligation under the Credit Agreement
or otherwise to make any BioSphere Loans or any other advances to BioSphere.
Based on the above representation and provided that BioSphere is not on the date
hereof and will not be at any time in the future be a Subsidiary (as such term
is defined in the Credit Agreement) of the Company, the Bank agrees that the
provisions of Section 6.7 of the Credit Agreement would not apply to BioSphere.

     The Company hereby confirms that: (a) the representations and warranties of
the Company contained in Section 4 of the Credit Agreement are true on and as of
the date hereof as if made on such date (except to the extent that such
representations and warranties expressly relate to an earlier date); (b) the
Company is in compliance in all material respects with all of the terms and
provisions set forth in the Credit Agreement on its part to be observed or
performed thereunder; and (c) after giving effect to this Consent and Amendment,
no Event of Default specified in Section 8 of the Credit Agreement, nor any
event which with the giving of notice or expiration of any applicable grace
period or both would constitute such an Event of Default, shall have occurred
and be continuing.

     Except as expressly stated herein, this letter (i) does not amend or modify
any of the Credit Agreement or any Loan Documents and (ii) does not constitute a
consent to any other actions or the issuance of any Indebtedness except for the
Notes. All provisions of the Credit

                                       -2-


Agreement (as amended hereby) and the Loan Documents shall remain in full force
and effect and, except as expressly stated herein, nothing herein shall
constitute a waiver of any such provision.

     Capitalized terms used but not defined herein which are defined in the
Credit Agreement have the same meanings herein as therein.

                                   Sincerely,

                                   FLEET NATIONAL BANK

                                   By: /s/ David A. Meagher
                                       ---------------------------------
                                       Name: David A. Meagher
                                       Title: Senior Associate

The foregoing is hereby
agreed to and accepted.

SEPRACOR INC.

By: /s/ Robert F. Scumaci
   -------------------------
   Name:  Robert F. Scumaci
   Title: Executive Vice President, Finance
          and Administration

BIOSPHERE MEDICAL, INC.

By: /s/ Robert M. Palladino
   -------------------------
   Name:  Robert M. Palladino
   Title: Vice President and Chief Financial
          Officer
                                       -3-


                                  AMENDMENT TO
                           SECOND AMENDED AND RESTATED
                        REVOLVING CREDIT AGREEMENT AMONG
                              FLEET NATIONAL BANK,
                                  SEPRACOR INC.
                                       AND
                             BIOSPHERE MEDICAL, INC.

     This Amendment (the "Amendment") to the Second Amended and Restated
Revolving Credit Agreement, dated as of December 22, 1999 (as amended, the
"Revolving Credit Agreement'), among Fleet National Bank ("Fleet"), Sepracor
Inc. ("Sepracor") and BioSphere Medical, Inc. ("BioSphere") is dated as of
November 13, 2001 and effective as of December 22, 1999.

     WHEREAS, Fleet, Sepracor and BioSphere are parties to the Revolving Credit
Agreement.

     WHEREAS, Fleet, Sepracor and BioSphere wish to amend the Revolving Credit
Agreement on the terms set forth herein.

     NOW THEREFORE for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agree as follows:

1.   Capitalized terms used herein and not otherwise defined will have the
     meaning set forth in the Revolving Credit Agreement.

2.   Section 1.1 of the Revolving Credit Agreement is hereby amended by adding
     a new definition of "Total Senior Liabilities" to read in its entirety as
     follows:

          "Total Senior Liabilities. Total Liabilities minus, without
     duplication, the aggregate of Subordinated Indebtedness and Subordinated
     Notes."

3.   Section 5.9 of the Revolving Credit Agreement is hereby amended by deleting
     Section 5.9 in its entirety and inserting in lieu thereof the following:

          "5.9 Minimum Liquidity Ratio. At the end of each fiscal quarter, the
     Cash Equivalent Amount of the Borrower shall be equal to or greater than
     150% of its Total Senior Liabilities."

4.   In all other respects, the Revolving Credit Agreement will be in full
     force and effect.

5.   This Amendment will be deemed to be a contract made under seal and shall
     be construed in accordance with and governed by the laws of the
     Commonwealth of Massachusetts (without giving effect to any conflicts of
     laws provisions contained therein).



6.   This Amendment may not be amended, waived, discharged or terminated
     except by a written instrument signed by the Bank and, in the case of
     amendment, by the Credit Parties. This Amendment shall be binding upon and
     inure to the benefit of the Credit Parties and Fleet and their respective
     successors and assigns; provided that the Credit Parties may not assign or
     transfer their rights or obligations hereunder. This Amendment may be
     signed in any number of counterparts with the same effect as if the
     signatures hereto and thereto were upon the same instrument.

                                       -2-


     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers and effective as of the day and year first
above written.

                                 SEPRACOR INC.

                                 By: /s/ Robert F. Scumaci
                                     -------------------------------------------
                                       Name:  Robert F. Scumaci
                                       Title: Executive Vice President, Finance
                                              and Administration

                                 BIOSPHERE MEDICAL, INC.

                                 By: /s/ Robert M. Palladino
                                     -------------------------------------------
                                       Name:  Robert M. Palladino
                                       Title: Vice President and Chief Financial
                                              Officer

                                 FLEET NATIONAL BANK

                                 By: /s/ Kimberly A. Martone
                                     -------------------------------------------
                                       Name:  Kimberly A. Martone
                                       Title: Managing Director

                                       -3-



                    FOURTH AMENDMENT TO THE CREDIT AGREEMENT


       This FOURTH AMENDMENT (this "AMENDMENT") dated as of December 28, 2001 to
the Credit Agreement is among SEPRACOR INC. (the "BORROWER"), BIOSPHERE MEDICAL,
INC. ("BIOSPHERE", collectively with the Borrower, the "CREDIT PARTIES") and
FLEET NATIONAL BANK (the "BANK").

       WHEREAS, the Credit Parties and the Bank wish to amend the Revolving
Credit Agreement, the parties hereby agree as follows:

       NOW, THEREFORE, in consideration of the foregoing and the agreements
contained herein, the parties hereby agree as follows:

       1. REFERENCE TO REVOLVING CREDIT AGREEMENT.

       Reference is made to the Second Amended and Restated Revolving Credit
Agreement dated as of December 22, 1999, among the Credit Parties and the Bank
as amended by Amendment No. 1 and Consent dated February 14, 2001, Amendment No.
2 and Consent dated November 8, 2001, and the Amendment dated as of November 13,
2001 (as so amended and as the same may be further amended and restated from
time to time, the "REVOLVING CREDIT AGREEMENT"). Capitalized terms used herein
which are defined in the Revolving Credit Agreement have the same meanings
herein as therein, except to the extent that such meanings are amended hereby.

       2. AMENDMENTS AND TERMINATIONS. The Credit Parties and the Bank agree
that the Credit Agreement is hereby amended, effective as of the date hereof, as
follows:

       (a) Section 1.1 of the Credit Agreement is amended by deleting the
definition of REVOLVING CREDIT TERMINATION DATE and replacing it with the
following: "REVOLVING CREDIT TERMINATION DATE. March 31, 2002 or such earlier
date on which the commitment to make Revolving Loans is terminated or the
Revolving Commitment Amount is reduced to zero in accordance with the terms of
this Agreement."

       (b) As the Credit Parties and the Bank have agreed that the BioSphere
Sublimit has been terminated and no amounts are outstanding thereunder,
BioSphere shall no longer be deemed to be a party to the Revolving Credit
Agreement. All duties, rights, and obligations of Biosphere contained in the
Revolving Credit Agreement are hereby terminated. All references in the
Revolving Credit Agreement to the "Credit Parties" shall refer only to the
Borrower.

       (c) The Guaranty Agreement be and hereby is terminated in its entirety
and shall have no further force or effect.

       (d) The BioSphere Medical Inc. Promissory Note dated December 22, 1999,
in aggregate principal amount of $2,000,000 made in favor of the Bank by
BioSphere is cancelled and terminated and of no further force and effect, and
BioSphere has no further obligations under the Note.



       3. NO DEFAULT; REPRESENTATIONS AND WARRANTIES, ETC.

       (a) The Borrower hereby confirms that: (i) the representations and
warranties of the Borrower contained in Article 4 of the Revolving Credit
Agreement are true on and as of the date hereof as if made on such date (except
to the extent that such representations and warranties expressly relate to an
earlier date); (ii) the Borrower is in compliance with all of the terms and
provisions set forth in the Credit Agreement on their part to be observed or
performed thereunder; and (iii) after giving effect to this Amendment, no Event
of Default, nor any event which with the giving of notice or expiration of any
applicable grace period or both would constitute such an Event of Default, shall
have occurred and be continuing.

       4. CONDITIONS TO THIS AMENDMENT.

       Concurrently herewith (and as conditions to the Bank's consent to this
Amendment), the Credit Parties will furnish the Bank with the following:

       (a) Appropriate corporate resolutions, if necessary, and such other
certificates, instruments and documents as the Bank may reasonably request for
the purpose of implementing or effectuating the provisions of the Credit
Agreement, as hereby amended, or this Amendment.

       (b) Such other documents and instruments as the Bank may reasonably
require in order to put this Amendment into full force and effect.

       (c) The Borrower shall have paid all reasonable expenses, including legal
fees and disbursements incurred by the Bank in connection with this Amendment
and the transactions contemplated hereby.

       5. MISCELLANEOUS.

       (a) Except to the extent specifically amended or terminated hereby, the
Revolving Credit Agreement, the Loan Documents and all related documents shall
remain in full force and effect. Whenever the terms or sections amended hereby
shall be referred to in the Credit Agreement, Loan Documents or such other
documents (whether directly or by incorporation into other defined terms), such
defined terms shall be deemed to refer to those terms or sections as amended by
this Amendment.

       (b) This Amendment may be executed in any number of counterparts, each of
which, when executed and delivered, shall be an original, but all counterparts
shall together constitute one instrument.

       (c) This Amendment shall be governed by the laws of the Commonwealth of
Massachusetts and shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.

                                       2




       IN WITNESS WHEREOF, the parties hereto have executed this Amendment which
shall be deemed to be a sealed instrument as of the date first above written.

                                       BORROWER

                                       SEPRACOR INC.,
                                       a Delaware corporation


                                       By: /s/ ROBERT F. SCUMACI
                                          ------------------------
                                          Name:  Robert F. Scumaci
                                          Title: Executive Vice President,
                                                 Finance and Administration

                                       3




                                       BIOSPHERE MEDICAL, INC.,
                                       a Delaware corporation


                                       By: /s/ JOHN CARNUCCIO
                                          ------------------------
                                          Name:  John Carnuccio
                                          Title: President and CEO


                                       4





                                       BANK

                                       FLEET NATIONAL BANK


                                       By: /s/ KIMBERLY MARTONE
                                          ------------------------
                                          Name: Kimberly Martone
                                          Title:  Managing Director

                                       5




                                   ALLONGE TO
               $25,000,000 PROMISSORY NOTE DATED DECEMBER 22, 1999
                                    ISSUED BY
                                  SEPRACOR INC.
                           AND PAYABLE TO THE ORDER OF
                               FLEET NATIONAL BANK

                                                           Boston, Massachusetts
                                                               December 28, 2001

     This Allonge shall be affixed to that certain $25,000,000 Promissory Note
dated December 22, 1999 (the "NOTE") made by Sepracor Inc. (the "BORROWER") and
made payable to the order of FLEET NATIONAL BANK (the "BANK") and shall become a
permanent part thereof and shall amend the Note as provided herein.

     By their execution of this Allonge in the spaces provided below, each of
the Bank and the Borrower hereby agrees that the fifth line of the Note is
amended by deleting "December 31, 2001" and replacing it with "March 31, 2002."

     Except as specifically amended hereby, the Note shall remain in full force
and effect. The undersigned hereby authorizes the Bank to affix this Allonge to
the Note and it shall for all purposes henceforth be part of the Note.

                                   SEPRACOR INC.

                                   By: /s/ Robert F. Scumaci
                                      ---------------------------------------
                                       Name:  Robert F. Scumaci
                                       Title: Executive Vice President,
                                              Finance and Administration

AGREED AND ACCEPTED:

FLEET NATIONAL BANK

By: /s/ Kimberly A. Martone
   -------------------------
      Name:  Kimberly A. Martone
      Title: Managing Director




EX-10.42
4
a2073815zex-10_42.txt
EXHIBIT 10.42



                                                                   EXHIBIT 10.42

                              [SEPRACOR LETTERHEAD]

                                   **REVISED**

VIA FAX & FEDERAL EXPRESS

September 10, 1999

Mr. James O'Shea
4005 Springfield Lane
Greenville, DE 19807

Dear Jim:

It is my pleasure to offer you the position of President and Chief Operating
Officer of Sepracor. This position will report to the Chairman and Chief
Executive Officer of the Company.

In this role, you will be responsible for all commercial operations of Sepracor,
including sales and marketing, business development, distribution, and
production. You will b responsible for the development and execution of the
Annual Operating Plan and will work together with the CEO to develop and
maintain a five-year strategic plan, and play an integral role in all major
strategic initiatives, such as acquisition.

In addition, you will play a major role in directing the Company's investments
in R&D through the establishment of a process of portfolio analysis and
planning.

We are pleased to offer you a salary of $350,000, paid bi-weekly. You will also
receive a yearly bonus of $200,000 paid annually upon achievement of mutually
acceptable goals which we will establish together.

In addition, you will also receive a stock option grant, contingent upon Board
of Directors' approval, for 500,000 shares at a strike price equivalent to the
price of Sepracor common stock at the close of the market on the day of the next
Board of Directors' meeting. 300,000 shares will vest over five years at a rate
of 20% per year, starting on the first anniversary of the option grant. 100,000
shares will begin to vest and will vest over four years at a of 25% per year,
when Sepracor common stock has traded at greater than $150/share for twenty
consecutive trading days. 100,000 shares will begin to vest and will vest over
three years at a rate of 33% per year, when Sepracor common stock has traded at
greater than $200/share for twenty consecutive trading days.

In the event involuntary termination occurs, continuance of your base salary and
benefits will be provided for you for one year from the date of your
termination.



In the event of a change of control in the ownership of the Company as defined
by greater than 50% ownership of the common shares outstanding, your unvested
stock options would vest on the date of change of control, as per the Company's
Stock Option Plan.

The Company will reimburse you for all reasonable relocation expenses, including
realty and closing costs on the sale and purchase of your current and new house,
respectively, and for moving of household goods.

Jim, I am delighted at the prospect of your joining Sepracor. I look forward to
working together to create an unusually successful company, and to having great
fun at the same time.

Please sign below to indicate your acceptance of this offer.

Very truly yours,

/s/  Timothy J. Barberich

Timothy J. Barberich
Chairman & Chief Executive Officer

ACCEPTED AND AGREED TO HEREIN:

/s/  James O'Shea                                        9/21/99
- ------------------------------                ----------------------------
James O'Shea                                  Date




EX-10.43
5
a2073815zex-10_43.txt
EXHIBIT 10.43




                                                               EXHIBIT 10.43


                       Confidential Materials omitted and
                          filed separately with the
                       Securities and Exchange Commission.
                          Asterisks denote omissions.

THIS AGREEMENT is made on the 20TH day of____December _____ 2001

(Effective Date).

BETWEEN

(1)   Minnesota Mining and Manufacture Company ("3M") and 3M Innovative
      Properties Company ("3M IPC"), both having a principal office at 3M
      Center, Building 275-3E-10, St. Paul, MN 55144-1000, USA).

(2)   Sepracor Inc. ("SEPRACOR"), having a principal office at 111 Locke Drive,
      Marlborough, MA 01752.

WHEREAS

A.    3M has experience and technology in the formulation, scale-up, and
      manufacture of pharmaceutical products in aerosols for inhalation therapy.

B.    SEPRACOR wishes 3M to scale-up an aerosol product that SEPRACOR has
      developed containing non-CFC propellants and a SEPRACOR proprietary
      compound known as levalbuterol tartrate which SEPRACOR wishes to market
      for inhalation therapy.

C.    If the scale-up is successful and SEPRACOR decides to market the resulting
      aerosol product or aerosol products, SEPRACOR shall purchase its
      requirements of the product or products from 3M subject to the terms and
      conditions of this Agreement and a Supply Agreement (as defined below), or
      if 3M is unable to, or chooses not to, supply, 3M shall provide SEPRACOR
      with reasonable assistance and licenses as set out in this Agreement to
      manufacture or have manufactured the product.

D.    3M is willing to conduct the scale-up subject to the terms of this
      Agreement, with the understanding that there is no guarantee that the
      program will be successful or that 3M will ultimately supply marketable
      product.

1.   INTERPRETATION AND DEFINITIONS

1.1   The terms defined in this Article 1 shall for all purposes in this
      Agreement have the meanings specified in this Article 1.

      1.1:1 The headings in this Agreement shall not affect its interpretation.

                                       -1-


      1.1:2 Throughout this Agreement, whenever required by the context, the
      singular includes the plural and vice versa and any gender includes any
      other gender.

1.1:3 The recitals and schedules to this Agreement constitute an integral part
      of this Agreement. In the event of conflict or inconsistency between any
      of the terms and conditions of this Agreement, the conflict or
      inconsistency shall be resolved according to the following order of
      priority: the clauses of the Agreement, the schedules, the recitals.

1.2   "Affiliate" shall mean:

      1.2:1 any individual who or Entity ("Entity" shall mean any
      corporation, firm, partnership, proprietorship, other form of business
      organization) that, in whatever country organized or resident, directly
      or indirectly through one or more intermediaries, is controlled by, or
      is under common control with, or controls, a Party; or

      1.2:2 any Entity in which any Party or any individual or Entity recited
      in the preceding Section (1) directly or indirectly through one or more
      intermediaries collectively has at least a forty percent (40%)
      ownership or voting rights interest (whether through stock ownership,
      stock power, voting proxy, or otherwise) or has the maximum ownership
      interest it is permitted to have in the Entity in the country where
      such Entity exists.

1.3   "Product" means a press-and-breathe inhaler containing a pressurized
      aerosol canister with a metered dose valve filled with a formulation of
      the Compound (as defined below) that SEPRACOR has selected having the
      formulation, and meeting the Specifications, set forth in Schedule 1.12.
      The term "Licensed Product" means Product containing the Compound
      levalbuterol tartrate. "Tartrate" shall mean any tartaric acid salt,
      [**].

1.4   "Authority" means a governmental agency, in a country or territory in
      which SEPRACOR proposes to sell Product, responsible for granting licences
      and/or approvals permitting the sale of the Product, in such country or
      territory.

1.5   "Compound" means the compound known as levalbuterol, including any salt,
      ester, solvate, clathrate, or polymorph thereof.

1.6   "SEPRACOR Components" means all components and ingredients, other than
      Compound, supplied by or on behalf of SEPRACOR for manufacturing Licensed
      Product.

1.7   "Scale-up Program" means the development work conducted pursuant to the
      protocol and the work schedule indicating milestones and activities
      annexed hereto as Schedule 1.7 as amended in writing from time to time in
      accordance with the terms of this Agreement.

1.8   "3M Confidential Information" means confidential information disclosed by
      3M to SEPRACOR in the course of and pursuant to this Agreement relating to
      aerosol

                                       -2-


      inhalation, or aerosol compositions, including: the specifications and
      chemistry of aerosol formulations of Compound developed by 3M or its
      Affiliates; metered dose inhaler devices and their specifications; the
      methods and techniques used by 3M to manufacture aerosol inhalers and
      metered dose devices; and confidential information directly or
      indirectly provided by 3M to assist SEPRACOR to obtain a licence or
      approval permitting the sale of Licensed Product, including clinical
      results for metered dose devices

1.9   "SEPRACOR Confidential Information" means confidential information
      disclosed by SEPRACOR to 3M in the course of and pursuant to this
      Agreement relating to Compound, aerosol inhalation, or aerosol
      compositions, including: the specifications and chemistry of formulations
      of the Compound developed by SEPRACOR or its Affiliates; metered dose
      inhaler devices and their specifications for delivery of Compound;
      SEPRACOR's clinical and non-clinical development plans; SEPRACOR's
      clinical data; and forecasts of requirements of Licensed Product.

1.10  "Parties" mean 3M, 3M IPC and SEPRACOR and their permitted assigns, and "a
      Party" means 3M, 3M IPC or SEPRACOR and their permitted assigns.

1.11  "Supply Agreement" means the supply agreement referred to in Article 8
      below.

1.12  "Specifications" means those specifications for Licensed Product,
      Compound, or SEPRACOR Components as established in writing by SEPRACOR,
      and subject to approval by 3M, which approval shall not unreasonably be
      withheld or delayed, and as may be amended from time to time in writing by
      SEPRACOR, subject to approval by 3M, which approval shall not unreasonably
      be withheld or delayed. Initial Specifications, once approved by both
      parties, will be set forth in Schedule 1.12.

1.13  "Test Methods" means those methods used for testing and releasing
      Compound, SEPRACOR Components, or Licensed Product, agreed upon in writing
      by the Parties and as amended from time to time, subject to approval by
      the Parties, which approval shall not unreasonably be withheld or delayed,
      provided that no Party shall have the obligation to provide to the other
      Party direct access to Test Methods that are provided by way of a DMF.

1.14  "3M Patent Rights" means all patents and patent applications that are
      owned or controlled by 3M or an Affiliate thereof and that cover
      manufacture, use, or sale of Licensed Product, including but not limited
      to certain of those patents claiming benefit of priority to, or having a
      substantially identical disclosure as, Great Britain application
      GB8828477, filed December 6, 1988, U.S. application 442,119, filed
      November 28, 1989, U.S. application 92,001, filed July 15, 1993, and all
      applicable continuations, continuations-inpart, divisionals, extensions,
      supplemental protection certificates, utility models, reissues, and
      reexaminations thereof.

                                       -3-


1.15  "3M Know-How" means 3M Confidential Information and any other information
      or data of 3M or 3M IPC useful in developing, optimizing, manufacturing,
      or gaining regulatory approval of Licensed Product, including any
      toxicological data, provided by 3M.

1.16  "Net Sales Price" shall mean the price received by SEPRACOR, their
      Affiliates, or permitted sublicensees for Licensed Product from
      wholesalers, distributors, managed healthcare organizations, or similar
      entities at the same level of distribution in arms length transactions
      involving cash as the sole consideration, which shall not include
      transfers within or between SEPRACOR, their Affiliates or sublicensees,
      after deduction of freight and insurance, rebates and chargebacks granted
      to managed health care organizations or to federal, state and local
      governments, their agencies, and purchasers and reimbursers or to trade
      customers, including but not limited to, wholesalers and chain and
      pharmacy buying groups, other trade and quantity discounts actually given,
      sales or value added taxes, and credits and allowances for returns.
      SEPRACOR's customers shall include purchasers in the chain of commerce who
      enter into agreements with SEPRACOR as to price, even though legal title
      to Licensed Product does not pass directly from SEPRACOR to such customer,
      and even though payment for Licensed Product is not made by such customer
      directly to SEPRACOR. Licensed Product sold in transactions involving
      consideration other than or in addition to cash shall be deemed to have
      been sold at the average price charged by SEPRACOR in an arm's length cash
      transaction to the applicable class of trade in the relevant annual period
      (or, if all transactions in the applicable class of trade involve
      consideration other than or in addition to cash, the average price charged
      by SEPRACOR in an arm's length cash transaction in the relevant annual
      period irrespective of class of trade). The preceding sentence shall not
      apply to Licensed Product samples provided free of charge to physicians in
      the course of promoting Licensed Product, nor shall it apply to Licensed
      Product provided free of charge as part of a contract involving Licensed
      Product only.

2.    TERM

2.1   This Agreement shall commence on the effective date set forth above and
      (subject to earlier termination according to the terms set out in this
      Agreement) shall expire on the first to occur of the date (i) Licensed
      Product is approved for sale in the U.S. or Europe, or (ii) five years
      from the Effective Date. However, this agreement may be extended upon
      written agreement of the parties.

3.    CONDUCT OF THE SCALE-UP PROGRAM

3.1   During the Scale-up Program, each Party shall be licensed free-of-charge
      under those rights of the other Party as are required for the sole purpose
      of conducting the Scale-up Program of Licensed Product. Further, for the
      avoidance of doubt and notwithstanding anything in this Agreement to the
      contrary, SEPRACOR shall have no right or license to 3M Patent Rights or
      3M Know-How, including the right to reference regulatory data, and

                                       -4-


      3M shall have no obligation to develop, supply, license, or provide
      access to 3M Know-How, including any regulatory data, for any Product
      other than Licensed Product

3.2   3M and SEPRACOR shall each identify the contact person at their respective
      offices to serve as the recipient of communications concerning the
      Scale-up Program.

3.3   Each Party shall use good faith reasonable efforts to perform those duties
      assigned to it in the Scale-up Program.

3.4   The Parties may by written agreement amend the Scale-up Program. Consent
      to amend the Scale-up Program shall not be unreasonably withheld or
      delayed, provided that an appropriate adjustment shall be made in the
      timetable, man-hours or other matters affected thereby to allow for any
      variation in the time required to complete the Scale-up Program as a
      consequence of an amendment.

3.5   3M shall notify SEPRACOR without undue delay if it becomes aware that the
      time estimated for a task or tasks set out in the Scale-up Program will be
      insufficient to perform such task or tasks. If the new time estimate
      exceeds the original estimate by more than 20%, the Parties shall discuss
      how to minimize the additional time.

4.    MEETINGS AND REPORTS RELATING TO THE SCALE-UP PROGRAM

4.1   A Joint Coordinating Committee (JCC), with a minimum of 2 persons each
      from 3M and SEPRACOR, shall coordinate and monitor conduct of the
      Development Program. JCC shall meet quarterly. 3M shall provide quarterly
      reports to SEPRACOR on the progress of the Scale-up Program and shall
      promptly notify SEPRACOR of any event that requires a decision by SEPRACOR
      or will have a serious effect on the progress of the Scale-up Program.

4.2   3M recognizes that SEPRACOR may elect to make changes to the Scale-up
      Program or Product definition during the course of development and scale
      up. If SEPRACOR elects to make such changes, 3M will upon request propose
      a revised Scale-up Program and budget.

5.    SUPPLY OF COMPOUND AND COMPONENTS

5.1   SEPRACOR shall supply 3M (i) [**] with sufficient quantities of the
      Compound and SEPRACOR Components as determined by the Scale-up Program
      to enable 3M to conduct the Scale-up Program and (ii) a certificate of
      analysis for the Compound and SEPRACOR Components. Any Compound and
      SEPRACOR Components unused by 3M at the termination of the Scale-up
      Program shall be returned upon request to SEPRACOR.

5.2   SEPRACOR shall promptly provide 3M with all information in or coming into
      its possession concerning the Compound that 3M will reasonably require for
      the safe handling, storage, testing, use and transport of the Compound.

                                       -5-


6.    CLINICAL STUDIES AND TOXICOLOGY STUDIES

6.1   SEPRACOR shall [**] be responsible for any clinical studies and,
      except as provided in Sections 6.2 and 6.3 below, any toxicology
      studies and all contact with any Authority concerning Licensed Product,
      provided that 3M shall have the right to require SEPRACOR to use a right
      of reference or analogous means to meet any Authority's disclosure
      requirements concerning 3M Confidential Information to the extent
      permitted by the Authorities. 3M shall, if requested, consult with and
      provide reasonable assistance to SEPRACOR in clinical trials as
      appropriate, provided that 3M's time for such consulting and assistance
      shall be paid by SEPRACOR and SEPRACOR shall ultimately bear all
      responsibility for any use of information provided by 3M (including use in
      regulatory filings and any third party liability for all such clinical
      trials).

6.2   3M will establish a Drug Master File (DMF) with appropriate information
      for the CMC section of the regulatory submissions for Licensed Product,
      and will provide a letter of authorization to FDA or health authorities to
      access the DMF for regulatory submissions for Licensed Product. In
      submissions where a right of reference is demonstrated to be inadequate,
      3M shall prepare a proprietary dossier including information which is
      necessary or required by law to obtain regulatory approval of Licensed
      Product. 3M shall respond promptly to all inquiries by any Authority
      concerning the proprietary dossier or the DMF and share the general
      substance of the inquiry and the response with SEPRACOR. The 3M
      proprietary dossier will be provided to (a) the applicable regulatory
      agency or (b) SEPRACOR, at 3M's election. Provided, however, that neither
      the forgoing, the information provided pursuant to Section 6.3 nor
      anything else in this Agreement shall be construed as a warranty by 3M
      that any DMF or other regulatory dossier will be approved by any
      Authority.

6.3   3M agrees to provide SEPRACOR as of the Effective Date, with:

          (a)  a right of reference to (i) data held by the International
               Pharmaceutical Aerosol Consortium for Toxicology Testing
               of}IFA-134a ("IPACT I") consistent with 3M's obligations to IPACT
               I, and (ii) any additional 3M data for which 3M has the right to
               grant a right of reference relating specifically to [**]
               that has previously been required by FDA in connection with
               approval of an [**]; and

          (b)  a right of reference that would authorize FDA to access all
               studies conducted by 3M or contracted by 3M in [**],
               including but not limited to toxicological and chronic human
               safety data and all pertinent cross-referenced information, (as
               approved on August 15, 1996) expressly for the purpose of review
               to substantiate the pre-clinical and clinical safety of albuterol
               in a formulation containing [**]. 3M agrees to provide a right
               to reference such information only for purposes of facilitating
               regulatory approval of Licensed Product and SEPRACOR shall not

                                       -6-


               use or disclose such information for any other purpose, including
               clinical comparisons between levalbuterol and albuterol apart
               from those comparisons that facilitate evaluation of the safety
               of levalbuterol in a formulation containing [**].

      3M shall respond promptly to all inquiries by any Authority concerning
      the information referenced by SEPRACOR pursuant to Sections 6.3 (a) and
      6.3(b), and shall share the general substance of the inquiry and the
      response with SEPRACOR. For the avoidance of doubt, the Parties
      expressly agree that 3M does not grant to SEPRACOR, and this Agreement
      creates no obligation on 3M to grant to SEPRACOR, any right of
      reference to safety data concerning the drug substance albuterol
      (including salts such as the sulfate) alone or to data not generated by
      or on behalf of 3M.

6.4   If requested by SEPRACOR and in accordance with the Scale-up Program, 3M
      shall manufacture and supply SEPRACOR with Licensed Product, including
      Licensed Product for use in clinical studies or toxicology studies, at
      prices calculated in the manner set out in Schedule 6.4 using reasonable
      endeavors to supply SEPRACOR in time to meet its needs. SEPRACOR shall
      pay 3M's invoices for such Licensed Products within [**] days of the
      date of 3M's invoice. Licensed Product that is to be used in clinical
      trials shall be manufactured and tested under cGMPs and the applicable
      Investigational New Drug Application. 3M will perform release testing of
      all batches to agreed upon Specifications. SEPRACOR shall have the right
      within 45 days to test batches on an audit basis prior to accepting the
      batch, however SEPRACOR shall have no right to delay payment. SEPRACOR
      will have a right to credit for Licensed Product, only in the event
      Licensed Product is found not to meet the warranty set forth in Section
      10.6.

6.5   3M shall allow SEPRACOR to perform a cGMP compliance audit promptly after
      signing of this Agreement on a date as agreed to by the parties.

6.6   3M and SEPRACOR shall discuss and agree to quality assurance and quality
      control responsibilities, to be set forth as Schedule 6.6 and signed by
      the Parties, including a batch release and record review process utilizing
      certificates of compliance and analysis and other reporting documents as
      appropriate between 3M and SEPRACOR. 3M shall, unless otherwise agreed, be
      responsible for testing raw materials and components, other than Compound
      and SEPRACOR Components, in accordance with 3M written specifications.
      SEPRACOR shall provide to 3M all methods currently in use at a time during
      development to be agreed upon by the parties, and 3M shall be responsible
      for development of any methods used for process measurements and any
      additional raw material test methods.

                                       -7-


6.7   If either party performs stability storage and stability testing of
      supplies, that Party will provide stability reports to the other Party
      corresponding to industry accepted pull points. Reports to include
      individual data points if deemed necessary by the receiving Party.

6.8   3M acknowledges that SEPRACOR has filed an IND under which Licensed
      Product will be tested and developed, and that SEPRACOR will be required
      to make regulatory commitments to FDA with respect to the development of
      Licensed Product. SEPRACOR shall use good faith reasonable efforts to
      inform 3M of such commitments and to consult 3M in connection with any
      such commitments that raise CMC issues and shall reimburse 3M for
      additional costs reasonably incurred as a result of such commitments, and
      3M shall use good faith reasonable efforts in order to operate in a manner
      that facilitates compliance with such commitments.

6.9   For the avoidance of doubt, the parties expressly agree that nothing in
      this Agreement shall be construed to limit SEPRACOR's right to conduct
      studies, including but not limited to preclinical and clinical studies,
      involving comparisons between albuterol and levalbuterol, or SEPRACOR's
      right to use or disclose the results of such studies.

7.    PAYMENT FOR ACCESS TO 3M CLINICAL INFORMATION AND THE SCALE-UP PROGRAM

7.1   In consideration for the rights of reference granted by 3M to SEPRACOR
      pursuant to Section 6.3 hereof, within [**] days of the Effective
      Date SEPRACOR shall pay to 3M a data access fee of [**] Dollars [**].

7.2   SEPRACOR shall pay 3M a service fee of [**] dollars $[**] per hour spent
      on the Scale-up Program, including time spent in writing reports,
      attending meetings, and managing the project; provided, however, that for
      the first [**] hours of work invoiced by 3M in 2002, which is the minimum
      amount of work SEPRACOR shall authorize 3M to conduct in 2002, under this
      Agreement in connection with the Scale-up Program, the service fee shall
      be [**] dollars $[**] per hour. Any other provision of this Agreement
      notwithstanding, SEPRACOR shall not have the right to terminate this
      Agreement, except for cause under section 12.1, until after the first
      [**] hours of work for 2002 are invoiced by 3M and paid by SEPRACOR under
      this Agreement in connection with the Scale-up Program. Units
      manufactured at 3M's production site will be charged as set forth in
      Schedule 6.4 based on theoretical batch size. Invoices for hourly work
      shall be submitted by 3M monthly and payment shall be made to 3M by
      SEPRACOR within [**] days of the date of 3M's invoice.

7.3   In addition to the payments in Section 7.2 above, SEPRACOR shall reimburse
      3M the reasonable cost of travel, subsistence and accommodation for travel
      in connection with the Scale-up Program at SEPRACOR's request or with
      SEPRACOR's written approval, such reimbursement to be consistent with 3M's
      internal travel policy.

                                       -8-


7.4   The hourly rate of [**] dollars $[**] shall remain unchanged until the
      31st December 2001, after which it may be increased [**] period to take
      into account reasonable increases in 3M's costs since the last increase
      in the hourly rate, provided that such adjustments shall not exceed the
      annual increase in the PPI (producer price index) from the prior calendar
      year.

8.    SUPPLY AGREEMENT

8.1   3M may exercise any right or fulfill any obligation in this Article 8
      itself or may procure an Affiliate to exercise such right or fulfill such
      obligation.

8.2   If SEPRACOR decides to market Licensed Product in any country or countries
      of SEPRACOR's choice, no later than the initiation of Phase III clinical
      studies SEPRACOR shall give prompt written notice to 3M following which
      the Parties shall, negotiate in good faith an exclusive Manufacture and
      Supply Agreement consistent with all relevant licensing and commercial
      supply terms contained in this Agreement and including reasonable annual
      minimum purchase requirements to be agreed upon no later than the NDA
      filing.

8.3   The Parties agree to negotiate in good faith a volume based supply price,
      to include minimums, for Licensed Product worldwide. The supply price of
      Licensed Product to SEPR.ACOR shall be a combination of unit price and
      royalty. Unit price of product will be no greater than $[**] per unit for
      the first [**] million units annually, and $[**] per unit for those units
      in excess of [**] million units annually. The royalty for the license
      granted under Section 9.3 shall be [**] percent ([**]%) of SEPRACOR's Net
      Sales Price (such royalty to be [**] when and in such countries where
      there are no issued or granted 3M Patent Rights). A supply price for
      sample Licensed Product will be negotiated by the Parties in the Supply
      Agreement. The following factors have been assumed for purposes of
      determining the above supply price:

               -   [**] actuation product
               -   SEPRACOR provides Levalbuterol tartrate at no cost
               -   3M purchase actuator, aluminum can, valve, propellant
                   and other formulation components and finished packaging
                   material
               -   3M's [**] manufacturing process is typical of other
                   3M manufactured products.
               -   3M's testing of raw materials and finished product is
                   typical of other 3M manufactured products.

      The above unit prices may be adjusted at any time prior to launch and
      thereafter annually and proportionally for any increase in 3M's Full
      Factory Cost (defined as 3M's costs for overhead, labor, raw material,
      and/or component costs directly allocable to the manufacture, labeling
      and/or packaging of Licensed Product and the cost of services supplied to
      3M by third parties which are directly allocable to the manufacture,
      labeling

                                       -9-


      and/or packaging of Licensed Product) including such amount as is
      necessary to allow 3M to maintain its factory cost ratio of Licensed
      Product. Such increase shall normally be no greater than PPI +1% from the
      prior calendar year. In the event of an extraordinary increase in price
      due to such factors as a shortage of raw material or change in product
      specifications or manufacturing mandated by regulatory authorities, 3M may
      increase the supply price for Licensed Product at the time it incurs such
      increase. In addition, 3M reserves the right prior to commencement of the
      Manufacture and Supply Agreement to increase the maximum price quoted
      herein for any change in the assumptions stated above or any increase in
      the cost of manufacturing Licensed Product due to an increase in the cost
      of acquiring SEPRACOR Components above the cost on the Effective date
      including any additional cost necessary to maintain 3M's factory cost
      ratio.

8.4   3M shall exclusively supply, using reasonable commercial efforts to do so,
      Licensed Product to SEPRACOR, Affiliates, and permitted sublicensees only
      and 3M shall not supply Product (not limited to Licensed Product) to any
      third party. Except as provided in Section 8.5 below, 3M shall have the
      exclusive right and license to supply SEPRACOR, its Affiliates and
      permitted sublicensee' s requirements of Licensed Product, and SEPRACOR,
      Affiliates, and permitted sublicensees shall not purchase Product (not
      limited to Licensed Product) other than from 3M, during the term of this
      Agreement.

8.5   Anything else in this Agreement to the contrary notwithstanding, SEPRACOR
      shall have the limited contractual right to procure Licensed Product for
      use in clinical trials only from a third party for such time as 3M is
      unable to provide SEPRACOR with such supply, provided, however, that (i)
      SEPRACOR shall diligently pursue obtaining regulatory approval for
      Licensed Product manufactured by 3M, (ii) neither SEPRACOR nor the third
      party supplier shall have any right to use any 3M Know-How in the
      manufacture of such Licensed Product, and (iii) from and after the time
      that 3M is able to supply Licensed Product pursuant to this Agreement or
      the Supply Agreement, 3M shall have the exclusive right and license to
      supply SEPRACOR, its Affiliates, and permitted sublicensee's requirements
      of Licensed Product during the term of this Agreement and any future
      Supply Agreement.

9.    OWNERSHIP OF INTELLECTUAL PROPERTY RIGHTS; LICENSES

9.1   Ownership of all right, title, and interest in intellectual property,
      including inventions, know-how, trade secrets and copyright, including but
      not limited to patent applications and patents, arising out of the
      Scale-up Program ("Rights") shall be allocated as follows:

      9.1:1   3M 1PC (or an Affiliate nominated by 3M IPC) shall own all
              Rights conceived solely by 3M and/or 3M Affiliate employees;

      9.1:2   SEPRACOR shall own all Rights conceived solely by SEPRACOR's
              and/or SEPRACOR Affiliate employees;

                                      -10-


      9.1:3   Rights jointly conceived by 3M (or a 3M Affiliate) and
              SEPRACOR (or a SEPRACOR Affiliate) shall be owned jointly by
              3M IPC (or an Affiliate nominated by 3M IPC) and SEPRACOR (or
              an Affiliate nominated by SEPRACOR). Each of the Parties shall
              have a royalty-free right to use the Rights which are jointly
              owned without the consent of and without accounting to the
              other Party independently of the other Party (with the right
              to sub-license) except as otherwise expressly provided herein.
              3M and 3M IPC shall share equally with SEPRACOR in the costs,
              fees and expenses of preparing, filing and prosecuting any
              patent application claiming jointly owned Rights and of
              maintaining and defending the Rights, provided that if either
              Party fails to pay its share, it shall assign its entire
              interest to the other Party. Unless otherwise agreed, patent
              applications shall be prepared and prosecuted by 3M IPC or, at
              3M IPC's election, an Affiliate of 3M IPC or independent
              counsel mutually acceptable to 3M IPC and SEPRACOR.

9.2   The Parties shall upon request cooperate with one another so far as
      necessary in connection with the filing of applications for patents for
      their respective inventions.

9.3   3M IPC hereby grants SEPRACOR a worldwide, royalty-bearing, non-exclusive
      license under the 3M Patent Rights and 3M Know-How to use, sell, offer for
      sale, and import Licensed Product manufactured by or for 3M under this
      Agreement or a subsequent Supply Agreement. SEPRACOR shall have the right
      to submit for listing on the FDA "Orange Book" patents under 3M Patent
      Rights that cover Licensed Product, provided that 3M and 3M IPC shall have
      no obligation to enforce any such patents and may grant licenses under the
      3M Patent Rights at 3M/3M IPC's sole discretion

9.4   If this Agreement is terminated by SEPRACOR pursuant to Section 12.2
      below, SEPRACOR will cease use of any 3M Confidential Information which
      has been disclosed to it by 3M and which is subject to the non-disclosure
      provisions of Article 11 below, and the license to 3M Know-How and 3M
      Patent Rights shall terminate.

9.5   If this Agreement is terminated by SEPRACOR pursuant to Section 12.1 or by
      3M pursuant to Section 12.3 below, the rights and obligations set forth in
      Section 6.3 shall remain in effect, and 3M and SEPRACOR shall cooperate
      diligently in the transfer, at SEPRACOR's expense, of 3M Know-How to
      SEPRACOR or an alternative manufacturer selected by SEPRACOR (subject to
      the last sentence of this Section 9.5). 3M shall continue to develop and
      supply Licensed Product to SEPRACOR under the terms of this Agreement or
      the Supply Agreement (as applicable) for up to 24 months after notice of
      termination and 3M IPC shall grant SEPRACOR such world-wide, non-exclusive
      licenses under 3M Patents and 3M Know-How to make, have made for it, use
      and sell Licensed Product at a royalty rate of 4% of Net Sales Price (such
      royalty to be reduced by one-half when and in such countries where there
      are no issued or granted 3M Patent Rights), PROVIDED, HOWEVER, that
      SEPRACOR shall indemnify 3M and 3M 1PC for any liability arising out of
      3M's continued activity after the date of notice of termination or arising
      out of use, manufacture, sale, promotion or transfer of Licensed Product
      by SEPRACOR or any third party working on behalf of SEPRACOR, from the
      date 3M provided written notice of termination. The disclosure of 3M
      Know-how to SEPRACOR or its

                                      -11-


      third party manufacturer shall be subject to undertakings that protect the
      3M Know-How from disclosure to others or use by SEPRACOR or its third
      party manufacturer beyond the scope of the license, including but not
      limited to use with products other than Licensed Product. 3M agrees to
      provide 3M employees for consultation in connection with the transfer of
      3M Know-How to be provided hereunder for a reasonable period and at a
      reasonable rate. 3M shall have the right to deny disclosure of 3M
      Confidential Information to a third party manufacturer for reasons
      relating to the ability of the third party to manufacture Licensed Product
      according to the then prevailing product standards or the lack of
      assurance the that the undertakings relating to protection and restricted
      use of 3M's Confidential Information and 3M's intellectual property rights
      will be complied with, provided that such denial would not be unreasonable
      in the reasonable judgment of a pharmaceutical manufacturer in the
      position of 3M.

10.   WARRANTIES, DISCLAIMERS, INDEMNIFICATION AND LIMITATION OF LIABILITIES

10.1  SEPRACOR warrants that to the best of its knowledge, through in-house
      patent counsel, that as of the effective date of this Agreement, Compound,
      SEPRACOR Components, and Licensed Product, and the processes used to make
      Compound, SEPRACOR Components, and Licensed Product, except for particular
      processes and components used by 3M that are not specified by SEPRACOR,
      will not inflinge any third party patent or other intellectual property
      rights. 3M warrants that to the best of its knowledge, through in-house
      patent counsel, that as of the effective date of this Agreement, its
      manufacturing processes, not specified by SEPRACOR or based upon Compound
      or SEPRACOR Components used for manufacturing Licensed Product will not
      infringe any third party patent or other intellectual property rights
      (i.e., there would be no infringement but for some attribute of Compound,
      SEPRACOR Component, or an attribute of Licensed Product specified by
      SEPRACOR). Each Party will notify the other Party promptly in the event a
      Party receives an accusation of infringement pertaining to Licensed
      Product.

10.2  Neither of the Parties is the agent of the other nor are the Parties
      partners or joint venturers.

10.3  Neither of the Parties warrants that the Scale-up Program will result in a
      commercially, technically, or regulatorily successful Product, although
      each of the Parties shall use reasonable commercial efforts to develop
      such Product.

10.4  Although 3M and SEPRACOR will use their reasonable efforts to conduct the
      Scale-up Program, no expenditures by either Party hereunder will be
      reimbursed because the development of any products or processes has been
      unsuccessful.

10.5  SEPRACOR represents and warrants that it will supply 3M Compound and
      SEPRACOR Components meeting the agreed upon written specifications.

                                      -12-


10.6  3M hereby represents and warrants that all Licensed Product at the time of
      shipment shall meet the agreed upon written Specifications for Licensed
      Product and be manufactured in accordance with the IND or NDA, as
      applicable, and cGMPs, provided, however, that 3M shall not be responsible
      for Licensed Product that does not meet Specifications as a result of
      SEPRACOR' s failure to supply Compound or SEPRACOR Components meeting
      specifications.

10.7  SEPRACOR warrants that it will conduct any clinical work relating to
      Licensed Product in accordance with all applicable laws.

10.8  EXCEPT AS OTHERWISE EXPLICITLY SET FORTH HEREIN, EACH PARTY EXPRESSLY
      DISCLAIMS TO THE OTHER PARTY ANY EXPRESS OR IMPLIED WARRANTY, INCLUDING
      WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND
      NON1NFRINGEMENT, ARISING OUT OF ITS PERFORMANCE OR ATTEMPTED DEVELOPMENT
      OF A PRODUCT OR PROCESS PURSUANT TO THIS AGREEMENT.

10.9  3M Indemnification -- 3M shall indemnify SEPRACOR against and hold it
      harmless from any and all loss or liability payable to third parties for
      any and all judgments, claims, causes of action, suits, proceedings,
      losses, damages, demands, fees, expenses, fines, penalties or costs
      (including without limitation reasonable attorney's fees, costs and
      disbursements) arising from any personal injury or alleged personal injury
      to any person made against SEPRACOR or 3M with respect to use of Licensed
      Product in clinical trials to the extent that it results from 3M's breach
      of the warranty set forth in Section 10.6 or for any claim that the
      manufacturing processes or components used by 3M, not specified by
      SEPRACOR or based upon Compound or SEPRACOR Components used for
      manufacturing Licensed Product are alleged to infringe any third party
      patent or other intellectual property rights (i.e., there would be no
      infringement but for some attribute of Compound, SEPRACOR Component, or
      some attribute of Licensed Product specified by SEPRACOR), provided,
      however, 3M shall be liable to the extent and only to the extent such
      breach resulted in the harm or injury for which SEPRACOR seeks
      indemnification.

10.10 SEPRACOR Indemnification - Except as set forth in Section 10.9, SEPRACOR
      shall indemnify and hold 3M harmless from any and all loss or liability
      payable to third parties for any and all judgments, claims, causes of
      action, suits, proceedings, damages, demands, fees, expenses, fines,
      penalties and costs (including without limitation reasonable attorney's
      fees, costs and disbursements) arising from any personal injury or alleged
      personal injury to any person made against SEPRACOR or 3M which result
      from (i) use or clinical study of Licensed Product by or on behalf of
      SEPRACOR, (ii) breach of SEPRACOR's warranty in Section 10.5, or a third
      party claim that Compound, SEPRACOR Components, Licensed Product, or the
      processes used to make Compound, SEPRACOR Components, and Licensed
      Product, except for particular processes or components used by 3M that are
      not specified by SEPRACOR, infringe any third party patent or other
      intellectual property rights.

                                      -13-


10.11 Except as set forth in Section 10.9, SEPRACOR's sole and exclusive remedy
      against 3M for failure to supply Licensed Product meeting Specifications
      shall be, at SEPRACOR's option, replacement of Licensed Product or a
      credit for the amount charged by 3M for such Licensed Product.

10.12 EXCEPT AS SET FORTH IN SECTIONS 10.9 AND 10.10 NEITHER PARTY SHALL UNDER
      ANY CIRCUMSTANCES BE LIABLE TO THE OTHER PARTY OR ITS AFFILIATES FOR ANY
      INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES IN ANY WAY RELATED
      TO LICENSED PRODUCT, OR THIS AGREEMENT UNDER ANY THEORY OF LAW, INCLUDING
      BUT NOT LIMITED TO, CONTRACT, NEGLIGENCE OR ANY OTHER LEGAL THEORY.

10.13 Any obligations regarding a duty to devote resources and efforts to the
      development and scale-up of products are contained in this Agreement.
      There is no implied obligation to devote any other level of resources or
      effort.

11.   CONFIDENTIALITY

11.1  In relation to the 3M, 3M IPC, and SEPRACOR Confidential Information, as
      the case may be, disclosed by one Party to the other, each Party agrees:

      11.1:1  not to provide or make available any of the other Party's
              Confidential Information in any form to any person other than
              those of its employees and agents who have a need to know
              consistent with the receiving Party's authorized use of such
              Confidential Information;

      11.1:2  not to use or reproduce any of the other Party's Confidential
              Information except for use reasonably necessary for its
              performance of this Agreement;

      11.1:3  not to publish or disclose any of the other Party's
              Confidential Information to third parties other than as
              expressly permitted in this Agreement, without disclosing
              Party's prior written consent.

11.2  The obligations of confidentiality and non-use in Section 11.1 above shall
      not apply to any part of such Confidential Information which:

      11.2:1  is disclosed only to Authorities or used only for the purposes
              of obtaining or maintaining regulatory approvals from
              Authorities concerning Licensed Products supplied by 3M; or

      11.2:2  is disclosed to or used by its Affiliates, its licensees and
              its Affiliates' licensees in the normal course of their
              business solely for the purposes set out in Section 11.2:1
              above, in which events recipients of such information shall be
              bound by

                                      -14-


              obligations of confidentiality no less onerous then those
              contained in this Article 11; or

      11.2:3  is disclosed to Affiliates of the Parties in order reasonably to
              perform this Agreement, in which events recipients of such
              information shall be bound by obligations of confidentiality no
              less onerous than those contained in this Article 11; or

      11.2:4  subject to Section 11.3 below, is in or comes into the public
              domain in any way without breach of this Agreement by the
              receiving Party; or

      11.2:5  subject to Section 11.3 below, the receiving Party can show was in
              its possession or known to it by being in its use or being
              recorded in its files or computers or other recording media prior
              to receipt from the disclosing Party and was not previously
              acquired by the receiving Party from the discloser under an
              obligation of confidence; or

      11.2:6  subject to Section 11.3 below, the receiving Party obtains or has
              available from a source other than the disclosing Party without
              breach by the receiving Party or such source of any obligation of
              confidentiality or non-use towards the disclosing Party; or

      11.2:7  is disclosed or used to comply with the disclosure obligations of
              the patent laws of any jurisdiction in connection with any patent
              application relating to Licensed Products or any component thereof
              or

      11.2:8  is disclosed by the receiving Party (a) with the prior written
              approval of the other Party or (b) without such approval, after a
              period often (10) years from the date of this Agreement or five
              (5) years from the date of termination of this Agreement, or if
              executed, five (5) years from the date of termination of the
              Supply Agreement whichever shall be the longer period.

11.3  If the receiving Party contends any one or more of the provisions to which
      Sections 11.2:4 to 11.2:6 apply, such Party shall give written notice to
      the disclosing Party together with evidence to support such contention
      prior to being relieved of the obligations of confidentiality and non-use,
      and furnish the disclosing Party with all facts upon which the receiving
      Party's contention is based. If the disclosing Party disagrees with the
      receiving Party's contention and so notifies the receiving Party within
      thirty (30) days of receipt of notification by the receiving Party, the
      Parties shall seek to resolve the dispute among themselves within twenty
      (20) days of notification of a dispute. If not so resolved, the Parties
      shall submit the dispute to binding arbitration by a mutually acceptable
      U.S. lawyer with experience in trade secret law of the U.S. The Party
      whose contention is denied shall pay the lawyer's fees incurred on
      resolving the dispute.

                                      -15-


11.4  Both 3M and SEPRACOR shall protect Confidential Information by using the
      same degree of care, but not less than a reasonable degree of care, to
      prevent the unauthorized disclosure or use of Confidential Information, as
      that Party uses to protect its own confidential information of like
      nature.

11.5  At such time as the Scale-up Program is terminated, and unless there is a
      Supply Agreement, each Party shall upon request return to the other in a
      secure manner all extant recorded information in its possession
      constituting the other Party's Confidential Information.

11.6  Notwithstanding the foregoing, the receiving Party shall be entitled to
      make any disclosure required by law or by any governmental or other
      regulatory authority of the other Party's Confidential Information
      provided that it gives the other Party not less than two (2) working days
      notice of such disclosure.

11.7  Each Party reserves all rights in its Confidential Information and no
      rights or obligations other than those expressly recited herein are
      granted or to be implied from this Agreement. In particular, no license is
      hereby granted directly or indirectly under any patent, invention,
      discovery, copyright or other intellectual property right now or in the
      future held, made, obtained or licensable by either Party. Nothing in this
      Agreement or its operation shall preclude or in any way impair or restrict
      either Party from continuing to engage in its business otherwise than in
      breach of the terms of this Agreement.

11.8  Nothing in this Agreement shall be construed as requiring a Party to
      disclose Confidential Information or to grant rights under licenses, or to
      render any technical assistance, which would violate any confidentiality
      undertakings or other obligations, or which would violate any present or
      future law or decree of any government or governmental officer or agency.

11.9  The Parties agree not to disclose the terms of this Agreement to third
      parties, other than Affiliates except to the extent required by law,
      without the prior written approval of the other. It is understood,
      however, that the existence of this Agreement between 3M and SEPRACOR
      itself is not confidential.

12.   TERMINATION

12.1  If one of the Parties:

      12.1:1  commits or allows to be committed a material incurable breach of
              any of its obligations in this Agreement or a breach capable of
              remedy which it shall fail to remedy within ninety (90) days (or
              thirty (30) days in the case of default in payment, except in the
              event SEPRACOR has defaulted on payment on two or more previous
              occasions in which case such required notice shall be 10 days)
              after written notice has been given to it by the Party not in
              default (specifically referring to this Section) requiring such
              remedy; or

                                      -16-


      12.1:2  shall pass a regulation for winding-up (otherwise than for the
              purpose of a solvent amalgamation or reconstruction where the
              resulting entity assumes all of the obligations of that Party) or
              a court makes an order to that effect, or ceases to carry on its
              business or substantially the whole of its business, or becomes or
              is declared insolvent or convenes a meeting of or makes or
              proposes to make any arrangement or composition with its creditors
              or if a liquidator receiver, administrator, trustee, manager or
              similar officer is appointed of any of its assets;

      then in any such events the Party not in default nor subject to an action
      under Section 12.1:2 above may by written notice terminate this Agreement
      at such future date (being no more than six (6) months after the date of
      such notice) as it may designate, but without prejudice to any right of
      either Party to sue for any antecedent breach of this Agreement.

12.2  SEPRACOR may terminate this Agreement without cause upon thirty (30) days
      prior written notice to 3M. All charges and expenses owed to 3M prior to
      delivery of SEPRACOR's notice shall become due and payable as well as all
      charges and expenses reasonably incurred by 3M in winding down the
      Scale-up Program over the ninety (90) day period following receipt of the
      notice of termination. Such charges and expenses shall not exceed the cost
      estimated for such period by reference to the Scale-up Program.

12.3  3M may terminate this Agreement or a subsequent Manufacturing and Supply
      Agreement upon thirty (30) days prior written notice if: (i) it can
      reasonably demonstrate to SEPRACOR that Licensed Product cannot be
      scaled-up by 3M; (ii) 3M transfers, or makes a business decision to
      discontinue, substantially all of its medicinal aerosol manufacturing
      business; (iii) Licensed Product develops a clinical profile involving an
      unusually high number or frequency of serious adverse clinical events that
      threatens to seriously damage 3M's corporate reputation and/or expose 3M
      to large potential liability and/or fines; (iv) 3M receives a third party
      claim for patent infringement involving Product that threatens to
      seriously damage 3M1's corporate reputation and/or expose 3M to large
      potential liability and/or fines; or (v) if 3M reasonably believes that
      the manufacture, use, sale, or importation of Product will infringe the
      valid intellectual property rights of a third party.

13.   FORCE MAJEURE

13.1  Neither 3M nor SEPRACOR shall be liable for any delay or for the
      consequences of any delay in performing any of its obligations under this
      Agreement if such delay is due to any cause whatsoever beyond its
      reasonable control, and each shall be entitled to a reasonable extension
      of the time for performing such obligations.

14.   CONTINTJTNG RESPONSIBILITIES AND WAIVER

14.1  Any termination of this Agreement shall not affect any rights or
      liabilities, including without limitation any rights accrued pursuant to
      Article 9 above, which expressly or by implication have accrued prior to
      the date of termination, and failure by either Party in any

                                      -17-


      one or more instances to terminate this Agreement on account of any
      default or breach by the other shall not be taken to constitute a
      condonation or waiver of the same or of any other default or breach by the
      other.

15.   NOTICES

15.1  Any notice or other document which may be given by either Party under this
      Agreement shall be deemed to have been duly given if left at or sent by
      post (whether by letter or, where the Parties agree, by magnetic tape or
      other form), facsimile transmission (confirmed by letter sent by post) or
      where the Parties expressly agree by electronic mail, in each case
      addressed as follows:

              3M:        Minnesota Mining and Manufacturing Co.
                         3M Center, Building 275-3E-10
                         St. Paul, MN 55 144-1000 USA
                         Attention: General Manager, Drug Delivery Systems
                         Fax: (651) 737-5265

              SEPRACOR:  Sepracor Inc.
                         111 Locke Drive
                         Marlborough, MA, 01752
                         Attention: President
                         Fax: (508) 357-7492

      or any other address notified to each other in writing in accordance with
      this Section as an address to which notices and other documents may be
      sent.

15.2  Any such communication shall be deemed to have been received by the other
      Party (if by post) five (5) days after the date of posting and if by
      facsimile transmission on the working day following transmission. Any
      communication by electronic mail shall be deemed to have been received on
      the working day following the day on which the communication is first
      stored in the other Party's electronic mailbox.

16.   WHOLE AGREEMENT AND VARIATION

16.1  This Agreement shall take affect in substitution for all or any previous
      agreements relating to its subject matter, whether formal agreements or
      agreements that would be inferred from the Parties' correspondence and/or
      oral statements and/or conduct, and all or any such agreements shall be
      deemed to have been terminated by mutual consent with effect from the date
      upon which this Agreement commences.

16.2  This Agreement embodies the entire understanding of the Parties and there
      are no other arrangements or understandings between the Parties relating
      to its subject matter. No amendment or modification of this Agreement
      shall be valid or binding upon either of the Parties unless made in
      writing and signed by an authorized representative.

                                      -18-


17.1  This Agreement and the rights granted in it and obligations undertaken may
      not be assigned by either of the Parties without the express written
      consent of the other, except:

      17.1:1  in the case of 3M on the sale or other transfer of substantially
              its entire business in aerosol propelled drugs, or

      17.1:2  3M may assign temporarily or permanently this Agreement or any
              rights granted or obligations undertaken to any Affiliate. 3M
              shall be responsible for the compliance by its Affiliates with the
              terms and conditions of this Agreement.

      17.1:3  SEPRACOR may assign this Agreement and its rights and obligations
              hereunder in connection with the transfer or sale of all or
              substantially all of its assets related to pharmaceutical
              business, or in the event of its merger or consolidation or change
              in control or similar transaction, provided that 3M may terminate
              unless the assignee covenants to continue with development and
              commercialization of Licensed Product at least the same or greater
              level as SEPRACOR immediately prior to the assignment.

18.   SEVERANCE

18.1  The provisions of this Agreement shall be deemed to be severable and thus
      if any part or parts of this Agreement are rendered void, invalid or
      unenforceable, such rendering shall not affect the validity or
      enforceability of the remainder unless the part or parts which are so
      rendered substantially impair the value of the whole Agreement to either
      Party. Subject to this, such part or parts of this Agreement so rendered
      shall be renegotiated between the Parties in such a way as to render the
      same valid and enforceable, and to achieve (to the extent possible) the
      economic, business and other purposes of the lawful provisions.

19.   INSURANCE

      SEPRACOR shall at its own expense obtain and maintain insurance of a type
      and amount as may be necessary to protect its interests and obligations
      connected with performance under this Agreement. SEPRACOR shall not do or
      omit to do any act, matter or thing which could prejudice or render
      voidable any such insurance. SEPRACOR shall, upon request by 3M, provide a
      certification evidencing the insurance or any renewal. SEPRACOR shall
      notify 3M of any material change in any such insurance arrangements, if
      possible, prior to such material change, but in any event, as soon as
      possible.


                                      -19-


20.   DISPUTE RESOLUTION

20.1  NON-BINDING MEDIATION. Disputes arising between the Parties relating to
      the making or performance of this Agreement (including ownership of
      intellectual property rights, breach of confidentiality, inventorship,
      etc.) shall be resolved in the following order of preference: (i) by good
      faith negotiation between executives of 3M and SEPRACOR who have authority
      to fully and finally resolve the dispute; (ii) if necessary, by
      non-binding mediation at a location acceptable to both Parties using a
      neutral mediator having experience with the industry under the Center for
      Public Resources Model Procedure for Mediation of Business Disputes (with
      the costs therefor shared equally); or (iii) as a last resort only, by
      arbitration of inventorship disputes as provided in Section 20.2 of this
      Article, or by litigation of any other disputes.

20.2  INVENTORSHIP DISPUTES. If the parties are unable to resolve any dispute
      regarding inventorship by negotiation or mediation under Section 20.1 of
      this Article, they agree to submit such dispute to binding arbitration
      under the Center for Public Resources Rules for Non-Administered
      Arbitration of Patent and Trade Secret Disputes. The arbitrator shall be
      an independent patent attorney residing in the United States and
      registered to practice before the United States Patent and Trademark
      Office. The arbitrator shall resolve the inventorship dispute in
      accordance with the laws of the United States within three (3) months of
      his or her appointment. The parties agree to supply to the arbitrator such
      documentary evidence of inventorship as they wish to rely upon together
      with a written statement of their position not to exceed twenty (20) pages
      in length within twenty (20) days of the appointment of the arbitrator.
      Unless the Parties agree to rely on affidavits, the arbitrator shall set a
      hearing at which each Party shall have up to eight (8) hours to present
      witnesses and to cross examine the witnesses for the other Party. If there
      is a hearing, each Party shall provide a statement summarizing the
      testimony of each of its witnesses to the other Party and the arbitrator
      at least fifteen (15) days in advance of the hearing. The arbitrator's
      award shall be in writing not to exceed twenty (20) pages in length and
      shall include reasoning in support of the award. The resolution of the
      arbitrator shall be final and binding on the Parties, without right of
      appeal.

20.3  CONFIDENTIALITY. All negotiations and proceedings under Sections 20.1 and
      20.2 of this Article 20 shall be treated as Confidential Information in
      accordance with the provisions of Article 11 (Confidentiality) of this
      Agreement, and shall also be treated as compromise and settlement
      negotiations for purposes of Rule 408 of the Federal Rules of Evidence and
      comparable state rules of evidence. Any mediator or arbitrator shall be
      bound by an agreement containing confidentiality provisions at least as
      restrictive as those contained in Article 11 (Confidentiality) of this
      Agreement.

20.4  EQUITABLE RELIEF. Nothing herein shall preclude either party from taking
      whatever actions are necessary to prevent immediate, irreparable harm to
      its interests. Otherwise, these procedures are exclusive and shall be
      fully exhausted prior to the initiation of any litigation.

20.5  GOVERNING LAW; PERSONAL JURISDICTION: WAIVER OF JURY. Any questions,
      claims, disputes, remedies or procedural matters arising out of or related
      to this Agreement shall be

                                      -20-


      governed exclusively by the laws of the State of Delaware, without regard
      to the principles of conflicts of law. The Parties agree that Minnesota
      and Massachusetts have a substantial relationship to this transaction, and
      each Party consents to personal jurisdiction in the courts of Minnesota
      and Massachusetts and agree that if a suit is commenced by SEPRACOR it
      shall be brought in Minnesota and if a suit is commenced by 3M or 3M IPC
      it shall be brought in Massachusetts. THE PARTIES FURTHER HEREBY CONSENT
      TO WAIVER OF ANY CONSTITUTIONAL, STATUTORY OR COMMON LAW RIGHT OF TRIAL BY
      JURY.

IN WITNESS WHEREOF, the Parties, through their respective duly authorized
officers, have executed this Agreement to be effective as of the Effective Date
first above written.

Signed: John Sampson           Title:                          Date: 12/20/01
       -------------------           ---------------------          ---------
For and on behalf of 3M

Signed: Gary L. Griswold       Title:                          Date: 12/20/01
       -------------------           ---------------------          ---------
For and on behalf of 3M IPC

Signed: James O'Shea           Title: President                Date: 12/20/01
       -------------------           ---------------------          ---------
For and on behalf of SEPRACOR

                                      -21-


Schedule 1.12 -- Specifications (to be determined)
Schedule 1.7  -- Scale-up Program
Schedule 6.4  -- Pricing of Product for Clinical Supplies and Scale-Up batches
Schedule 6.6  -- Quality Assurance and Quality Control Responsibilities (to be
                 determined)

                                   Page 1 of 3


               Schedule 1.12 -- Specifications (to be determined)

                                   Page 1 of 3


                                                                    Confidential

                        Schedule 1.7 -- Scale-up Program

                                   Page 1 of 3


              SEPRACOR XOPENEX(R) HFA MDI PROCESS SCALE-UP PROJECT
                                December 12, 2001

GENERAL ASSUMPTIONS

- -    Project initiation is December 1, 2001.
- -    The plan is designed to develop a process that supplies nominal [**]-dose
     product per US requirements.
- -    The plan assumes that the optimization runs will meet required
     process/product acceptance criteria for a US product.
- -    Only 1 container/closure system is to be developed for the product assuming
     use of Sepracor components. [**].
- -    The dates stated are all estimates. However, the earliest commercialization
     date is a primary objective goal of both companies.
- -    The project is taken to the point that 3M provides the [**] manufacturing
     process, DMF references and stability data portions of the NDA. The cost
     estimates exclude additional time for 3M review and comments on the NDA
     package, responses to FDA and responding to NDA deficiencies.
- -    No critical issues develop during the course of the project.
- -    OUS clinical supplies will not be needed from the registration batches.
- -    Process validation will not be performed until commercialization batches.
- -    NDA submission will occur after completion of the Sepracor generated
     stability report covering the testing interval identified as required to
     support the NDA submission. The NDA submission date will not necessarily be
     contingent upon the availability of 12 months stability data. The NDA will
     be amended with additional stability data as available.
- -    Product costs are in addition to development costs.

LAB PROCESS INVESTIGATIONS

- -    The Sepracor data package contains sufficient information on crimp
     optimization to minimize 3M's investigation time.
- -    Sepracor will perform pharmaceutical performance testing on lab scale
     samples to confirm equivalent product performance to the current process
     prior to full scale batch manufacture.
- -    Appropriate clean testing studies and methods currently exist.

PROCESS OPTIMIZATION

- -    At least [**] lots (preferably more) of all raw materials provided by
     Sepracor ([**]) are available to manufacture all [**] initial batches of
     product.
- -    The manufacturing dates are not yet reserved. Availability of the
     production facility will be based on the production schedule at the time
     the development agreement is finalized. Delays in the plan may occur if
     manufacturing conflicts are found.

                                   Page 1 of 3

                                                                    Confidential

              SEPRACOR XOPENEX(R) HFA MDI PROCESS SCALE-UP PROJECT
                                December 12, 2001

- -    For initial process optimization purposes, [**] batches will be run at full
     scale capacity ([**] units) with [**] at the edge of process tolerances
     (high and low) and [**] at the nominal setpoints.
- -    In-process testing will be performed on the [**] nominal process batch
     prior to manufacture of the [**] batches at nominal settings.
- -    The optimization batches will be filled in the following sequence: [**].
- -    The plan assumes that the first [**] lots of product manufactured at the
     nominal process settings meet specifications. If the [**] batches are
     found to be acceptable, they will be utilized for NDA clinical trials and
     NDA stability testing.
- -    If the [**] batches at nominal process settings are placed on NDA stability
     then batches #[**] and [**] will only be manufactured to provide
     information for the process performance requirements for the CMC section of
     the NDA.
- -    Batches [**] and [**] are not to be placed on NDA stability. This places a
     higher risk on the stability performance of the first [**] batches.
- -    If the optimization runs are not successful in meeting acceptable
     product/process criteria, additional optimizations will be required.
- -    Process maintenance runs are only listed through 2005, but will be
     necessary on an annual basis until approval of the product.

REGISTRATION STABILITY/CLINICAL SUPPLIES

- -    Stability testing will be performed on nominal [**]-dose product only to
     US requirements. Additional raw material or finished product testing for
     OUS markets is not included in this plan.
- -    3M will perform pivotal stability, according to a pie-defined protocoL
     Responsibility for the testing of these samples will be shared between 3M
     and Sepracor until analytical methods have been fully transferred to 3M.
     Samples will be stored in stability ovens at both 3M and Sepracor during
     this period.
- -    All stability protocols will be developed jointly by both Sepracor and 3M
     prior to study initiation. 3M DDS will be responsible for developing all
     manufacturing protocols which will be subject to Sepracor QA review. All
     summary reports will he jointly reviewed by both Sepracor and 3M DDS.
- -    No lot will be placed into a clinical study until full review of the
     resulting batch clearance testing and protocol sample testing and agreement
     between Sepracor and 3M Drug Delivery. Testing, review and approval of data
     should be targeted for completion within [**] weeks from availability of
     samples.
- -    Release of the [**] batches at the nominal process settings for use in
     clinical studies is to be contingent on review and consideration of the
     test data from the [**] optimization batches at the extreme process
     conditions.
- -    For interim stability testing intervals, Sepracor will accept and 3M may
     provide QA data sheets within [**] weeks of the testing interval per agreed
     upon format.

                                   Page 2 of 3


              SEPRACOR XOPENEX(R) HFA MDI PROCESS SCALE-UP PROJECT
                                December 12, 2001

+    Method crossovers will initially be between Sepracor and 3M St. Paul.
     Analysts from St. Paul will perform the in-process testing for the
     optimization batches. Method crossovers between 3M St. Paul and the
     Northridge QC lab have been added as a separate set of tasks and will occur
     at a later date to expedite method training and crossovers.

DEVELOPMENT COSTS

The following cost estimates assume full stability testing by 3M. Depending on
the timing of analytical method transfer from Sepracor to 3M, the actual 3M
Development Costs may be lower.



                                          2001         2002         2003         2004         2005      2006
                                    ------------------------------------------------------------------------
                                                                                   
   @ $[**]/hour                     $   [**]        $ [**]       $ [**]       $  [**]      $  [**]   $  [**]
                                    ----------  -----------  -----------   ----------   ----------   -------
   Incremental increase for [**]    $   [**]        $ [**]       $ [**]       $  [**]      $  [**]   $  [**]
   hours charged at $[**]/hour
   (Section 7.2) not reflected
   in subsequent Cost Summary
   document
                                    ----------  -----------  -----------   ----------   ----------   -------
   Total                            $   [**]        $ [**]       $ [**]       $  [**]      $  [**]   $ 2,800
                                    ----------  -----------  -----------   ----------   ----------   -------


PRODUCT COSTS

+    [**] batches at full scale ([**] units/each) = [**] units.
- -    This does not include process maintenance lots (estimated at [**]
     per year until product approval).

                                   Page 3 of 3


             Schedule 6.4 - Pricing of Product for Clinical Supplies

Pricing of Product will be $[**] per unit based on theoretical batch size.
Pricing assumes:

- -     SEPRACOR provides Compound.
- -     SEPRACOR Components are canister, valve, actuator.
- -     3M provides Samples to SEPRACOR in a bulk packaged unlabelled format.
- -     Batch size minimums are defined by 3M process.
- -     FOB 3M's manufacturing location.

                                      -26-


Schedule 6.6 - Quality Assurance and Quality Control Responsibilities (to be
               determined)

                                      -26-

Exhibit 13

SEPRACOR INC. SELECTED FINANCIAL DATA

(1)

Represents Sepracor's portion of BioSphere Medical, Inc. losses in 2001, Sepracor's portion of HemaSure Inc. losses and a gain of $5,000 resulting from the release of a HemaSure loan guarantee in 2000 as a result of HemaSure Inc.'s repayment in full of the loan, and HemaSure Inc. and Versicor Inc. losses in 1999. Includes the write-off of a HemaSure line of credit guarantee in 1998. See Footnote C—Notes to Consolidated Financial Statements.

(2)

Includes $7,497 in expenses relating to prepaid interest and fees for the conversion of 6.25% convertible subordinated debentures in 2000.

1

(3)

Represents Sepracor's gain on the sale of 2,600,000 shares of BioSphere Medical Inc. common stock in 2001 and Sepracor's gain on the sale of ChiRex Inc. in 1997.

(4)

Discontinued operations relate to BioSphere Medical, Inc. See Footnote I—Notes to Consolidated Financial Statements.

(5)

Includes $150 and $600 in preferred stock dividends in 1998 and 1997, respectively.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward-Looking Statements

        This Annual Report to Stockholders contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 concerning the Company's business, operations and financial condition, including statements with respect to the safety, efficacy and potential benefits of the Company's products under development, expectations with respect to development and commercialization of the Company's product candidates, the timing of the submission, acceptance and approval of regulatory filings, the scope of patent protection with respect to these product candidates and the Company's products and information with respect to the other plans and strategies for the Company's business and the business of the subsidiaries. All statements other than statements of historical facts included in this Annual Report to Stockholders regarding the Company's strategy, future operations, timetables for product testing, regulatory approvals and commercialization, financial position, costs, prospects, plans and objectives of management are forward-looking statements. When used in this Annual Report to Stockholders, the words "expect", anticipate", intend", "plan", "believe", "seek", "estimate", and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Because these forward-looking statements involve risks and uncertainties, actual results could differ materially from those expressed or implied by these forward-looking statements for a number of important reasons, including those discussed under "Factors Affecting Future Operating Results", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Annual Report to Stockholders.

        You should read these statements carefully because they discuss the Company's expectations about its future performance, contain projections of the Company's future operating results or its future financial condition, or state other "forward-looking" information. You should be aware that the occurrence of any of the events described in these risk factors and elsewhere in this Annual Report to Stockholders could substantially harm the Company's business, results of operations and financial condition and that upon the occurrence of any of these events, the trading price of Sepracor's common stock could decline.

        Sepracor cannot guarantee any future results, levels of activity, performance or achievements. The forward-looking statements contained in this Annual Report to Stockholders represent the Company's expectations as of the date of this Annual Report to Stockholders and should not be relied upon as representing its expectations as of any other date. Subsequent events and developments will cause the Company's expectations to change. However, while the Company may elect to update these forward-looking statements, it specifically disclaims any intention or obligation to do so, even if its expectations change.

Overview

        Sepracor Inc. is a research-based pharmaceutical company dedicated to treating and preventing human disease through the discovery, development and commercialization of innovative pharmaceutical compounds including product candidates directed toward serving unmet medical needs. Sepracor's drug development program has yielded an extensive portfolio of pharmaceutical compounds that are focused

2

on the treatment of respiratory, urology and central nervous system disorders. Sepracor's corporate headquarters are located in Marlborough, Massachusetts.

        The consolidated financial statements include the accounts of Sepracor Inc. ("Sepracor" or the "Company") and its majority and wholly-owned subsidiaries, including BioSphere Medical, Inc. ("BioSphere") (a consolidated subsidiary through July 2, 2001) and Sepracor Canada Limited. The consolidated financial statements also include equity ownership in Sepracor's affiliate, HemaSure Inc. ("HemaSure"), and an investment in Versicor Inc. ("Versicor").

        BioSphere is an endovascular medical device company, pioneering the use of patented and proprietary bioengineered microspheres as a new class of embolotherapy devices. Sepracor owned approximately 64% of BioSphere at December 31, 1999. On February 4, 2000, BioSphere completed a $5,900,000 private placement of common stock and warrants. As a result of this transaction, Sepracor recorded a net gain of approximately $2,771,000 through additional paid-in capital and Sepracor's ownership of BioSphere decreased to approximately 59%. On July 31, 2000, BioSphere sold approximately $13,000,000 of its common stock in a private equity placement. Of this amount, Sepracor purchased approximately $5,000,000 of BioSphere common stock. As a result of the transaction, Sepracor recorded a net gain of approximately $1,702,000 through additional paid-in capital, and the Company's ownership in BioSphere decreased to approximately 56%. At December 31, 2000, Sepracor's ownership in BioSphere was approximately 55%.

        In July 2001, Sepracor sold 2,000,000 shares of BioSphere common stock held by it in an underwritten public offering in which BioSphere also sold 2,000,000 shares of its common stock at a price to the public of $11.00 per share. In August 2001, Sepracor sold an additional 600,000 shares of BioSphere common stock held by it at $11.00 per share pursuant to exercise of the underwriters' over-allotment option. Sepracor received net proceeds, after offering costs, from the combined sales of approximately $26,526,000 and recognized a gain of approximately $23,034,000 in 2001. Sepracor recorded approximately $5,590,000 through additional paid-in capital as its gain on BioSphere's sale of 2,000,000 shares of BioSphere common stock. As a result of the public offering, Sepracor's ownership in BioSphere has been reduced to approximately 25% as of December 31, 2001. Effective July 3, 2001, Sepracor no longer consolidates the results of BioSphere and now records its investment in BioSphere under the equity method. Sepracor recorded $1,601,000 as its share of BioSphere losses for the period ended December 31, 2001.

        HemaSure had been applying its proprietary filtration technology to develop products to increase the safety of blood collection and transfusion. At December 31, 1999, Sepracor owned approximately 27% of the outstanding shares of HemaSure common stock. In February 1999, the Company entered into an agreement with HemaSure pursuant to which Sepracor invested $2,000,000 in exchange for 1,333,334 shares of HemaSure common stock and for warrants to purchase approximately 667,000 of additional shares of HemaSure common stock. In October 1999, HemaSure completed a private placement financing which resulted in Sepracor recording a gain of $820,000 through additional paid-in capital. On March 3, 2000, HemaSure completed a $28,000,000 private placement of common stock. As a result of this transaction, Sepracor's ownership of HemaSure decreased to approximately 22% and Sepracor recorded a gain of approximately $1,417,000 through additional paid-in capital. The Company also had a $5,000,000 liability at December 31, 1999, relating to a guarantee of a line of credit for HemaSure. In September 2000, HemaSure repaid the $5,000,000 line of credit, and as a result, Sepracor recorded a $5,000,000 equity in investee gain and removed the corresponding liability for the loan guarantee. Sepracor accounts for its investment in HemaSure using the equity method of accounting. At December 31, 2001 and 2000, Sepracor's ownership in HemaSure was approximately 23% and 22%, respectively and its investment in HemaSure was recorded at zero.

3

        In February 2001, HemaSure signed an asset purchase agreement with Whatman plc. Under the terms of the agreement, Whatman agreed to purchase HemaSure's assets, except for cash, cash equivalents and marketable securities of HemaSure, subject to certain exceptions as defined in the agreement. On May 29, 2001, HemaSure completed the sale to Whatman Bioscience Inc., a Massachusetts corporation and a subsidiary of Whatman plc. Following the sale, HemaSure changed its corporate name to HMSR, Inc.

        In November 2001, HMSR, Inc. announced that it had signed a definitive agreement to merge with Point Therapeutics, Inc. Following the merger, HMSR's current stockholders will own approximately 23% of the combined company. HMSR's stockholders voted to approve the merger at a stockholders' meeting held in March 2002.

        Versicor develops novel drug candidates principally for the treatment of infectious diseases. From December 10, 1997 through April 1999, Sepracor recorded Versicor's results based on the equity method of accounting. As a result of various Versicor private equity offerings in 1999, Sepracor recorded a gain through additional paid-in capital of $1,077,000 in 1999 and began accounting for its investment under the cost method of accounting in April 1999. In 1999, Sepracor paid $1,000,000 to Versicor under a promissory note agreement, which was later converted into Versicor preferred stock. In August 2000, Versicor completed an initial public offering of its common stock. As of December 31, 2000, Sepracor owned approximately 8% of Versicor's outstanding common stock. Sepracor considers its investment in Versicor as an available-for-sale security and as such has marked to market its investment at the December 31, 2000 market price of $8.625 per share, which resulted in the recording of an unrealized gain of $10,688,000 as a separate component of stockholders' equity in 2000.

        As of December 31, 2001, Sepracor owns 1,809,143 shares, or approximately 8%, of Versicor's outstanding common stock. Sepracor also has warrants to purchase an additional 76,250 shares of Versicor common stock at $5.00 per share, which expire in December 2002. Sepracor recognized $1,252,000 as other income in 2001 for changes in the valuation of the warrants at December 31, 2001. Sepracor has marked to market its investment in Versicor at the December 31, 2001 market price of $20.25 per share, which resulted in the recording of an unrealized gain of $22,889,000 as a separate component of stockholders' equity in 2001.

        In May 1999, Sepracor introduced XOPENEX brand levalbuterol HCl, a single isomer of the bronchodilator albuterol. XOPENEX is the first pharmaceutical product developed and commercialized by Sepracor.

        During 2002, the Company expects to incur increasing operating expenses primarily due to expansion of research and development activities relating to development of the Company's portfolio of pharmaceuticals and late stage drug candidates. Sales and marketing expenses are expected to increase in connection with a larger sales force. As a result, the Company expects to incur operating losses for at least the next two years.

Revenue-Related Agreements

        Tecastemizole.    Effective January 1998, Sepracor and Janssen Pharmaceutica, N.V., a wholly-owned subsidiary of Johnson & Johnson ("Janssen"), entered into an agreement (the "Tecastemizole Agreement"; formerly referred to as the "Norastemizole Agreement"), relating to the development and marketing of tecastemizole (formerly norastemizole), a third generation nonsedating antihistamine. Under the terms of the Tecastemizole Agreement, the companies agreed to jointly fund the development of tecastemizole, and Sepracor granted to Janssen an option to acquire certain rights regarding the product in the United States and abroad. In May 1999, Sepracor announced that Johnson & Johnson elected not to exercise its option to co-promote tecastemizole under the Tecastemizole Agreement. Sepracor continued to fund clinical development and marketing of the drug and submitted an NDA to the U.S. Food and Drug Administration (the "FDA") for SOLTARA brand

4

tecastemizole in March 2001. Under the terms of the Tecastemizole Agreement, Sepracor has worldwide rights to make, use and sell prescription tecastemizole products under all Johnson & Johnson intellectual property rights relating to tecastemizole, including the right to reference Johnson & Johnson's data for astemizole, in exchange for royalty payments on sales of tecastemizole. Sepracor anticipates selling SOLTARA, if approved, through its own expanded sales force.

        Fexofenadine.    In September 1999, Hoechst Marion Roussel Inc. (now Aventis) and Sepracor settled patent issues with respect to fexofenadine, marketed by Aventis as ALLEGRA®, and amended their existing agreement (as so amended, the "Aventis Fexofenadine Agreement"). Under the terms of the U.S. Aventis Fexofenadine Agreement, Aventis received all rights to Sepracor's patents with respect to fexofenadine and obtained an exclusive license to various Sepracor U.S. patent applications related to fexofenadine. In October 1999, upon effectiveness of the amended Aventis Fexofenadine Agreement, Sepracor recognized license fee revenue of $1,875,000 from a milestone payment that had been previously deferred. Sepracor has earned royalties on fexofenadine sales in the United States since February 2001. Under the terms of a separate ex-U.S. Aventis Fexofenadine Agreement, Aventis obtained an exclusive license to Sepracor's patents related to fexofenadine, that had been the subject of litigation in Europe, as well as various other patent oppositions between the two companies outside the United States. Sepracor has been entitled to royalties on fexofenadine product sales since March 1, 1999 in countries where Sepracor has patents related to fexofenadine. The Company recorded $25,379,000, $2,495,000 and $1,746,000 of royalty revenues under the Aventis Fexofenadine Agreement in 2001, 2000 and 1999, respectively.

        Levocetirizine.    In June 1999, Sepracor entered into a licensing agreement with UCB Farchim SA, an affiliate of UCB ("UCB"), relating to levocetirizine, an isomer of cetirizine, which is marketed by UCB as ZYRTEC® (the "UCB Agreement"), for the treatment of allergic rhinitis. Under the terms of the UCB Agreement, Sepracor has exclusively licensed to UCB all of Sepracor's issued patents and pending patent applications relating to levocetirizine in all countries, except the United States and Japan. Sepracor is entitled to receive royalties under the UCB Agreement upon first product sales and royalties will escalate upon achievement of sales volume milestones. In September 2001, UCB announced that European Union Member States granted a positive opinion for levocetirizine, a single isomer of ZYRTEC, for the treatment of symptoms of seasonal allergic rhinitis (SAR), perennial allergic rhinitis (PAR) and chronic idiopathic urticaria (CIU), or hives of unknown cause, in adults and children aged 6 years and older. UCB has marketed levocetirizine under the brand names XUSAL™ and XYZAL® in Germany since February 2001, and in 4 other European countries since the fourth quarter of 2001. UCB has received regulatory approval in 9 other countries where Sepracor expects to earn royalties upon launch in 2002.

        Desloratadine.    In December 1997, Sepracor licensed to Schering Plough Corporation ("Schering") exclusive worldwide rights to Sepracor's patents covering desloratadine (the "DCL Agreement"), an active metabolite of loratadine, which is used as an antihistamine. In 1998, Schering paid Sepracor an initial license fee of $5,000,000. Under the terms of the DCL Agreement, Sepracor is entitled to receive royalties on desloratadine sales, beginning at product launch. Royalties will escalate over time upon achievement of sales volume and other milestones. On January 19, 2001, Schering received an approvable letter for desloratadine from the FDA, which indicated that the product could be approved pending final approval by the FDA. On February 15, 2001, Schering announced that the FDA had issued reports citing deficiencies concerning Schering's compliance with current Good Manufacturing Processes, or GMPs, and that the FDA had advised Schering that GMP deficiencies must be resolved prior to the FDA granting approval of desloratadine. In December 2001, Schering announced that CLARINEX® (desloratadine) 5mg tablets had received marketing clearance from the FDA and Schering commercially launched CLARINEX in 2002.

5

        Eszopiclone.    In October 1999, Sepracor entered into an agreement with Rhone-Poulenc Rorer SA (now Aventis) under which Sepracor exclusively licensed Aventis' preclinical, clinical and post-marketing surveillance data package relating to zopiclone, its isomers and metabolites, to develop, make, use and sell eszopiclone in the United States (the "Aventis Eszopiclone Agreement"). Under the Aventis Eszopiclone Agreement, Aventis assigned all U.S. patent applications relating to zopiclone to Sepracor, and Aventis retained the right under the licensed data package to manufacture (S)-zopiclone in the U.S. for non-U.S. markets. In addition, Sepracor paid a $5,000,000 license fee to Aventis in 1999 and will pay a royalty to Aventis on eszopiclone product sales in the U.S., if any. Sepracor recognized expense of $1,000,000 in 2000 based on the initiation of Phase III clinical trials of eszopiclone and may be required to pay additional milestone payments to Aventis.

        (R)-Fluoxetine.    In December 1998, Sepracor entered into an agreement with Eli Lilly and Company ("Lilly") under which Sepracor granted to Lilly exclusive worldwide rights to Sepracor's patents covering (R)-fluoxetine, a modified form of an active ingredient found in fluoxetine, marketed by Lilly as PROZAC (the "Lilly Agreement"). In April 2000, following completion of the Federal Trade Commission review of the Lilly Agreement, the Company received an initial milestone payment and license fee of $20,000,000, which was recorded as license fee revenue in 2000. The Company also recorded $3,573,000 of collaborative research and development revenue in 2000 related to previous costs incurred in the development of (R)-fluoxetine under the Lilly Agreement. In October 2000, the Company was notified by Lilly that Lilly had terminated the exclusive license agreement covering (R)-fluoxetine. In accordance with the Lilly Agreement, Lilly has returned the existing scientific data on the project to Sepracor. Given the extended development timetable and an assessment of the competitive environment, we have elected not to pursue development of (R)-fluoxetine at this time.

        Ticalopride.    In July 1998, Sepracor entered into a license agreement with Janssen (the "Ticalopride Agreement"; formerly referred to as the "Norcisapride Agreement") giving Janssen exclusive worldwide rights to Sepracor's patents covering ticalopride ((+)-norcisapride), an isomer of the active metabolite of Janssen's PROPULSID. Under the terms of the Ticalopride Agreement, Sepracor has exclusively licensed to Janssen rights to develop and market the ticalopride product worldwide. Under the Ticalopride Agreement, Janssen has agreed to pay Sepracor royalties on ticalopride sales, if any, beginning at product launch in those countries where Sepracor has issued patents covering Janssen's approved indications. Under the terms of the Ticalopride Agreement, the royalty rate to be paid to Sepracor will escalate upon the achievement of sales volume milestones. In April 2001, the Company was notified by Janssen that clinical investigators were informed that two Phase II trials to evaluate the efficacy and safety of ticalopride in subjects with symptoms of GERD, or gastroparesis, were being suspended pending further analysis of a small number of adverse events reported in GERD and diabetic patients. We continue to work with Johnson and Johnson to assess the data from the suspended Phase II trials of ticalopride.

Results of Operations

Year Ended December 31, 2001 Compared to 2000

        Product sales were $125,248,000 in 2001 as compared with $57,160,000 in 2000, an increase of 119%. Sales of XOPENEX, which Sepracor commercially introduced in May 1999, accounted for approximately 98% of 2001 product sales and 96% of 2000 product sales. The increase in product sales in 2001 as compared with 2000 is due primarily to increased unit volume sales of XOPENEX.

        Royalties were $25,663,000 in 2001 as compared with $2,573,000 in 2000. The increase in 2001 as compared with 2000 is primarily due to increased royalties earned on sales of ALLEGRA in 2001, under the Aventis Fexofenadine Agreement in 2001. Sepracor began earning royalties on commercial sales of ALLEGRA in the United States during February 2001, in Japan during November 2000 and in several other countries from 1999 to present.

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        License fees and other revenues were $1,184,000 in 2001 as compared with $21,939,000 in 2000. License fee revenue in 2000 was comprised of a $20,000,000 milestone and license fee payment recognized under the Lilly Agreement. Under the Lilly Agreement, Sepracor licensed to Lilly its patents covering (R)-fluoxetine. Other revenues represent revenues of BioSphere other than product revenues recognized by BioSphere in connection with its core EmboSphere Microsphere business.

        Collaborative research and development revenues were $0 in 2001 as compared with $3,573,000 in 2000. Collaborative research and development revenues in 2000 were comprised of fees recognized under the Lilly Agreement.

        Cost of products sold, as a percentage of product sales, was 12% in 2001 compared with 20% in 2000. The decrease in cost of products sold as a percentage of product sales in 2001 as compared with 2000 was primarily due to lower XOPENEX manufacturing costs on a per unit basis due primarily to an increased number of units having been produced in 2001, as compared to 2000.

        Cost of license fees and other revenue was $493,000 in 2001 as compared with $3,056,000 in 2000. The cost of license fee revenue in 2000 was $2,000,000, which represents sublicense fees owed by us under a license agreement with McLean Hospital pertaining to patents licensed by us to Lilly under the Lilly Agreement.

        Research and development expenses were $231,278,000 in 2001 as compared with $170,759,000 in 2000, an increase of 35%. The increase in 2001 as compared with 2000 is primarily due to increased spending on preclinical and clinical studies in Sepracor's pharmaceutical programs, including (1) the initiation of new clinical studies for SOLTARA brand tecastemizole, and a NDA submission to the FDA for tecastemizole, which was submitted in March 2001, (2) NDA preparation costs and Phase III clinical study costs relating to ESTORRA brand eszopiclone, (3) the initiation of Phase III clinical studies for (S)-oxybutynin and the completion of Phase II clinical studies for (S)-oxybutynin, (4) the initiation of a Phase III clinical study for (R,R)-formoterol and (5) the expenses related to several clinical trials for levalbuterol and new formulations of XOPENEX and the completion of a supplemental New Drug Application (an "sNDA") for a pediatric formulation of XOPENEX, which was submitted to the FDA in March 2001.

        Drug development and approval in the U.S. is a multi-step process regulated by the FDA. The process begins with the filing of an IND, which, if successful, allows opportunity for clinical study of the potential new drug. Clinical development typically involves three phases of study: Phase I, II and III. The most significant costs in clinical development are in the Phase III clinical trials as they tend to be the longest and largest studies in the drug development process. Following successful completion of Phase III clinical trials, an NDA must be filed with, and accepted by, the FDA, and the FDA must approve the NDA, prior to commercialization of the drug. Sepracor currently has four product candidates in Phase III clinical studies and one NDA recently reviewed, but not approved, by the FDA. The successful development of the Company's product candidates is highly uncertain. An estimation of product completion dates and completion costs can vary significantly for each product candidate and are difficult to predict. The lengthy process of seeking FDA approvals, and the subsequent compliance with applicable statutes and regulations, require the expenditure of substantial resources. Any failure by the Company to obtain, or any delay in obtaining, regulatory approvals could materially adversely affect the Company's business. The Company cannot assure you that any approval required by the FDA will be obtained on a timely basis, if at all.

        For additional discussion of the risks and uncertainties associated with completing development of potential product candidates, see "Factors Affecting Future Operating Results".

        Below is a summary of Sepracor's product candidates and the related stages of development for each product candidate in clinical development. The "Estimate of Completion of Phase" column contains forward-looking statements regarding timing of completion of product development phases.

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The actual timing of completion phases could differ materially from the estimates provided in the table. The table is sorted by highest to lowest spending amounts in 2001, and the 5 product candidates listed accounted for approximately 90% of the Company's direct project research and development spending in 2001.

*

SOLTARA received a "not-approvable" letter from the FDA in March 2002. The Company does not expect the SOLTARA NDA to receive FDA approval, if at all, before mid-2003.

        Selling, marketing and distribution expenses were $111,654,000 in 2001 as compared with $77,410,000 in 2000, an increase of 44%. The increase in 2001 as compared with 2000 is principally due to additional salary and other payroll-related costs resulting from an increase in sales and marketing personnel, costs related to contracting with a third party contract sales organization, marketing, promotion and advertising costs related to XOPENEX, and increased marketing costs in preparation for an anticipated SOLTARA brand tecastemizole product launch.

        General and administrative and patent costs were $19,732,000 in 2001 as compared with $20,988,000 in 2000, a decrease of 6%. The decrease in 2001 as compared with 2000 is primarily the result of the consolidation of only six months of BioSphere costs in 2001 compared to twelve months in 2000. In 2001, Sepracor sold 2,600,000 shares of BioSphere common stock, which reduced Sepracor's ownership in BioSphere to approximately 25%. Sepracor now records its investment in BioSphere under the equity method effective July 3, 2001.

        Interest income was $25,669,000 in 2001 as compared with $41,919,000 in 2000. The decrease in 2001 as compared with 2000 is due to lower average cash and short and long-term investment balances available for investment and a decrease in the interest rates earned on investments in 2001.

        Interest expense was $47,793,000 in 2001 as compared with $47,760,000 in 2000. The slight increase in 2001 as compared with 2000 is due primarily to interest on the $500,000,000 of 5.75% convertible subordinated notes that Sepracor issued in December 2001, partially offset by the conversion of $92,858,000 in principal amount of 6.25% convertible subordinated debentures in February 2001.

        Gain on sale of BioSphere stock was $23,034,000 in 2001 as compared with $0 in 2000. This gain represents Sepracor's net gain on Sepracor's sale of 2,600,000 shares of BioSphere common stock as part of a public offering by BioSphere in July and August 2001.

        Equity in investee gains (losses) were ($1,601,000) in 2001 as compared with $3,501,000 in 2000. The equity in investee loss in 2001 represents Sepracor's portion of BioSphere losses for 2001. In 2000, the net equity in investee gain consists of Sepracor's portion of the net loss of HemaSure of ($1,499,000), offset by a gain of $5,000,000 from the release of a loan guarantee for HemaSure.

        Net other income (expense) was $997,000 in 2001 as compared with ($7,051,000) in 2000. Other income in 2001 primarily represents income of $1,252,000 recognized on the increased valuation of Versicor warrants being recorded as a derivative. Other expense in 2000 primarily represents inducements and other costs of $7,497,000 from the conversion of $96,424,000 in principal amount of Sepracor's 6.25% convertible subordinated debentures.

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        Minority interest in subsidiaries (net of discontinued operations) resulted in a reduction of consolidated net loss of $2,152,000 in 2001 as compared with $3,620,000 in 2000. The decrease in minority interest is due to Sepracor's sale of 2,600,000 shares of BioSphere common stock, which resulted in a reduction of its ownership in BioSphere from approximately 55% to 25% as of December 31, 2001. Sepracor no longer consolidates BioSphere and now records its investment in BioSphere under the equity method, effective July 3, 2001.

Year Ended December 31, 2000 Compared to 1999

        Product sales were $57,160,000 in 2000 as compared with $16,383,000 in 1999, an increase of 249%. Sales of XOPENEX, which Sepracor commercially introduced in May 1999, accounted for approximately 96% of 2000 product sales as compared with 86% of 1999 product sales. The increase in product sales in 2000 as compared with 1999 is due primarily to increased unit volume sales of XOPENEX.

        Royalties were $2,573,000 in 2000 as compared with $2,000,000 in 1999. The increase in 2000 as compared with 1999 is primarily due to increased royalties earned on sales of ALLEGRA in 2000 under the Aventis Fexofenadine Agreement.

        License fees and other revenues were $21,939,000 in 2000 as compared with $1,886,000 in 1999. The increase in 2000 as compared with 1999 is primarily due to a $20,000,000 milestone and license fee payment recognized under the Lilly Agreement in 2000. Other revenues represent revenues of BioSphere other than product revenues recognized by BioSphere in connection with its core EmboSphere Microsphere business.

        Collaborative research and development revenues were $3,573,000 in 2000 as compared with $2,390,000 in 1999. The increase in 2000 as compared with 1999 is due to collaborative research and development revenue recognized in 2000 under the Lilly Agreement. Collaborative research and development revenues in 1999 were comprised of fees recognized under the Tecastemizole Agreement.

        Cost of products sold, as a percentage of product sales, was 20% in 2000 as compared with 29% in 1999. The decrease in cost of products sold as a percentage of product sales in 2000 as compared with 1999 is due primarily to an increase in sales of XOPENEX pharmaceutical products as a percentage of total product sales, which have a lower cost as a percentage of product sales, as compared to non-pharmaceutical product sales. Pharmaceutical products represent primarily XOPENEX. Non-pharmaceutical products represent BioSphere's products, including BioSphere's EmboSphere Microsphere line of medical devices. Pharmaceutical product sales represented approximately 96% of total product sales in 2000 as compared with approximately 86% of total product sales in 1999. Additionally, the cost of non-pharmaceutical product sales as a percentage of non-pharmaceutical product sales declined significantly in 2000 as BioSphere began to increase sales of its higher margin EmboSphere Microspheres.

        Cost of license fee and other revenue was $3,056,000 in 2000 as compared with $108,000 in 1999. The cost of license fee revenue in 2000 was $2,000,000, which represents sublicense fees owed by us under a license agreement with McLean Hospital pertaining to patents licensed by us to Lilly under the Lilly Agreement.

        Research and development expenses were $170,759,000 in 2000 as compared with $122,400,000 in 1999, an increase of 40%. The increase in 2000 as compared with 1999 is primarily due to increased spending on preclinical and clinical studies in Sepracor's pharmaceutical programs, including (1) the initiation of 15 new studies for tecastemizole and preparation efforts of an NDA for submission to the FDA for tecastemizole, which was submitted in March 2001, (2) the initiation of 17 new studies for eszopiclone, formerly (S)-zopiclone, including two Phase III studies, (3) the completion of a major phase IIb/III study for (S)-oxybutynin, (4) the completion of a Phase II study for (R,R)-formoterol and

9

(5) the expenses related to several trials for levalbuterol and new formulations of XOPENEX. In 2000, the Company initiated several other preclinical and clinical studies and submitted an Investigational New Drug application ("IND") for the (S)-sibutramine metabolite for the treatment of sexual dysfunction.

        See the discussion relating to research and development expenses for the year ended December 31, 2001 compared to 2000. The research and development spending in 2000 and 1999 was concentrated on the same product candidates described in the 2001 discussion.

        Selling, marketing and distribution costs were $77,410,000 in 2000 as compared with $48,211,000 in 1999, an increase of 61%. The increase in 2000 as compared with 1999 is principally due to increased salary and other payroll related costs resulting from an increase in sales and marketing personnel, costs resulting from contracting with two third party contract sales organizations, and marketing, promotion and advertising costs related to XOPENEX.

        General and administrative and patent costs were $20,988,000 in 2000 as compared with $17,125,000 in 1999, an increase of 23%. The increase in 2000 as compared with 1999 is primarily due to $1,381,000 of additional amortization of deferred financing costs, $345,000 of additional insurance costs and $1,081,000 of additional BioSphere amortization of goodwill and stock-based compensation costs in 2000.

        Interest income was $41,919,000 in 2000 as compared with $21,896,000 in 1999. The increase in 2000 as compared with 1999 is due to larger average cash and short and long-term investment balances available for investment primarily as a result of the sale of $460,000,000 of 5% convertible subordinated debentures in February 2000.

        Interest expense was $47,760,000 in 2000 as compared with $33,078,000 in 1999. The increase in 2000 as compared with 1999 is due primarily to interest on the $460,000,000 of 5% convertible subordinated debentures issued in February 2000.

        Equity in investee gains (losses) were $3,501,000 in 2000 as compared with ($3,246,000) in 1999. In 2000, the net gain in equity of investees consists of the Company's portion of the net loss of HemaSure of ($1,499,000) offset by a gain of $5,000,000 from the release of a loan guarantee for HemaSure. In 1999, the net loss in equity of investees consists of the Company's portion of the net loss of HemaSure of ($2,737,000) and the Company's portion of the net loss of Versicor of ($509,000).

        Net other income (expense) was ($7,051,000) in 2000 as compared with $272,000 in 1999. Other expense in 2000 is primarily the result of inducements and other costs of $7,497,000 from the conversion of $96,424,000 in principal amount of Sepracor's 6.25% convertible subordinated debentures.

        Minority interest in subsidiaries (net of discontinued operations) resulted in a reduction of consolidated net loss of $3,620,000 in 2000 as compared with $1,438,000 in 1999. The increase in 2000 as compared with 1999 is due to increased losses of BioSphere and an increase in the Company's minority ownership of BioSphere to 45% in 2000 as compared with 36% in 1999.

Other

Critical Accounting Policies

        In December 2001, the Securities and Exchange Commission, or SEC, requested that all registrants discuss their most "critical accounting policies" in management's discussion and analysis of financial condition and results of operations. The SEC indicated that a "critical accounting policy" is one which is both important to the portrayal of the company's financial condition and results and requires management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. While our significant accounting

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policies are more fully described in Note B to our consolidated financial statements included in this report, we believe the following accounting policies to be critical:

Revenue Recognition:    Sepracor recognizes revenue from product sales when title to product and associated risk of loss has passed to the customer, and collectability is reasonably assured. All revenues from product sales are recorded net of applicable allowances for returns, rebates and other applicable discounts and allowances.

        License fees and other revenue include non-refundable upfront license fees, milestones, and other revenue. Non-refundable upfront license fees are recorded as revenue over the related performance period or at such time when there are no remaining performance obligations. Milestones are recorded as revenue when achieved and only if there are no remaining performance obligations and the fees are non-refundable. Other revenue includes revenues recognized by BioSphere unrelated to its core EmboSphere Microsphere business.

        Sepracor records collaborative research and development revenue from research and development contracts over the term of the applicable contract, as it incurs costs related to the contract.

Royalty Revenue Recognition:    Royalty revenue is recognized based upon estimates of sales in licensed territories in the period in which the sales occur. These estimates are derived from information from the company paying the royalty when possible, or from historical data and third party prescription data. Changes in market conditions, such as the introduction of competitive products, can lead to significant deviations from historical patterns and therefore cause estimates to be inaccurate. When estimates differ from actual results, the difference is recognized in the following quarter, provided the difference is not material to the results of either quarter. If the difference was considered material, it would be adjusted in the quarter in which the discrepancy occurred.

Rebate and Return Reserves:    Certain product sales qualify for rebates from standard list pricing due to government sponsored programs or other contractual agreements. The Company also allows for return of its product for up to one year after product expiration. Reserves for product returns and rebates are derived through an analysis of historical experience updated for changes in facts and circumstances as appropriate and by utilizing reports obtained from external, independent sources. If government contracts change materially, the associated reserves estimated for those programs can change significantly. Estimates of reserves for returns are impacted by the extended return cycle, and by other factors such as introduction of a new competitive product, or other change in market conditions leading to a change in historical return patterns.

Patents, Intangible Assets and Other Assets:    Major assets capitalized include third party patents and licenses purchased, as well as deferred financing costs. Long-lived assets are reviewed for impairment by comparing the undiscounted projected cash flows of the related assets with their carrying amount. Any write-downs are treated as permanent reductions in the carrying amount of the assets.

        The Company currently has long-lived assets, which include patents on drug compounds in late stages of clinical development but not yet successfully developed or approved. If any of these drug compounds fails to receive final FDA approval, we could potentially have material write-downs of assets related to the drug compounds.

Accounts Receivable and Bad Debt:    Sepracor's trade receivables in 2001 and 2000 primarily represent amounts due to the Company from wholesalers, distributors and retailers of its pharmaceutical product. Sepracor performs ongoing credit evaluations of its customers and generally does not require collateral. Bad debt write-offs were not significant in 2001, 2000 and 1999; however the Company monitors its receivables closely due to few customers making up a large portion of the overall revenues.

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Recent Accounting Pronouncements

        In June 2001, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards, or SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that all business combinations be accounted for under the purchase method and that certain acquired intangible assets in a business combination be recognized as assets apart from goodwill. SFAS No. 142 requires that ratable amortization of goodwill and certain intangible assets be replaced with periodic tests of the goodwill's impairment and that intangible assets be amortized over their useful lives. SFAS No. 141 is effective for all business combinations initiated after June 30, 2001 and for all business combinations accounted for by the purchase method for which the date of acquisition is after June 30, 2001. The provisions of SFAS No. 142 will be effective for fiscal years beginning after December 15, 2001, and will thus be adopted by us in fiscal year 2002. However, for goodwill and intangible assets acquired after June 30, 2001, certain provisions of SFAS 142 will be effective from the date of acquisition. The Company notes that SFAS No. 141 does not currently have any effect on the reported financial results and does not expect the adoption of SFAS No. 142 to have a material impact on the Company's financial statements and related disclosures.

        In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." This statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This statement applies to all entities. It applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of a long-lived asset, except for certain obligations of lessees. This statement is effective for financial statements issued for fiscal years beginning after June 15, 2002. The Company does not believe that the adoption of this standard will have a material impact on the Company's financial statements and related disclosures.

        In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 144 further refines the requirements of SFAS No. 121 that companies (1) recognize an impairment loss only if the carrying amount of a long-lived asset is not recoverable based on its undiscounted future cash flows and (2) measure an impairment loss as the difference between the carrying amount and fair value of the asset. In addition, SFAS No. 144 provides guidance on accounting and disclosure issues surrounding long-lived assets to be disposed of by sale. The Company will adopt SFAS No. 144 during the first quarter of 2002 and does not believe that the adoption of this standard will have a material impact on the Company's financial statements and related disclosures.

Liquidity and Capital Resources

        Our liquidity requirements have historically consisted of research and development expenses, sales and marketing expenses, capital expenditures, working capital, debt service and general corporate expenses. We have funded these requirements and the growth of our business through convertible subordinated debt offerings, the issuance of common stock, including the exercise of stock options, and sales of product and license agreements for our drug compounds. The Company expects to meet its short-term liquidity needs through the use of its cash and short-term investments on hand at December 31, 2001.

Cash Flows

        Cash, cash equivalents and short and long-term investments totaled $904,389,000 at December 31, 2001, compared to $634,479,000 at December 31, 2000.

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        The net cash used in operating activities for the year ended December 31, 2001 was $208,419,000. The net cash used in operating activities includes a net loss from continuing operations of $224,015,000 adjusted by non-cash charges of $15,081,000. These charges were offset by the gain on the sale of BioSphere common stock of $23,034,000 and the minority interest in subsidiary portion of the net loss of $2,152,000. Accounts receivable increased by $8,718,000 due primarily to the increased sales of XOPENEX during December 2001 versus December 2000, and inventory increased by $4,581,000 primarily due to increased production of XOPENEX inventory. Other current assets increased by $5,425,000 primarily due to royalty receivables related the Aventis Fexofenadine Agreement. The accounts payable and accrued expense amounts increased a total of $34,353,000 primarily due to the timing of cash disbursements and increased research and development, and sales and marketing activities. Other current liabilities increased by $10,072,000 primarily due to additional accruals for product revenue rebates and return reserves as a result of increased XOPENEX revenues.

        The net cash provided by investing activities for the year ended December 31, 2001 was $77,400,000. Cash provided by net sales of short and long-term investments was $91,078,000, and net proceeds from the sale of BioSphere stock was $26,526,000 partially offset by the deconsolidation of BioSphere's cash of $9,405,000 and purchases of property and equipment of $28,688,000. Included in purchases of property and equipment is $13,093,000 of loan receivable from a construction loan agreement with a third party related to the construction of a new corporate and research and development building in Marlborough, Massachusetts. Sepracor has recorded the amounts loaned as construction in progress on the balance sheet in accordance with EITF 97-10.

        Sepracor expects purchases of property and equipment costs to be approximately $50,000,000 to $55,000,000 in 2002, of which $14,225,000 represents an additional advance under the construction loan agreement with a third party related to the construction of a new corporate and research and development building in Marlborough, Massachusetts, approximately $12,000,000 is furniture, fixtures, and leasehold improvements related to the new building and $16,000,000 is for computer equipment and software. The Company expects depreciation to be approximately $12,000,000 to $15,000,000 in 2002. Sepracor has an option to purchase the land and building being constructed upon its completion in June 2002 and extending through January 2004, at a purchase price estimated to be $38,000,000. If Sepracor elects to purchase the building, the construction loan outstanding, estimated to be $27,319,000 at June 2002, would be repaid to Sepracor.

        The net cash provided by financing activities for the year ended December 31, 2001 was $491,662,000. The Company received approximately $486,018,000 in net proceeds from the issuance of the $500,000,000 in aggregate principal amount of 5.75% convertible subordinated notes. The Company also received approximately $4,701,000 in proceeds from the issuance of approximately 309,000 shares of common stock under its employee stock plans.

        Sepracor does not have any off-balance sheet arrangements, or special purpose entities or activities that include non-exchange traded contracts accounted for at fair value.

        Sepracor's wholly-owned subsidiary, Sepracor Canada Limited, has an interest free credit agreement with a Canadian provincial business development agency for approximately $370,000 in term debt. At December 31, 2001, Sepracor Canada Limited had received approximately $370,000 of such term debt, of which approximately $78,000 remains outstanding. Sepracor Canada Limited also has a Canadian Government grant which may be repayable if Sepracor Canada Limited fails to meet certain conditions. The grant is recorded as debt and is being amortized over the useful lives of the related capital assets. The unamortized balance as of December 31, 2001 was approximately $779,000.

Line of Credit

        Sepracor is party to a revolving line of credit agreement with a commercial bank (the "Revolving Credit Agreement"), which provides for borrowing of up to $25,000,000. In December 2001, Sepracor

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amended its Revolving Credit Agreement to remove BioSphere as a party and extended the term to March 31, 2002. Sepracor intends to seek to extend the Revolving Credit Agreement in 2002. Sepracor may not be able to successfully extend the Revolving Credit Agreement or negotiate a revolving line of credit with another commercial bank. Interest is payable monthly in arrears at prime (4.75% at December 31, 2001) or the LIBOR rate (1.9% at December 31, 2001) plus .75%. All borrowings are collateralized by certain assets of the Company. The Revolving Credit Agreement contains covenants relating to minimum tangible capital base, minimum cash or cash equivalents, minimum liquidity ratio and maximum leverage. At December 31, 2001 and 2000, no amounts were outstanding under the Revolving Credit Agreement.

Convertible Subordinated Debt

        In February 1998, Sepracor issued $189,475,000 in principal amount of 6.25% convertible subordinated debentures due 2005 (the "6.25% Debentures"). The 6.25% Debentures were convertible into Sepracor common stock, at the option of the holder, at a price of $23.685 per share and bore interest at 6.25% payable semi-annually, commencing on August 15, 1998. The 6.25% Debentures were redeemable by the Company commencing February 2001. As part of the sale of the 6.25% Debentures, Sepracor incurred approximately $6,105,000 of offering costs, which were recorded as other assets and were being amortized over seven years, the term of the 6.25% Debentures. The net proceeds to the Company after offering costs were approximately $183,370,000.

        In February 2000, Sepracor converted $96,424,000 in principal amount of its 6.25% Debentures. Costs related to the conversion of the 6.25% Debentures, including inducements and other costs of approximately $7,497,000, were recorded as other expense. As a result of the conversion, Sepracor issued 4,071,176 shares of Sepracor common stock and wrote off approximately $2,373,000 of deferred finance costs against additional paid-in capital.

        In January 2001, the Company announced that on February 21, 2001 it would redeem the $92,858,000 in principal amount of 6.25% Debentures that remained outstanding. On February 20, 2001, prior to the redemption, all outstanding 6.25% Debentures were converted. As a result of the conversion, Sepracor issued 3,920,608 shares of Sepracor common stock and wrote off approximately $1,525,000 of deferred finance costs against additional paid-in capital.

        In December 1998, Sepracor issued $300,000,000 in principal amount of 7% convertible subordinated debentures due 2005 (the "7% Debentures"). The 7% Debentures are convertible into Sepracor common stock, at the option of the holder, at a price of $62.4375 per share and bear interest at 7% payable semi-annually, commencing on June 15, 1999. The 7% Debentures were not redeemable by the Company until December 20, 2001. The Company may be required to repurchase the 7% Debentures at the option of the holders if there was a change in control of the Company. As part of the sale of the 7% Debentures, Sepracor incurred approximately $9,919,000 of offering costs, which were recorded as other assets and are being amortized over seven years, the term of the 7% Debentures. The net proceeds to the Company after offering costs were approximately $290,081,000.

        In February 2000, Sepracor issued $400,000,000 in principal amount of 5% convertible subordinated debentures due 2007 (the "5% Debentures"). On March 9, 2000, Sepracor issued an additional $60,000,000 in principal amount of 5% Debentures pursuant to an option granted to the initial purchaser of the 5% Debentures. The 5% Debentures are convertible into Sepracor common stock, at the option of the holder, at a price of $92.38 per share and bear interest at 5% payable semi-annually, commencing on August 15, 2000. The 5% Debentures are redeemable by the Company prior to February 15, 2003 if the trading price of Sepracor common stock exceeds 150% of the conversion price ($138.57) for 20 trading days in a period of 30 consecutive trading days. The 5% Debentures are redeemable by the Company on or after February 15, 2003 if the trading price of Sepracor common stock exceeds 120% of the conversion price ($110.86) for 20 trading days in a period of 30 consecutive

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trading days. The Company may be required to repurchase the 5% Debentures at the option of the holders if there is a change in control of the Company. As part of the sale of the 5% Debentures, Sepracor incurred approximately $14,033,000 of offering costs, which were recorded as other assets and are being amortized over seven years, the term of the 5% Debentures. The net proceeds to the Company after offering costs were approximately $445,967,000.

        In November 2001, Sepracor issued $400,000,000 in principal amount of 5.75% convertible subordinated notes due 2006 (the "5.75% Notes"). In December 2001, Sepracor issued an additional $100,000,000 in principal amount of 5.75% Notes pursuant to an option granted to the initial purchaser of the 5.75% Notes. The 5.75% Notes are convertible into Sepracor common stock, at the option of the holder, at a price of $60.00 per share. The 5.75% Notes bear interest at 5.75% payable semiannually, commencing on May 15, 2002. The 5.75% Notes are convertible at the option of the Company prior to maturity if the closing price of Sepracor common stock exceeds 145% of the conversion price ($87.00) for at least 20 out of 30 consecutive trading days ending within five trading days prior to notice of conversion. The Company may be required to repurchase the 5.75% Notes at the option of the holders if there is a change in control of the Company. As part of the sale of the 5.75% Notes, Sepracor has incurred offering costs of approximately $13,982,000 and expects to incur total costs of $14,500,000 which have been recorded as other assets and are being amortized over five years, which is the term of the 5.75% Notes. The estimated net proceeds to the Company after offering costs are expected to be approximately $485,500,000.

Sale of BioSphere Common Stock; Change to Equity Method of Accounting

        In July 2001, Sepracor sold 2,000,000 shares of BioSphere common stock held by it in a public offering in which BioSphere also sold 2,000,000 shares of its common stock at a price to the public of $11.00 per share. On August 2, 2001, the underwriters exercised their over-allotment option to purchase an additional 600,000 shares of BioSphere common stock from Sepracor at a price to the public of $11.00 per share. Sepracor received net proceeds, after offering costs, from the sale of BioSphere common stock of approximately $26,526,000 and has recognized a gain of approximately $23,034,000 in 2001. Sepracor recorded approximately $5,590,000 through additional paid-in capital as its gain on BioSphere's sale of 2,000,000 shares of BioSphere common stock. As a result of the public offering, Sepracor's ownership in BioSphere has been reduced from approximately 55% to 25% as of December 31, 2001. Sepracor no longer consolidates BioSphere and now records its investment in BioSphere under the equity method, effective July 3, 2001. Sepracor has recorded $1,601,000 as its share of BioSphere losses for the six months ended December 31, 2001.

        We have summarized below our material contractual cash obligations as of December 31, 2001.