SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
SCHEDULE 13D*
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO
13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO 13d-2(a)
Visible Genetics Inc.
(Name of Issuer)
Common Stock
(Title of Class of Securities)
92829S104
(CUSIP Number)
Peter K. Hilal, MD
c/o Hilal Capital Management
60 East 42nd Street, Suite 1946
New York, NY 10165
(Name, address and telephone
number of person authorized to
receive notices and communications)
July 15, 1999
(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box [ ].
NOTE: Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. See Rule 13d-7 for
other parties to whom copies are to be sent.
(Continued on following pages)
________________
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter the disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be
deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act
of 1934 ("Act") or otherwise subject to the liabilities of that section of the
Act but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
CUSIP No. 92829S104 13D Page 2 of 47 Pages
- -----------------------------------------------------------------------------
(1) NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS.
OF ABOVE PERSONS (ENTITIES ONLY)
Hilal Capital QP, LP
- -----------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [X]
(b) [ ]
- -----------------------------------------------------------------------------
(3) SEC USE ONLY
- -----------------------------------------------------------------------------
(4) SOURCE OF FUNDS **
00
- -----------------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
- -----------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- -----------------------------------------------------------------------------
NUMBER OF (7) SOLE VOTING POWER
-0-
SHARES --------------------------------------------------------------
BENEFICIALLY (8) SHARED VOTING POWER
378,408
OWNED BY --------------------------------------------------------------
EACH (9) SOLE DISPOSITIVE POWER
-0-
REPORTING --------------------------------------------------------------
PERSON WITH (10) SHARED DISPOSITIVE POWER
378,408
- -----------------------------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON
378,408
- -----------------------------------------------------------------------------
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
- -----------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11)
2.9%
- -----------------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON **
PN
- -----------------------------------------------------------------------------
** SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 92829S104 13D Page 3 of 47 Pages
- -----------------------------------------------------------------------------
(1) NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS.
OF ABOVE PERSONS (ENTITIES ONLY)
Hilal Capital, LP
- -----------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [X]
(b) [ ]
- -----------------------------------------------------------------------------
(3) SEC USE ONLY
- -----------------------------------------------------------------------------
(4) SOURCE OF FUNDS **
00
- -----------------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
- -----------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- -----------------------------------------------------------------------------
NUMBER OF (7) SOLE VOTING POWER
-0-
SHARES --------------------------------------------------------------
BENEFICIALLY (8) SHARED VOTING POWER
145,159
OWNED BY --------------------------------------------------------------
EACH (9) SOLE DISPOSITIVE POWER
-0-
REPORTING --------------------------------------------------------------
PERSON WITH (10) SHARED DISPOSITIVE POWER
145,159
- -----------------------------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON
145,159
- -----------------------------------------------------------------------------
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
- -----------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11)
1.1%
- -----------------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON **
PN
- -----------------------------------------------------------------------------
** SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 92829S104 13D Page 4 of 47 Pages
- -----------------------------------------------------------------------------
(1) NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS.
OF ABOVE PERSONS (ENTITIES ONLY)
Hilal Capital Partners LLC
- -----------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [X]
(b) [ ]
- -----------------------------------------------------------------------------
(3) SEC USE ONLY
- -----------------------------------------------------------------------------
(4) SOURCE OF FUNDS **
00
- -----------------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
- -----------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- -----------------------------------------------------------------------------
NUMBER OF (7) SOLE VOTING POWER
-0-
SHARES --------------------------------------------------------------
BENEFICIALLY (8) SHARED VOTING POWER
523,567
OWNED BY --------------------------------------------------------------
EACH (9) SOLE DISPOSITIVE POWER
-0-
REPORTING --------------------------------------------------------------
PERSON WITH (10) SHARED DISPOSITIVE POWER
523,567
- -----------------------------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON
523,567
- -----------------------------------------------------------------------------
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
- -----------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11)
4.0%
- -----------------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON **
OO
- -----------------------------------------------------------------------------
** SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 92829S104 13D Page 5 of 47 Pages
- -----------------------------------------------------------------------------
(1) NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS.
OF ABOVE PERSONS (ENTITIES ONLY)
Hilal Capital Management LLC
- -----------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [X]
(b) [ ]
- -----------------------------------------------------------------------------
(3) SEC USE ONLY
- -----------------------------------------------------------------------------
(4) SOURCE OF FUNDS **
00
- -----------------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
- -----------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- -----------------------------------------------------------------------------
NUMBER OF (7) SOLE VOTING POWER
-0-
SHARES --------------------------------------------------------------
BENEFICIALLY (8) SHARED VOTING POWER
781,210
OWNED BY --------------------------------------------------------------
EACH (9) SOLE DISPOSITIVE POWER
-0-
REPORTING --------------------------------------------------------------
PERSON WITH (10) SHARED DISPOSITIVE POWER
781,210
- -----------------------------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON
781,210
- -----------------------------------------------------------------------------
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
- -----------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11)
5.9%
- -----------------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON **
IA
- -----------------------------------------------------------------------------
** SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 92829S104 13D Page 6 of 47 Pages
- -----------------------------------------------------------------------------
(1) NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS.
OF ABOVE PERSONS (ENTITIES ONLY)
Peter K. Hilal, M.D.
- -----------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [X]
(b) [ ]
- -----------------------------------------------------------------------------
(3) SEC USE ONLY
- -----------------------------------------------------------------------------
(4) SOURCE OF FUNDS **
00
- -----------------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
- -----------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- -----------------------------------------------------------------------------
NUMBER OF (7) SOLE VOTING POWER
357,899
SHARES --------------------------------------------------------------
BENEFICIALLY (8) SHARED VOTING POWER
1,304,777
OWNED BY --------------------------------------------------------------
EACH (9) SOLE DISPOSITIVE POWER
357,899
REPORTING --------------------------------------------------------------
PERSON WITH (10) SHARED DISPOSITIVE POWER
1,304,777
- -----------------------------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON
1,662,676
- -----------------------------------------------------------------------------
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
- -----------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11)
12.6%
- -----------------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON **
IN
- -----------------------------------------------------------------------------
** SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 92829S104 13D Page 7 of 47 Pages
Item 1. Security and Issuer.
This statement relates to (i) shares of common stock, par value (the
"Common Stock") of Visible Genetics Inc. (the "Company"); (ii) Series A
Convertible Preferred Shares, convertible into Common Stock, of the Company
("Preferred Stock"); and (iii) warrants issued by the Company that entitle the
holder to purchase Common Stock (the "Warrants"). The Company's principal
executive offices are located at 700 Bay Street, Suite 1000, Toronto, Ontario,
Canada M5G 126.
Item 2. Identity and Background.
(a) This statement is filed by:
(i) Hilal Capital QP, LP ("HCQP"), a Delaware limited
partnership, with respect to the shares of Common Stock and
Preferred Stock and Warrants owned by it; (ii) Hilal Capital,
LP ("HCLP"), a Delaware limited partnership, with respect to
the shares of Common Stock and Preferred Stock and Warrants owned
by it; (iii) Hilal Capital Partners, LLC ("HCP"), a Delaware
limited liability company, with respect to the shares of Common
Stock and Preferred Stock and Warrants directly owned by HCQP and
HCLP; (iv) Hilal Capital Management LLC ("HCM"), a Delaware
limited liability company, with respect to the shares of Common
Stock and Preferred Stock and Warrants directly owned by Hilal
Capital International ("HCI"), a Cayman Islands company, and shares of
Common Stock held in another discretionary account ("the Account");
and (v) Peter K. Hilal, MD ("Dr. Hilal"), with respect to the
shares of Common Stock and Preferred Stock and Warrants directly
owned by HCQP, HCLP, HCI and the Account, as well as the Common Stock
owned by him directly and by certain managed accounts over which
Dr. Hilal exercises dispositive power.
The general partner of HCQP and HCLP is HCP. HCM serves as
investment manager to HCI and the Account. Dr. Hilal serves
as managing member of HCP and HCM and exercises dispositive power
over certain managed accounts.
The foregoing persons are hereinafter sometimes
collectively referred to as the "Reporting Persons". Any
disclosures herein with respect to persons other than the
Reporting Persons are made on information and belief after
making inquiry to the appropriate party.
(b) The address of the business office of each of the Reporting
Persons is 60 East 42nd Street, Suite 1946, New York, New York
10165.
(c) The principal business of each of HCQP and HCLP is that of a
private investment firm engaging in the purchase and sale of
securities for investment for its own account. The principal
business of HCP is serving as general partner to HCQP and HCLP.
The principal business of HCM is that of an investment manager on
behalf of HCI and the Account. The principal business of Dr.
Hilal is as the Managing Member of HCP and HCM.
<PAGE>
No. 92829S104 13D Page 8 of 47 Pages
(d) None of the persons referred to in paragraph (a) above has,
during the last five years, been convicted in a criminal
proceeding (excluding traffic violations or similar
misdemeanors).
(e) None of the persons referred to in paragraph (a) above has, during
the last five years, been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and, as
a result of such proceeding, was, or is subject to, a judgment,
decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, Federal or State
securities laws or finding any violation with respect to such
laws.
(f) HCQP and HCLP are limited partnerships organized under the laws of
the State of Delaware. HCP and HCM are limited liability
companies organized under the laws of the State of Delaware. Dr.
Hilal is a United States citizen.
Item 3. Source and Amount of Funds and Other Consideration.
On July 15, 1999, HCQP, HCLP, HCI and the Account converted an aggregate
of $3.9 million in principal amount, plus accrued interest of $47,666, of
their outstanding loan to the Company into 3,948 shares of Preferred Stock
(convertible into Common Stock at $11.00 per share) and warrants to purchase
147,098 shares of Common Stock exercisable for a four-year period at $12.60
per share.
The net investment cost (including commissions, if any) of all of the
shares of Common Stock, Preferred Stock, and Warrants directly owned by HCQP is
$4,477,542; HCLP is $1,704,568; HCI is $5,714,787; and the Account is
$4,244,221. The net investment cost (including commissions, if any) of the
shares of Common Stock directly owned by managed accounts over which Dr. Hilal
has dispositive power is $4,388,264. The net investment cost (including
commissions, if any) of the shares of Common Stock directly owned by Dr. Hilal
is $778,903. Neither HCP nor HCM owns directly any shares of Common Stock.
Item 4. Purpose of the Transaction.
The Reporting Persons acquired the shares of Common and Preferred Stock
and the Warrants for investment purposes, and the Reporting Persons intend to
evaluate the performance of such securities as an investment in the ordinary
course of business. The Reporting Persons pursue an investment objective that
seeks capital appreciation. In pursuing this investment objective, the
Reporting Persons analyze the operations, capital structure and markets of
companies in which they invest, including the Company, on a continuous basis
through analysis of documentation and discussions with knowledgeable industry
and market observers and with representatives of such companies (often at the
invitation of management).
<PAGE>
No. 92829S104 13D Page 9 of 47 Pages
Each Reporting Person will continuously assess the Company's business,
financial condition, results of operations and prospects, general economic
conditions, the securities markets in general and those for the Company's
securities in particular, other developments and other investment
opportunities. Depending on such assessments, one or more of the Reporting
Persons may acquire additional shares of Common and Preferred Stock or
Warrants or may determine to sell or otherwise dispose of all or some of its
holdings of shares of Common and Preferred Stock or Warrants. Such actions
will depend upon a variety of factors, including, without limitation, current
and anticipated future trading prices for the Common Stock, the financial
condition, results of operations and prospects of the Company, alternate
investment opportunities, and general economic, financial market and industry
conditions.
None of the Reporting Persons has any plans or proposals which relate to,
or could result in, any of the matters referred to in paragraphs (a) through
(j), inclusive, of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
(a) The approximate aggregate percentage of Common Stock reported
beneficially owned by each person herein is based upon the
9,569,988 shares of Common Stock issued and outstanding as of
July 12, 1999, as reported by the Company's transfer agent, and
also includes 358,879 shares of the Common Stock that would
result from conversion of the Preferred Stock held by the
Reporting Persons, 543,098 shares of Common Stock that would
result from the exercise of the Warrants held by the Reporting
Persons, and 2,727,273 shares of Common Stock that would result
from the conversion of the Preferred Stock held by E.M. Warburg,
Pincus & Co. LLC ("Warburg"), for a total number of 13,199,238
shares issued and outstanding. In view of the fact that the
Preferred Stock generally votes together with the Common Stock on
an as-converted basis, the shares of Preferred Stock held by both
the Reporting Persons and Warburg (representing all of the
outstanding shares of Preferred Stock) have been included in
determining the total shares of Common Stock issued and
outstanding, in order to fairly present the relative voting power
and economic interest of the Reporting Persons. Only the
Warrants owned by the Reporting Persons have been included.
As of the close of business on July 26, 1999:
(i) HCQP owns beneficially 47,979 shares of Common Stock, 1,452
shares of Preferred Stock convertible into 131,970 shares of
Common Stock, and 198,459 Warrants, for a total of 378,408 shares
of Common Stock, constituting approximately 2.9% of the shares of
Common Stock outstanding.
(ii) HCLP owns beneficially 14,458 shares of Common Stock, 571
shares of Preferred Stock convertible into 51,919 shares of Common
Stock, and 78,782 Warrants, for a total of 145,159 shares of
Common Stock, constituting approximately 1.1% of the shares of
Common Stock outstanding.
<PAGE>
No. 92829S104 13D Page 10 of 47 Pages
(iii) HCP owns directly no shares of Common Stock or Preferred
Stock or Warrants. By reason of the provisions of Rule
13d-3 of the Securities Exchange Act of 1934, as amended
(the "Act"), HCP may be deemed to own beneficially the
62,437 shares of Common Stock, 2,023 shares of Preferred
Stock convertible into 183,889 shares of Common Stock, and
277,241 Warrants held by HCQP and HCLP, for a total of
523,567 shares of Common Stock constituting approximately
4.0% of the shares of Common Stock outstanding.
(iv) HCM owns directly no shares of Common Stock or Preferred
Stock or Warrants. By reason of the provisions of Rule
13d-3 of the Act, it may be deemed to beneficially own the
340,363 shares of Common Stock, 1,925 shares of Preferred
Stock convertible into 174,990 shares of Common Stock, and
265,857 Warrants beneficially owned by HCI and the 293,972
shares of Common Stock beneficially owned by the Account.
When the Shares beneficially owned by HCI and the Account
are aggregated they total 340,363 shares of Common Stock,
1,925 shares of Preferred Stock convertible into 174,990
shares of Common Stock, and 265,857 Warrants, totaling
781,210 shares of Common Stock, constituting approximately
5.9% of the shares of Common Stock outstanding.
(v) By reason of the provisions of Rule 13d-3 of the Act, Dr.
Hilal may be deemed to own beneficially the 47,979 shares of
Common Stock, 1,452 shares of Preferred Stock convertible
into 131,970 shares of Common Stock, and 198,459 Warrants
owned by HCQP; the 14,458 shares of Common Stock, 571 shares
of Preferred Stock convertible into 51,919 shares of Common
Stock, and 78,782 Warrants owned by HCLP; the 46,391 shares
of Common Stock, 1,925 shares of Preferred Stock convertible
into 174,990 shares of Common Stock, and 265,857 Warrants
owned by HCI; the 293,972 shares of Common Stock owned by
the Account, and the 357,899 shares of Common Stock owned by
the managed accounts over which Dr. Hilal has dispositive
power. When the shares of Common Stock, Preferred Stock,
and Warrants beneficially owned by HCQP, HCLP, HCI, the
Account and the managed accounts over which Dr. Hilal has
dispositive power are aggregated, they total 760,699 shares
of Common Stock, 3,948 shares of Preferred Stock convertible
into 358,879 shares of Common Stock, and 543,098 Warrants,
totaling 1,662,676 shares of Common Stock or approximately
12.6% of the shares outstanding.
(vi) In the aggregate, the Reporting Persons beneficially own
760,699 shares of Common Stock, 3,948 shares of Preferred
Stock convertible into 358,879 shares of Common Stock and
543,098 Warrants, for a total of 1,662,676 shares of Common
Stock, constituting 12.6% of the shares outstanding.
(b) HCQP and HCLP have the power to dispose of and the power to vote
the shares of Common Stock and Preferred Stock and the Warrants
<PAGE>
No. 92829S104 13D Page 11 of 47 Pages
beneficially owned by them, which power may be exercised by their
general partner, HCP, or HCP's managing member, Dr. Hilal. Each
of HCI and the Account is a party to an investment management
agreement with HCM pursuant to which HCM has investment authority
with respect to securities held by HCI or in the Account, as the
case may be. Such authority includes the power to dispose of and
the power to vote securities held. Such power may be exercised by
HCM's managing member, Dr. Hilal. Dr. Hilal, as the managing
member of HCM and HCP, has shared power to dispose of and shared
power to vote the Common Stock and Preferred Stock and the
Warrants held by other Reporting Persons. Additionally, Dr. Hilal
has sole dispositive power to vote the Common Stock held by
certain managed accounts.
(c) The trading dates, number of shares of Common Stock purchased or
sold and price per share for all transactions in the Common Stock
from the 60th day prior to July 26, 1999 until July 26, 1999 by
HCQP, HCLP, and HCM (on behalf of HCI and the Account), are set
forth in Schedules A, B, and C, respectively. Dr. Hilal has not
bought or sold any shares of common stock from the 60th day prior
to July 26, 1999 until July 26, 1999.
(d) No person other than each respective record owner of shares of
Common Stock, Preferred Stock or Warrants referred to herein is
known to have the right to receive or the power to direct the
receipt of dividends from or the proceeds of sale of such shares
of Common Stock or Preferred Stock or Warrants.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of the Issuer.
Other than the Joint Acquisition Statement attached as Exhibit 1 hereto,
the Conversion Letter attached as Exhibit 2 hereto, and the form of Warrant
attached as Exhibit 3 hereto, there are no contracts, arrangements,
understandings or relationships (legal or otherwise) among the persons named in
Item 2 hereof and between such persons and any person with respect to any
securities of the Company, including but not limited to transfer or voting of
any other securities, finder's fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of profits, divisions of profits or
loss, or the giving or withholding of proxies.
Item 7. Materials to be Filed as Exhibits.
There is filed herewith as Exhibit 1 a written agreement relating to the
filing of joint acquisition statements as required by Rule 13d-1(k) under the
Securities Exchange Act of 1934, as amended.
There is also filed herewith as Exhibit 2 a Conversion Letter which
converted debt held by the Reporting Persons into the equity described in this
Form 13D and a form of Warrant Agreement attached as Exhibit 3.
<PAGE>
No. 92829S104 13D Page 12 of 47 Pages
SIGNATURES
After reasonable inquiry and to the best of our knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
DATED: July 26, 1998
/s/
Dr. Peter K. Hilal, individually, and as
managing member of Hilal Capital Partners LLC,
on behalf of itself and on behalf of
Hilal Capital, LP and Hilal Capital QP, LP as
the general partner thereof, and as managing
member of Hilal Capital Management LLC, on
behalf of itself.
<PAGE>
No. 92829S104 13D Page 13 of 47 Pages
Schedule A
HILAL CAPITAL QP, LP
Number of Price Per Share
Shares of (including commissions,
Date of Common Stock if any)
Transaction Purchased/(Sold)
6/24/99 (14,904) 18.3121
6/25/99 (1,800) 16.9788
07/09/99 (85,000) 10.2781
07/15/99 2,160 13.5824
07/16/99 2,160 14.2282
07/19/99 2,160 14.2486
07/20/99 2,160 13.5398
07/21/99 2,160 13.7273
07/22/99 2,160 13.7027
07/23/99 3,600 14.1336
Number of
Shares of
Date of Preferred Stock Price Conversion
Transaction Purchased/(Sold) Per Share Price
7/15/99 1,452 $1000.00 $11.00
Number of Warrants
Exercisable to
Date of Purchase Common Stock Exercise Expiration
Transaction Purchased/(Sold) Price Date
7/15/99 54,088 $12.60 7/15/2003
<PAGE>
CUSIP No. 92829S104 13D Page 14 of 47 Pages
Schedule B
HILAL CAPITAL, LP
Number of Price Per Share
Shares of (including commissions,
Date of Common Stock if any)
Transaction Purchased/(Sold)
06/24/99 (5,796) 18.3122
06/25/99 (700) 16.9788
07/09/99 (35,000) 10.2781
07/15/99 840 13.5821
07/16/99 840 14.2285
07/19/99 840 14.2486
07/20/99 840 13.5405
07/21/99 840 13.7273
07/22/99 840 13.7274
07/23/99 1,400 14.1335
Number of
Shares of
Date of Preferred Stock Price Conversion
Transaction Purchased/(Sold) Per Share Price
7/15/99 571 $1000.00 $11.00
Number of Warrants
Exercisable to
Date of Purchase Common Stock Exercise Expiration
Transaction Purchased/(Sold) Price Date
7/15/99 21,285 $12.60 7/15/2003
<PAGE>
CUSIP No. 92829S104 13D Page 15 of 47 Pages
Schedule C
HILAL CAPITAL MANAGEMENT LLC
Date of Number of Price Per Share
Transaction Client Shares of (including commissions,
Common Stock if any)
Purchased/(Sold)
06/21/99 HCI (3,700) 16.5842
06/22/99 HCI (19,000) 16.6675
06/23/99 HCI (10,000) 17.5263
07/09/99 HCI (80,000) 10.2578
Number of
Shares of
Date of Preferred Stock Price Conversion
Transaction Client Purchased/(Sold) Per Share Price
7/15/99 HCI 1,925 $1000.00 $11.00
Number of Warrants
Exercisable to
Date of Purchase Common Stock Exercise Expiration
Transaction Client Purchased/(Sold) Price Date
7/15/99 HCI 71,725 $12.60 7/15/2003
<PAGE>
CUSIP No. 92829S104 13D Page 16 of 47 Pages
EXHIBIT 1
JOINT ACQUISITION STATEMENT
PURSUANT TO RULE 13D-1(k)
The undersigned acknowledge and agree that the foregoing statement on Schedule
13D, is filed on behalf of each of the undersigned and that all subsequent
amendments to this statement on Schedule 13D, shall be filed on behalf of each
of the undersigned without the necessity of filing additional joint
acquisition statements. The undersigned acknowledge that each shall be
responsible for the timely filing of such amendments, and for the completeness
and accuracy of the information concerning him or it contained therein, but
shall not be responsible for the completeness and accuracy of the information
concerning the others, except to the extent that he or it knows or has reason
to believe that such information is inaccurate.
Dated: July 23, 1998
/s/
Dr. Peter K. Hilal, individually, and as
managing member of Hilal Capital Partners LLC,
on behalf of itself and on behalf of
Hilal Capital, LP and Hilal Capital QP, LP as
the general partner thereof, and as managing
member of Hilal Capital Management LLC, on
behalf of itself.
<PAGE>
CUSIP No. 92829S104 13D Page 17 of 47 Pages
EXHIBIT 2
CONVERSION LETTER
July 23, 1999
Hilal Capital Management, LLC
60 East 42nd Street Suite 1946
New York, New York 10165
Attention: Dr. Peter K. Hilal
Gentlemen:
Reference is made to the Term Loan Agreement dated as of April 30,
1998, as amended (the "Loan Agreement") among Visible Genetics Corp., Hilal
Capital, LP, Hilal Capital QP, LP, Hilal Capital International, Ltd.,
Highbridge International LLC, Hilal Capital Management LLC, as advisor for Leo
Holdings, Inc., and C.J. Partners L.P.
All capitalized terms used in this letter which are not defined in
this letter and which are defined in the Loan Agreement shall have the same
meaning in this letter as in the Loan Agreement.
Schedule A annexed hereto sets forth the outstanding principal
amount and accrued but unpaid interest as of the date hereof owed by the
Borrower to each Lender. Such schedule shall be amended to reflect additional
accrued interest if the Transaction is not completed on July 15, 1999.
We have advised you that Visible Genetics Inc. (the "Company") and
E.M. Warburg, Pincus & Co. LLC ("Warburg Pincus") entered into a letter of
intent dated July 8, 1999 pursuant to which certain funds affiliated with
Warburg, Pincus intend to invest $30 million in the Company in exchange for
the issuance by the Company to such funds of (the "Transaction") (i) 30,000
Series A Convertible Preferred Shares with a liquidation value of $30 million
which are convertible into common shares of the Company at a conversion price
of $11.00 per share (the "Preferred Shares") and (ii) warrants to purchase
1,100,000 common shares of the Company exercisable for four years at a price
of $12.60 per share (the "Warrants").
By signing this letter, each of us hereby agrees as follows:
1. Effective upon the closing of the Transaction the Loans shall
be repaid as follows:
(a) the full principal amount and all interest owed to each
of Highbridge International LLC ("Highbridge") and Leo Holdings, Inc. ("Leo")
shall be repaid out of the proceeds of the Transaction and such Lenders shall
deliver to the Company, in exchange therefore, the original copies of the
notes evidencing such Loans, marked "Paid in Full."
(b) Each of the Loans outstanding to each Lender other than
Highbridge and Leo shall automatically be converted into (i) that number of
Preferred Shares allocated to such Lender as set forth on Schedule A; and (ii)
that number of Warrants allocated to such Lender as set forth on Schedule A,
and shall be deemed to be paid in full. The Company shall deliver to such
<PAGE>
CUSIP No. 92829S104 13D Page 18 of 47 Pages
Hilal Capital Management, LLC
July 23, 1999
Page 2
Lenders certificates evidencing such preferred shares and warrants in exchange
for the original copies of the promissory notes evidencing such Loans, marked
"Paid in Full."
(c) Concurrent with, and as a condition to, the repayment
of the Loans, the Lenders shall execute and deliver to the Borrower or
Guarantor in form satisfactory for filing in the appropriate jurisdiction,
such termination statements and other instruments as the Borrower and
Guarantor shall request terminating any and all Liens in the assets of the
Company, the Borrower and any of their respective subsidiaries in favor of
Lenders, including but not limited to Liens in patents, trademarks and other
intellectual property. To the extent that any such instrument is not executed
or delivered at the time of repayment of Loans, the Lenders shall promptly
thereafter execute and deliver such instrument to Borrower or Guarantor. Each
Lender shall take any other action which Borrower or Guarantor may reasonably
request so as to ensure that all Liens in favor of Lenders are released and
any recording or other public evidence thereof is extinguished.
(d) Upon repayment of the Loans as set forth herein, the
Loan Agreement and the Guaranty shall be terminated and shall be of no further
force and effect.
2. (a) The Company shall file a registration statement with
the Securities and Exchange Commission on or prior to October 30, 1999,
covering the common shares issuable upon conversion of the Preferred Shares
and exercise the Warrants and shall use its commercially reasonable best
efforts to have such registration statement declared effective by the
Securities and Exchange Commission on or prior to December 31, 1999.
(b) The Company hereby agrees that the common shares
issuable upon conversion of the Preferred Shares and exercise of the Warrants
shall constitute Registrable Securities as such term is defined in the
Registration Rights Agreement dated as of April 30, 1998, among the Company
and the Lenders (the "Registration Rights Agreement").
(c) The Company and the Lenders hereby amend the
Registration Rights Agreement by deleting Section 2.2(b) in its entirety and
replacing it with a new Section 2(b) annexed as Exhibit A hereto. The
Registration Rights Agreement as amended hereby remains in full force and
effect.
3. On the earlier of the date on which the Company or Warburg
Pincus have elected not to complete the Transaction or, if the Transaction
shall not be completed by September 30, 1999, this Agreement shall be of no
further force and effect. If the Transaction is not completed and the Company
enters into an alternative equity financing, the Lenders will have the right,
at their election, to participate in that Transaction by converting their
outstanding Loans on the same basis as the other participants in the
Transaction.
4. (a) This Agreement shall be governed by the laws of the
State of New York without giving effect to the principle of conflicts of laws.
<PAGE>
CUSIP No. 92829S104 13D Page 19 of 47 Pages
Hilal Capital Management, LLC
July 23, 1999
Page 3
(b) This Agreement constitutes the entire understanding of
the parties hereto with respect to this subject matter hereof and supersedes
all prior agreements and understanding among such parties with respect to the
subject matter hereof.
[The rest of this page intentionally left blank]
<PAGE>
CUSIP No. 92829S104 13D Page 20 of 47 Pages
Hilal Capital Management, LLC
July 23, 1999
Page 5
(c) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
Very truly yours,
VISIBLE GENETICS CORP.
By:
-----------------------------
VISIBLE GENETICS INC.
By:
-----------------------------
Agreed and Accepted:
HILAL CAPITAL, LP
By:
----------------------
HILAL CAPITAL QP, LP
By:
----------------------
HILAL CAPITAL INTERNATIONAL, LTD
By:
----------------------
HIGHBRIDGE INTERNATIONAL, LLC
By: Highbridge Capital Management, LLC
By:
----------------------
<PAGE>
CUSIP No. 92829S104 13D Page 21 of 47 Pages
Hilal Capital Management, LLC
July 23, 1999
Page 6
HILAL CAPITAL MANAGEMENT LLC,
ad adviser to Leo Holdings, Inc.
By:
----------------------
C.J. PARTNERS, L.P.
By:
----------------------
<PAGE>
CUSIP No. 92829S104 13D Page 22 of 47 Pages
Exhibit A
---------
Section 2.2(b) of the Hilal Capital Registration Rights Agreement
of April 30, 1998, as proposed to be amended:
(b) Priority in Incidental Registration. If an
-----------------------------------
Incidental Registration involves an Underwritten Offering (on a firm
commitment basis), and the sole or the lead managing Underwriter, as the case
may be, of such Underwritten Offering shall advise the Company in writing
(with a copy to each Holder requesting registration) on or before the date
five days prior to the date then scheduled for such offering that, in its
opinion, the amount of securities (including Registrable Securities) requested
to be included in such registration exceeds the amount which can be sold in
such offering without materially interfering with the successful marketing of
the securities being offered (such writing to state the basis of such opinion
and the approximate number of such securities which may be included in such
offering without such effect), the Company shall include in such registration,
to the extent of the number which the Company is so advised may be included in
such offering without such effect, (i) in the case of a registration initiated
by the Company, (A) first, the securities that the Company proposes to
register for its own account, (B) second, the Registrable Securities requested
to be included in such registration by the Holders and the securities
requested to be included in such registration by any other Person who has been
granted incidental or piggyback registration rights, allocated pro rata in
proportion to the number of securities requested to be included in such
registration by each of them, and (c) third, other securities of the Company
to be registered on behalf of any other Person, and (ii) in the case of a
registration initiated by a Person other than the Company, (A) first, the
securities requested to be included in such registration by any Persons
initiating such registration, allocated pro rata in proportion to the number
of securities requested to be included in such registration by each of them,
(B) second, the Registrable Securities of any Holder and the securities of any
other Persons who have been granted incidental or piggyback registration
rights (who have not initiated such registration) requested to be included in
such registration statement, allocated pro rata in proportion to the number of
securities requested to be included in such registration by each of them, (C)
third, the securities that the Company proposes to register for its own
account, and (D) fourth, other securities of the Company to be registered on
behalf of any other Person; provided, however, that in the event the Company
will not, by virtue of this Section 2.2(b), include in any such registration
all of the Registrable Securities of any Holder requested to be included in
such registration, such Holder may, upon written notice to the Company given
within three days of the time such Holder first is notified of such matter,
reduce the amount of Registrable Securities it desires to have included in
such registration, whereupon only the Registrable Securities, if any, it
desires to have included in such registration, whereupon only the Registrable
Securities, if any, it desires to have included will be so included and the
Holders not so reducing shall be entitled to a corresponding increase in the
amount of Registrable Securities to be included in such registration.
<PAGE>
CUSIP No. 92829S104 13D Page 23 of 47 Pages
Page 1
Schedule A
----------
Interest
Amount Total Number of
Principal of Loan Principal Series A
Amount of Through and Preferred Number of
Loan 7/15/99 Interest Shares Warrants
--------- ------- --------- --------- ---------
1 Hilal Capital, LP 564,217 12,057 576,274 571 21,285
2 Hilal Capital QP, LP 1,434,136 30,647 1,464,783 1,452 54,088
3 Hilal Capital
International, Ltd 1,901,647 40,638 1,942,285 1,925 71,725
4 Highbridge
International 3,000,000 64,110 3,064,110
5 Hilal Capital
Management LLC 100,000 2,137 102,137
Leo Holdings, Inc.
--------- ------- --------- ----- -------
TOTAL 7,000,000 149,589 7,149,589 3,948 147,098
========= ======= ========= ===== =======
<PAGE>
CUSIP No. 92829S104 13D Page 24 of 47 Pages
Page 2
<TABLE>
<CAPTION>
Schedule A
----------
TRANCHE A LOAN ISSUED 9/29 DUE 7/15/99
--------------------------------------
Oct,
Amt 2 Day Nov,
Loaned Adj. Dec
Entity 9/29/98 =2 days Interest
------- ------- --------
<S> <C> <C> <C>
HILAL CAPITAL, LP 145,000 79 3,625
HILAL CAPITAL QP, LP 358,000 196 8,950
HILAL CAPITAL INTL 497,000 272 12,425
--------- --- ------
TOTAL 1,000,000 548 25,000
========= === ======
Jan, Apr,
Feb, May, 15 Days/ Total Total
Mar June 365 Interest due
Interest Interest 7/1 - 7/15 Receivable from VGI
-------- -------- ---------- ---------- --------
<C> <C> <C> <C> <C>
3,718 3,811 642 11,875 156,875
9,179 9,408 1,585 27,733 385,733
12,742 13,061 2,201 38,501 535,501
------ ------ ----- ------ ---------
25,639 26,280 4,428 78,108 1,078,108
====== ====== ===== ====== =========
</TABLE>
<PAGE>
CUSIP No. 92829S104 13D Page 25 of 47 Pages
Page 3
Schedule A (continued)
-------------------------------
Hilal Capital, LP
156,875
Wire Instructions:
Chase Manhattan Bank, N.Y.
ABA #021-000-021
F/A/O Goldman Sachs & Co, N.Y.
A/C # 930-1-011483
F/F/C Hilal Capital, LP
A/C # 002-04545-8
-------------------------------
------------------------------
Hilal Capital QP, LP
385,733
Wire Instructions:
Chase Manhattan Bank, N.Y.
ABA #021-000-021
F/A/O Goldman Sachs & Co, N.Y.
A/C #930-1-011483
F/F/C Hilal Capital QP, LP
A/C # 002-04656-3
------------------------------
----------------------------------------
Hilal Capital International, Ltd
535,501
Wire Instructions:
Citibank, N.Y.
ABA # 021-000-089
F/A/O Goldman Sachs (Cayman) Trust, Ltd.
A/C #4074-61069
F/F/C Hilal Capital International, Ltd
A/C # 002-04675-3
----------------------------------------
<PAGE>
CUSIP No. 92829S104 13D Page 26 of 47 Pages
EXHIBIT 3
FORM OF WARRANT
WARRANT AGREEMENT
THIS WARRANT AGREEMENT dated , 1999
----- --
BETWEEN:
VISIBLE GENETICS INC., a corporation organized
under the laws of Ontario (the "Company")
and
[ ] (the "Purchaser")
----------------
WHEREAS, on the date hereof, the Purchaser has entered into a
Securities Purchase Agreement with the Company pursuant to which, and upon and
subject to the terms and conditions hereof, the Company has agreed to issue to
the Purchaser (registered in such name or names as shall be designated by the
Purchaser by notice to the Company), [ ] warrants (the "Warrants") to
---
purchase in the aggregate [ ] common shares ("Common Shares") of the
----
Company (the "Warrant Shares"), subject to adjustment as provided herein. Each
Warrant entitles the holder to purchase one Common Share, subject to
adjustment pursuant to the terms of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein and for other good and valuable consideration, the parties
hereto agree as follows:
1. Issuance of Warrants; Form of Warrants
--------------------------------------
(a) The Company hereby agrees to issue and deliver to the
Purchaser on the date hereof a certificate evidencing the Warrants. The form
of certificate evidencing the Warrants and the form of election to purchase
the Warrant Shares to be printed on the reverse thereof shall be substantially
as set forth in Exhibit A attached hereto.
(b) The Warrants shall be executed on behalf of the Company by
the manual or facsimile signature of the present or any future Chairman,
President or Vice President of the Company, under its corporate seal, affixed
or in facsimile.
(c) The Warrants shall be dated as of the date of the execution
thereof by the Company either upon initial issuance or upon division,
exchange, substitution or transfer.
<page 1>
<PAGE>
CUSIP No. 92829S104 13D Page 27 of 47 Pages
2. Registration
------------
The Warrants shall be numbered and shall be registered on the
books of the Company (the "Warrant Register") as they are issued. The Company
shall be entitled to treat the registered holder of any Warrant on the Warrant
Register (the "Holder") as the owner in fact thereof for all purposes and
shall not be bound to recognize any equitable or other claim to or interest in
such Warrant on the part of any other Person, and shall not be liable for any
registration or transfer of Warrants which are registered or to be registered
in the name of a fiduciary or the nominee of a fiduciary unless made with the
actual knowledge that a fiduciary or nominee is committing a breach of trust
in requesting such registration or transfer, or with actual knowledge of such
facts that its participation therein amounts to bad faith. The Warrants shall
be registered initially in the name or names as the Purchaser shall request in
such denominations as the Purchaser may request in writing to the Company
prior to the time of issuance of such Warrants requested by the Purchaser.
3. Exchange of Warrant Certificates
--------------------------------
Subject to compliance with any restriction upon transfer set forth
in this Agreement, each Warrant certificate may be exchanged for another
certificate or certificates entitling the Holder thereof to purchase a like
aggregate number of Warrant Shares as the certificate or certificates
surrendered then entitle such Holder to purchase. No fractional Warrant
certificates will be issued. Any Holder desiring to exchange a Warrant
certificate or certificates shall make such request in writing delivered to
the Company and shall surrender, properly endorsed, the certificate or
certificates to be so exchanged. Thereupon the Company shall execute and
deliver to the person entitled thereto a new Warrant certificate or
certificates, as the case may be, as so requested.
4. Transfer of Warrants
--------------------
Subject to compliance with the restrictions on transfer set forth
in this Agreement, and subject to Section 6 hereof, the Warrants shall be
transferable only on the Warrant register upon delivery thereof duly endorsed
by the Holder or by his duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment or authority to
transfer. In all cases of transfer by an attorney, the original power of
attorney, duly approved or an official copy thereof, duly certified, shall be
deposited with the Company. In case of transfer by executors, administrators,
guardians or other legal representatives, duly authenticated evidence of their
authority shall be produced, and may be required to be deposited with the
Company in its discretion.
<page 2>
<PAGE>
CUSIP No. 92829S104 13D Page 28 of 47 Pages
5. Term of Warrants, Exercise of Warrants; Compliance with Government
------------------------------------------------------------------
Regulations
- -----------
5.1 Term of Warrants; Exercise of Warrants
--------------------------------------
(a) Each Warrant entitles the registered owner thereof to
purchase one Warrant Share, subject to adjustment pursuant to Section 9 of
this Agreement, at any time from and after the date hereof until 5:00 p.m.,
Toronto time, on the date four (4) years after the date of issuance thereof
("Expiration Date") at an initial purchase price of U.S. $12.60, subject to
adjustment pursuant to Section 9 of this Agreement (such purchase price being
hereinafter referred to as the "Warrant Price"). The Warrant Price is payable
either by: (i) certified check, bank draft or wire transfer, in each case, of
immediately available funds to the Company at its principal office in Toronto,
Ontario, or as the Company may direct; (ii) by surrender to the Company for
cancellation of securities of the Company having a Market Price (as
hereinafter defined) on the date of exercise equal to the Warrant Price; or
(iii) by a combination of the methods described in clauses (i) and (ii) above.
In lieu of exercising the Warrant, the Holder may elect to receive a payment
equal to the difference between (A) the Market Price multiplied by the number
of Warrant Shares as to which the payment is then being elected and (B) the
then Warrant Price multiplied by such number of Warrant Shares, payable by the
Company to the Holder only in shares of Common Shares valued at the Market
Price on the date of exercise.
For purposes hereof, the term "Market Price" shall mean the
average closing price of a Common Share or other security for the 15
consecutive trading days preceding such day on the principal national
securities exchange on which the Common Shares or securities are listed or
admitted to trading or, if not listed or admitted to trading on any national
securities exchange, the average of the reported closing prices during such 15
trading day period on the Nasdaq National Market or, if the shares are not
listed on the Nasdaq National Market, in the over-the-counter market or, if
the Common Shares or securities are not publicly traded, the Market Price for
such day shall be the fair market value thereof determined in good faith and
in the reasonable exercise of good business judgment by the Board of Directors
of the Company.
Each Warrant not exercised prior to 5:00 p.m. Toronto time, on the
Expiration Date shall become void and all rights thereunder and all rights in
respect thereof under this Agreement shall cease as of such time.
(b) The Warrant Price and the number of Warrant Shares are
subject to adjustment upon the occurrence of certain events pursuant to the
provisions of Section 9 of this Agreement. Subject to the provisions of this
Agreement, each Holder shall have the right, which may be exercised as
expressed in such Warrants, to purchase from the Company (and the Company
shall issue and sell to such registered Holder of Warrants) the number of
fully paid and non-assessable Warrant Shares specified in such Warrants, upon
<page 3>
<PAGE>
CUSIP No. 92829S104 13D Page 29 of 47 Pages
surrender to the Company, or its duly authorized agent, of certificates
representing such Warrants, with the form of election to purchase on the
reverse thereof duly filled in and signed, and upon payment to the Company of
the Warrant Price, as adjusted in accordance with the provisions of Section 9
of this Agreement, for the number of Warrant Shares in respect of which such
Warrants are then exercised. The date of exercise of any Warrant shall be
deemed to be the date of its receipt by the Company if received prior to 5:00
p.m. on a business day in Toronto, Ontario or, if not received prior to such
time on such business day, the next business day, duly filled in and signed
and accompanied by proper payment as herein provided. Payment of the Warrant
Price shall be made as aforesaid.
(c) Subject to Section 6 hereof, upon such surrender of
certificates representing Warrants, and payment of the Warrant Price as
aforesaid, the Company shall issue and cause to be promptly delivered to or
upon the written order of the Holder and (subject to receipt of evidence of
compliance with the Securities Act of 1933, as amended (the "Act") or
applicable Canadian securities laws, or both, in accordance with the
provisions of Section 12 of this Agreement) in such name or names as the
Holder may designate, a certificate or certificates for the number of full
Warrant Shares so purchased upon the exercise of such Warrants. If permitted
by applicable law, such certificate or certificates shall be deemed to have
been issued and any person so designated to be named therein shall be deemed
to have become a holder of record of such shares as of the date of the
surrender of such Warrants and payment of the Warrant Price as aforesaid. The
rights of purchase represented by the Warrants shall be exercisable, at the
election of the Holders thereof, either in full or from time to time in part
and, in the event that any Warrant is exercised in respect of less than all of
the Warrant Shares purchasable on such exercise at any time prior to the
Expiration Date, a new certificate evidencing the remaining Warrant or
Warrants will be issued.
5.2 Compliance with Government Regulations
--------------------------------------
The Company covenants that if the issuance of any Warrant Shares
(taking into account all available private placement or similar exemptions)
requires, under any Canadian federal or provincial or U.S. federal or state
law or applicable governing rule or regulation of any national securities
exchange, approval of any governmental authority, or listing on any securities
exchange before such shares may be issued upon exercise, the Company will in
good faith and as expeditiously as possible endeavor to cause such shares to
be duly approved or listed on the relevant securities exchange, as the case
may be or to take such actions as may be necessary to obtain any required
governmental approvals; provided, however, that subject to any registration
rights agreement then in effect between the Company and the Purchaser, in no
event shall such Warrant Shares be issued, and the Company is hereby
authorized to suspend the exercise of all Warrants, for the period during
which such approval or listing is required but not in effect; provided,
further, that in no event shall the Purchaser be permitted to exercise its
rights under this Section 5.2 hereof while a suspension of the exercise of the
Warrants is in effect; provided, further, that in the event that a suspension
of the exercise of the Warrants is in effect on the Expiration Date, the term
<page 4>
<PAGE>
CUSIP No. 92829S104 13D Page 30 of 47 Pages
of the Warrants shall be extended to a date equivalent to the number of days
of such suspension, but in no case more than 150 days after such suspension is
lifted. The Company shall give prompt notice of any such suspension and shall
promptly return all Warrants and payment of the Warrant Price thereof to all
Holders who tender such Warrants and Warrant Price during such suspension
period. Notwithstanding anything contained herein to the contrary, subject to
any registration rights agreement then in effect between the Company and the
Purchaser, nothing herein shall require the Company to register any Warrant
Shares under the Act.
6. Payment of Taxes
----------------
The Company will pay all documentary stamp taxes, if any,
attributable to the initial issuance of Warrant Shares upon the exercise of
Warrants; provided, however, that the Company shall not be required to pay any
tax or other governmental charge which may be payable in respect of any
transfer involved in the issue or delivery of any certificates for Warrants or
Warrant Shares in a name other than that of the registered Holder of such
Warrants, and the Company shall not register any such transfer or issue any
such certificate until such tax or governmental charge, if required, shall
have been paid.
7. Mutilated or Missing Warrants
-----------------------------
In case any of the Warrants shall be mutilated, lost, stolen or
destroyed, the Company shall issue and deliver in exchange and substitution
for and upon cancellation of the mutilated Warrant, or in lieu of and
substitution for the Warrant lost, stolen or destroyed, a new Warrant of like
tenor and representing an equivalent right or interest; but only upon receipt
of evidence reasonably satisfactory to the Company of such loss, theft or
destruction of such Warrant and indemnity or bond, if requested, also
reasonably satisfactory to the Company. An applicant for such substitute
Warrants shall also comply with such other reasonable procedures and pay such
other reasonable charges as the Company may prescribe.
8. Reservation of Warrant Shares: Purchase of Warrants
---------------------------------------------------
8.1 Reservation of Warrant Shares
-----------------------------
The Company hereby represents and warrants that there have been
reserved and allotted to and in favour of the Holder out of the authorized and
unissued Common Shares, a number of shares sufficient to provide for the
exercise of the rights of purchase represented by the Warrants, and the
transfer agent for the Common Shares ("Transfer Agent") and every subsequent
transfer agent for any shares of the Company's capital stock issuable upon the
exercise of any of the rights of purchase aforesaid will forthwith be
irrevocably authorized and directed at all times until the Expiration Date to
reserve such number of authorized and unissued shares as shall be required for
such purpose. The Company will keep a copy of this Agreement on file with the
<page 5>
<PAGE>
CUSIP No. 92829S104 13D Page 31 of 47 Pages
Transfer Agent and with every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. The Company will supply the Transfer Agent and
any such subsequent transfer agent with duly executed certificates
representing Common Shares for such purpose and will itself provide or
otherwise make available any cash which may be required by Section 11 of this
Agreement. The Company will furnish to the Transfer Agent and any such
subsequent transfer agent a copy of all notices of adjustments, and
certificates related thereto, transmitted to each Holder pursuant to Section
9.11 hereof. All Warrants surrendered in the exercise of the rights thereby
evidenced shall be cancelled by the Company and retired.
8.2 Purchase of Warrants by Company
-------------------------------
The Company shall have the right, except as limited by law, other
agreements, or herein, to purchase or otherwise acquire in negotiated
transactions, Warrants at such times, in such manner and for such
consideration as it may deem appropriate.
9. Adjustment of Warrant Price and Number of Warrant Shares
--------------------------------------------------------
9.1 Adjustments. Except as provided in Section 9.10 below, if and
-----------
whenever the Company shall issue or sell any Common Shares for a consideration
per share less than the Warrant Price in effect immediately prior to such
issue or sale (a "Triggering Transaction"), then, forthwith upon such
Triggering Transaction, the Warrant Price shall be reduced to the price
(calculated to the nearest cent) determined by multiplying the Warrant Price
in effect immediately prior to the time of such Triggering Transaction by a
fraction, the numerator of which shall be the sum of (x) the Number of Shares
Deemed Outstanding (as hereinafter defined) immediately prior to such
Triggering Transaction multiplied by the Warrant Price immediately prior to
such Triggering Transaction plus (y) the consideration received by the Company
upon such Triggering Transaction, and the denominator of which shall be the
product of (x) the Number of Shares Deemed Outstanding immediately after such
issue or sale, multiplied by (y) the Warrant Price immediately prior to such
Triggering Transaction. For purposes of this Section 9, the term "Number of
Shares Deemed Outstanding" at any given time shall mean the sum of (i) the
number of Common Shares outstanding at such time, (ii) the number of Common
Shares issuable upon the exercise of any outstanding options, warrants
(including this Warrant) or other securities convertible into Common Shares
outstanding at such time and (iii), without duplication, the number of Common
Shares deemed to be outstanding under this Section 5 at such time.
Upon each adjustment of the Warrant Price pursuant to this Section
9, the Holder shall thereafter be entitled to acquire upon exercise, at the
Warrant Price resulting from such adjustment, the number of Warrant Shares
obtainable by multiplying the Warrant Price in effect immediately prior to
<page 6>
<PAGE>
CUSIP No. 92829S104 13D Page 32 of 47 Pages
such adjustment by the number of Common Shares acquirable immediately prior to
such adjustment and dividing the product thereof by the Warrant Price
resulting from such adjustment. For the purposes of this Section 9.1, the
following Sections 9.2 to 9.5, inclusive, shall also be applicable; except
that this Warrant shall be deemed exercised and outstanding for all purposes
and computations under this Section 9.1 and the then current Warrant Price
shall be deemed the Warrant Price per share.
9.2 Issuance of Rights or Options. In case at any time the Company
-----------------------------
shall in any manner grant (whether directly or by assumption in a merger or
otherwise) any rights to subscribe for or to purchase, or any options for the
purchase of, Common Shares or any shares or securities convertible into or
exchangeable for Common Shares (such convertible or exchangeable shares or
securities being herein called "Convertible Securities") whether or not such
rights or options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share (the "Option
Price") for which Common Shares is issuable upon the exercise of such rights
or options or upon conversion or exchange of such Convertible Securities
(determined by dividing (i) the total amount, if any, received or receivable
by the Company as consideration for the granting of such rights or options,
plus the minimum aggregate amount of additional consideration payable to the
Company upon the exercise of all such rights or options, plus, in the case of
such rights or options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable upon the issue
or sale of such Convertible Securities and upon the conversion or exchange
thereof, by (ii) the total maximum number of Common Shares issuable upon the
exercise of such rights or options or upon the conversion or exchange of all
such Convertible Securities issuable upon the exercise of such rights or
options) shall be less than the Warrant Price in effect immediately prior to
the time of the granting of such rights or options, then the total maximum
number of Common Shares issuable upon the exercise of such rights or options
or upon conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such rights or options shall be (as
of the date of granting of such rights or options) deemed to be outstanding
and to have been issued on the date of such grant for the Option Price per
share. Except as otherwise provided in Section 9.4, no adjustment of the
Warrant Price shall be made upon the actual issue of such Common Shares or of
such Convertible Securities upon exercise of such rights or options or upon
the actual issue of such Common Shares upon conversion or exchange of such
Convertible Securities.
9.3 Issuance of Convertible Securities. In case the Company shall in
----------------------------------
any manner issue (whether directly or by assumption in a merger or otherwise)
or sell any Convertible Securities, whether or not the rights to exchange or
convert thereunder are immediately exercisable, and the price per share (the
"Conversion Price") for which Common Shares are issuable upon which conversion
or exchange (determined by dividing (i) the total amount received or
receivable by the Company as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
<page 7>
<PAGE>
CUSIP No. 92829S104 13D Page 33 of 47 Pages
thereof, by (ii) the total maximum number of Common Shares issuable upon the
conversion or exchange of all such Convertible Securities) shall be less than
the Warrant Price in effect immediately prior to the time of such issue or
sale determined as of the date of such issue or sale of such Convertible
Securities, as the case may be, then the total maximum number of Common Shares
issuable upon conversion or exchange of all such Convertible Securities shall
(as of the date of the issue or sale of such Convertible Securities) be deemed
to be outstanding and to have been issued on such date for the Conversion
Price per share, provided that (a) except as otherwise provided in Section 9.4
below, no adjustment of the Warrant Price shall be made upon the actual issue
of such Common Shares upon conversion or exchange of such Convertible
Securities, and (b) if any such issue or sale of such Convertible Securities
is made upon exercise of any rights to subscribe for or to purchase or any
option to purchase any such Convertible Securities for which adjustments of
the Warrant Price have been or are to be made pursuant to other provisions of
this Section 9, no further adjustment of the Warrant Price shall be made by
reason of such issue or sale.
9.4 Change in Option Price or Conversion Rate; Expiration of Options
----------------------------------------------------------------
or Convertible Securities. Upon the happening of any of the following events,
- -------------------------
namely, if the purchase price provided for in any right or option referred to
in Section 9.2, the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in Section
9.2 or Section 9.3, or the rate at which any Convertible Securities referred
to in Section 9.2 or Section 9.3 are convertible into or exchangeable for
Common Shares shall change at any time (other than under or by reason of
provisions designed to protect against dilution), the Warrant Price in effect
at the time of such event shall forthwith be readjusted to the Warrant Price
which would have been in effect at such time had such rights, options or
Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold. If the purchase price provided for in
any such right or option referred to in Section 9.2 or if the rate at which
any Convertible Securities referred to in Section 9.2 or Section 9.3 are
convertible into or exchangeable for Common Shares shall be adjusted at any
time under or by reason of provisions with respect thereto designed to protect
against dilution then in the case of the delivery of Common Shares upon the
exercise of any such right or option or upon conversion or exchange of any
such right or option or upon conversion or exchange of any such Convertible
Securities, the Warrant Price then in effect hereunder shall forthwith be
adjusted to such respective amount as would have obtained had such right,
option or Convertible Security never been issued as to such Common Shares and
had adjustment been made upon the issuance of Common Shares delivered as
aforesaid. On the expiration of any option or right or the termination of any
right to convert or exchange any Convertible Securities, the Warrant Price
then in effect hereunder shall forthwith be increased to the Warrant Price
which would have been in effect at the time of such expiration or termination
had such option or rights or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination, never been issued and the
Common Shares issuable thereunder shall no longer be deemed outstanding.
<page 8>
<PAGE>
CUSIP No. 92829S104 13D Page 34 of 47 Pages
9.5 Consideration for Shares. In case any Common Shares or Convertible
------------------------
Securities or any rights or options to purchase any such Common Shares or
Convertible Securities shall be issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by the Company
therefor, before deduction therefrom of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Company in
connection therewith. In case any Common Shares or Convertible Securities or
any rights or options to purchase any such Common Shares or Convertible
Securities shall be issued or sold for consideration other than cash, the
amount of the consideration other than cash received by the Company shall be
deemed to be the fair value of such consideration as determined in good faith
and in the reasonable exercise of business judgment by the Board of Directors
of the Company, before deduction of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Company in connection
therewith. In case any Common Shares or Convertible Securities or any rights
or options to purchase such Common Shares or Convertible Securities shall be
issued in connection with any merger in which the Company is the surviving
corporation, the amount of consideration therefor shall be deemed to be the
fair value as determined in good faith and in the reasonable exercise of
business judgment by the Board of Directors of the Company of such portion of
the assets and business of the non-surviving corporation as such Board shall
determine in good faith and in the reasonable exercise of business judgment,
to be attributable to such Common Shares, Convertible Securities, rights or
options, as the case may be. In case any rights or options to purchase any
Common Shares or Convertible Securities shall be issued in connection with the
issue and sale of other securities of the Company, together comprising one
integral transaction in which no specific consideration is allocated to such
rights or options by the parties thereto, such rights or options shall be
deemed to have been issued without consideration.
9.6 Record Date. In case the Company shall take a record of the
-----------
holders of its Common Shares for the purpose of entitling them (i) to receive
a dividend or other distribution payable in Common Shares or in Convertible
Securities, or (ii) to subscribe for or purchase Common Shares or Convertible
Securities, then such record date shall be deemed to be the date of the issue
or sale of the Common Shares deemed to have been issued or sold upon the
declaration of such dividend or in the making of such other distribution or
the date of the granting of such right of subscription or purchase, as the
case may be.
9.7 Distributions. If at any time after the date hereof there is a
-------------
distribution to the holders of Common Shares by way of a dividend (whether in
the ordinary course or otherwise) or other distribution of any of the property
or assets (including cash) of the Company, the Warrant Price shall be adjusted
immediately after the record date for such distribution or dividend by
deducting from the current Warrant Price then in effect on such record date
the amount per share of the dividend or the other distribution to be paid if
<page 9>
<PAGE>
CUSIP No. 92829S104 13D Page 35 of 47 Pages
payable in cash, or the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be conclusive in
the absence of manifest error) per share of any property or other assets to be
distributed to holders of Common Shares. To the extent that such distribution
or dividend is not made or paid, as the case may be, the Warrant Price shall
be readjusted to the Warrant Price which was in effect prior to such record
date.
9.8 Subdivision or Combination of Shares. In case the Company shall at
------------------------------------
any time (i) issue a dividend payable in Common Shares or Convertible
Securities or any rights to subscribe for or to purchase, or any options for
the purchase of, Common Shares or Convertible Securities or (ii) subdivide its
outstanding Common Shares into a greater number of shares or combine its
outstanding Common Shares into a smaller number of shares, the Warrant Price
in effect immediately prior to such subdivision or combination shall be
adjusted to an amount that bears the same relationship to the Warrant Price in
effect immediately prior to such action as the total amount of Common Shares
outstanding immediately prior to such action bears to the total number of
Common Shares outstanding immediately after such action, and the number of
Common Shares purchasable upon the exercise of any Warrant shall be that
number of Common Shares obtained by multiplying the number of Common Shares
purchasable immediately prior to such adjustment upon the exercise of such
Warrant by the Warrant Price in effect immediately prior to such adjustment
and dividing the product so obtained by the Warrant Price in effect after such
adjustment.
9.9 Reorganization, Reclassification, Consolidation, Merger or Sale.
---------------------------------------------------------------
If any capital reorganization or reclassification of the capital shares of the
Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Shares
shall be entitled to receive shares, securities or assets with respect to or
in exchange for Common Shares, then, as a condition of such reorganization,
reclassification, consolidation, exercise, merger or sale, lawful and adequate
provision shall be made whereby the Holder shall thereafter have the right to
receive upon the basis and upon the terms and conditions specified herein and
in lieu of the Common Shares of the Company immediately theretofore receivable
upon the exercise of this Warrant, the highest amount of shares, securities or
assets (including cash) as may be issued or payable with respect to or in
exchange for a number of outstanding Common Shares equal to the number of
Warrant Shares for which this Warrant could have been exercised immediately
prior to such reorganization, reclassification, consolidation, merger or sale,
and in any such case appropriate provision shall be made with respect to the
rights and interests of such holder to the end that the provisions hereof
shall thereafter be applicable, as nearly as may be, in relation to any
shares, securities or assets (including cash) thereafter deliverable upon the
exercise of this Warrant. The Company will not effect any consolidation,
merger or sale, unless prior to the consummation thereof the successor
corporation (if other than the Company) resulting from such consolidation or
merger or the corporation purchasing such assets shall assume, by written
instrument executed and mailed or delivered to the Holder at the last address
<page 10>
<PAGE>
CUSIP No. 92829S104 13D Page 36 of 47 Pages
of such holder appearing on the books of the Company, the obligation to
deliver to such Holder such shares, securities or assets (including cash) as,
in accordance with the foregoing provisions, the Holder may be entitled to
receive. If a purchase, tender or exchange offer is made to and accepted by
the holders of more than 50% of the outstanding Common Shares of the Company,
the Company shall not effect any consolidation, merger or sale with the person
having made such offer or with any Affiliate of such person, unless prior to
the consummation of such consolidation, merger or sale the holder of this
Warrant shall have been given a reasonable opportunity to then elect to
receive upon the exercise of this Warrant either the shares, securities or
assets then issuable with respect to the Common Shares of the Company or the
shares, securities or assets, or the equivalent, issued to previous holders of
the Common Shares in accordance with such offer. For purposes hereof, the
term "Affiliate" with respect to any given person shall mean any person
controlling, controlled by or under common control with the given person.
(b) Notwithstanding the foregoing, in the event of a merger or
consolidation of the Company in which the consideration otherwise receivable
in such merger or consolidation by the Holder upon exercise of the Warrant
consists solely of securities of an issuer whose equity securities are
registered under the Securities Exchange Act of 1934, as amended (a "Public
Issuer"), this Warrant may, at the option of the corporation surviving the
merger or consolidation, be converted into either the right to receive an
amount in cash equal to the number of Warrant Shares for which the Warrant is
then being exercised multiplied by the Market Price of a Common Share or a
warrant to acquire Common Shares of the Public Issuer. In the event the
corporation surviving the merger or consolidation elects to convert this
Warrant into the right to acquire Common Shares of the Public Issuer, the
Warrant Price in effect immediately following such merger or consolidation
shall equal the Warrant Price in effect immediately prior to such merger or
consolidation multiplied by a fraction, the numerator of which shall be the
Market Price of a Common Share of the Public Issuer and the denominator of
which shall be the Market Price of a Common Share of the Company, and the
number of Common Shares of the Public Company for which this Warrant shall be
exercisable shall equal the number of Warrant Shares represented by this
Warrant immediately prior to such merger or consolidation multiplied by a
fraction, the numerator of which shall equal the Market Price of a Common
Share of the Company and the denominator of which shall equal the Market Price
of a Common Share of the Public Issuer.
9.10 No Adjustment for Exercise of Certain Issuances. The provisions
-----------------------------------------------
of this Section 9 shall not apply to any Common Shares issued, issuable or
deemed outstanding under Sections 9.2 to 9.5 inclusive: (i) to any person
pursuant to any stock option, stock purchase or other plan or arrangement
approved by the Board of Directors of the Company for the benefit of officers,
employees, consultants, contractors, or directors of the Company or its
subsidiaries, (ii) pursuant to options, warrants and conversion rights in
existence on the date of issuance hereof (including, without limitation, the
conversion rights set forth in the Company's Series A Convertible Preferred
Shares); or (iii) to shares issuable to Dr. Thomas Merigan in connection with
the letter of understanding previously entered into by the Company with Dr.
Merigan.
<page 11>
<PAGE>
CUSIP No. 92829S104 13D Page 37 of 47 Pages
9.11 Certain Rules. The following rules shall apply regarding the
-------------
adjustment to the number of Warrant Shares:
(a) any adjustments made as a result of the provisions of this
Section 9 are cumulative and will be computed to the nearest whole Warrant
Share except as provided in Section 11;
(b) no adjustment of the Warrant Price shall be made in an
amount less than $.01 per share, but any such lesser adjustment shall be
carried forward and shall be made at the time and together with the next
subsequent adjustment which together with any adjustments so carried forward
shall amount to $.01 per share or more; and
(c) if any question arises at any time with respect to the
number of Warrant Shares or any adjustment to such number or the amount of any
cash payment made in lieu of issuing a fractional share, such question shall
be conclusively determined by the auditors of the Company or, if they are
unwilling or unable to act, by such other firm of independent internationally
recognized chartered accountants as may be selected by the directors and such
determination shall be binding upon the Company and the Holder. If any such
determination is made, the Company shall deliver a notice to the Holder
setting forth the determination made.
9.12 Notice of Adjustment. Upon any adjustment of the Warrant
--------------------
Price, and from time to time upon the request of the Holder the Company shall
furnish to the Holder the Warrant Price resulting from such adjustment or
otherwise in effect and the number of Warrant Shares then available for
purchase under this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
10. Statement on Warrants
---------------------
Irrespective of any adjustments in the Warrant Price or the number
or kind of securities purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
11. Fractional Interests
--------------------
The Company shall not be required to issue fractional Warrant
Shares on the exercise of Warrants. If more than one Warrant shall be
presented for exercise in full at the same time by the same Holder, the number
of full Warrant Shares which shall be issuable upon the exercise thereof shall
be computed on the basis of the aggregate number of Warrant Shares purchasable
on exercise of the Warrants so presented. If any fraction of a Warrant Share
<page 12>
<PAGE>
CUSIP No. 92829S104 13D Page 38 of 47 Pages
would, except for the provisions of this Section 11, be issuable on the
exercise of any Warrant (or specified portion thereof), the Company shall pay
a cash adjustment in respect of such final fraction in an amount equal to the
same fair market value of such fractional share as may be determined in good
faith by the Directors of the Company on the business day which next precedes
the day of exercise.
12. Registration Under the Securities Act of 1933
---------------------------------------------
The Purchaser represents and warrants to the Company that the
Purchaser will not dispose of any Warrants or Warrant Shares except pursuant
to (i) a current prospectus or an effective registration statement or (ii) an
exemption therefrom available under applicable Canadian securities law or the
Act and the rules and regulations of the Securities and Exchange Commission
thereunder. The Purchaser represents and warrants that it is acquiring the
Warrants for its own account and with no intention of distributing or
reselling such Warrants or Warrant Shares or any part thereof in any
transaction that would be in violation of the securities laws of the United
States of America or any state or any province of Canada, without prejudice,
however, to the Purchaser's rights at all times to sell or otherwise dispose
of all or any part of such Warrants or Warrant Shares under a registration
statement under the Act or under an exemption from such registration available
under such Act or under applicable Canadian law.
13. Certificates to Bear Legends
----------------------------
The Warrants shall be subject to a stop-transfer order and the
certificate certificates therefor shall bear the following legend by which
each Holder shall be bound:
"THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE COMMON
SHARES OR OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE
NOT BEEN (A) REGISTERED PURSUANT TO THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER SECURITIES
LAWS AND MAY NOT BE SOLD, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SAID
ACT OR SUCH LAWS, OR AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT A REGISTRATION
STATEMENT IS NOT REQUIRED OR (B) QUALIFIED FOR SALE UNDER THE
SECURITIES LAWS OF ANY CANADIAN PROVINCE AND MAY BE SOLD IN
SUCH PROVINCES ONLY PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION AND PROSPECTUS PROVISIONS OF SUCH SECURITIES
LAWS."
Subject to the provisions of any registration rights or other
agreement between the Company and the Purchaser, the Warrant Shares or other
securities issued upon exercise of the Warrants shall be subject to a
stop-transfer order and the certificate or certificates evidencing any such
Warrant Shares or securities shall, if the facts stated in the following
legend are then correct, bear the following legend by which the Holder thereof
shall be bound:
<page 13>
<PAGE>
CUSIP No. 92829S104 13D Page 39 of 47 Pages
"THE SHARES OR OTHER SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN (A) REGISTERED PURSUANT TO THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER SECURITIES
LAWS AND MAY NOT BE SOLD, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SAID ACT OR SUCH LAWS, OR AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT A REGISTRATION
STATEMENT IS NOT REQUIRED OR (B) QUALIFIED FOR SALE UNDER THE
SECURITIES LAWS OF ANY CANADIAN PROVINCE AND MAY BE SOLD IN
SUCH PROVINCES ONLY PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION AND PROSPECTUS PROVISIONS OF SUCH SECURITIES
LAWS."
14. No Rights as Shareholders; Notices to Holders
---------------------------------------------
Nothing contained in this Agreement or in any of the Warrants shall
be construed as conferring upon the Holders or their transferees the right to
vote or to receive dividends or to consent to or receive notice as
shareholders in respect of any meeting of shareholders for the election of
directors of the Company or on any other matter, or any rights whatsoever as
shareholders of the Company. If, however, at any time prior to the exercise of
the Warrants, the Company shall propose:
(i) to pay a cash dividend or a dividend payable otherwise than
in cash, or any other distribution in respect of the Common Shares
pursuant to, without limitation, any spin-off, split-off or other
distribution of the Company's assets;
(ii) to distribute to all holders of Common Shares evidences of
its indebtedness or assets or securities other than its Common
Shares;
(iii) to offer the holders of its Common Shares the right to
subscribe for or purchase any shares of any class of securities or
to receive any other rights;
(iv) to effect any classification, reclassification, subdivision
or other reorganization or recapitalization of the Common Shares
which the Company is authorized to issue;
(v) to effect a consolidation or merger or a conveyance of all
or substantially all of the assets of the Company; or
(vi) to effect the voluntary or involuntary dissolution,
liquidation or winding up of the Company; then, and in each such
case, the Company shall give notice in writing of such event to
the Holders as provided in Section 17 hereof, such giving of
notice and publication to be completed at least 20 days prior to
the date fixed as a record date or the date of closing the
<page 14>
<PAGE>
CUSIP No. 92829S104 13D Page 40 of 47 Pages
transfer books for the determination of the shareholders entitled
to such dividend, distribution, or subscription rights, or for the
determination of shareholders entitled to vote on such proposed
issuance, classification, reclassification, subdivision,
recapitalization, consolidation, merger, conveyance, dissolution,
liquidation or winding up. Such notice shall specify such record
date or the date of closing the transfer books, as the case may
be. Failure to publish, mail or receive such notice or any defect
therein or in the publication or mailing thereof shall not affect
the validity of any action taken in connection with such dividend,
distribution or subscription rights, or such proposed
reorganization, consolidation, merger, conveyance, dissolution,
liquidation or winding up; provided, however, that any rights of
the Purchaser with respect to any failure of the Company to give
notice as provided herein of any such action shall not be
prejudiced by any such action.
15. Inspection of Warrant Agreement
-------------------------------
The Company shall keep copies of this Agreement available for
inspection by the Holders during normal business hours at its principal
office.
16. Identity of Transfer Agent
--------------------------
Forthwith upon the appointment of any subsequent transfer agent
for the Warrant Shares, or any other securities issuable upon the exercise of
the Warrants, the Company will send to each Holder a statement setting forth
the name and address of such subsequent transfer agent.
17. Notices
-------
All notices and other communications provided for hereunder shall
be in writing and shall be mailed, facsimiled, or sent by Federal Express or
similarly reliable overnight courier, or delivered, if to the Company, at the
following address:
Visible Genetics Inc.
700 Bay Street
Toronto, Ontario M5G IZ6
Attention: Chief Financial Officer
Telephone: (416) 813-3266
Facsimile: (416) 813-3250
<page 15>
<PAGE>
CUSIP No. 92829S104 13D Page 41 of 47 Pages
with copies to:
Goldman, Spring, Schwartz & Kichler
40 Sheppard Avenue West
Suite 700
North York, Ontario
M2N 6K9
Attention: Samuel Schwartz, Esq.
Telephone: (416) 225-9400
Facsimile: (416) 225-4805
and
Baer Marks & Upham LLP
805 Third Avenue
New York, NY 10022
Attention: Steven S. Pretsfelder, Esq.
Telephone: (212) 702-5730
Facsimile: (212) 702-5941
if to the Holder, to it at the following address:
[ ]
-----------------------
Telephone: (212) 953-1002
Facsimile: (212) 953-1012
with a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Attention: Mark A. Broude, Esq.
Telephone: (212) 756-2219
Facsimile: (212) 593-5955
or, as to each party, at such other address as shall be designated by such
party in a written notice to the other party complying as to delivery with the
terms of this Section 17. All such notices and other communications shall be
effective, (i) if mailed, when received, (ii) if sent by facsimile, when
transmitted (provided a confirmation of transmission is received by the
transmitting party), (iii) if delivered to an overnight courier, when
received, or (iv) if delivered, upon delivery.
18. Governing Law
-------------
This Agreement shall be governed by and construed in accordance
with the laws of the Province of Ontario and the laws of Canada applicable
therein.
<page 16>
<PAGE>
CUSIP No. 92829S104 13D Page 42 of 47 Pages
19. Supplements and Amendments
--------------------------
This Agreement may only be amended or supplemented with the
written consent of both the Company and the Holder.
20. Successors
----------
All the covenants and provisions of this Agreement by or for the
benefit of the Company or the Holder shall bind and inure to the
benefit of their respective transferees, assignees, successors and permitted
assigns hereunder.
21. Benefits of this Agreement
--------------------------
Nothing in this Agreement shall be construed to give to any person
or corporation other than the Company and the Holder, any legal or equitable
right, remedy or claim under this Agreement, but this Agreement shall be for
the sole and exclusive benefit of the Company and the Holder of the Warrants
and Warrant Shares.
22. Headings
--------
The headings of the sections and subsections of this Agreement
have been inserted for convenience only and shall have no substantive effect.
23. Counterparts
------------
This Agreement may be executed in counterparts each of which so
executed shall be deemed to be an original, but such counterparts together
shall constitute but one and the same instrument.
24. References to Dollar Amounts
----------------------------
All references in this Agreement or in the exhibits hereto to
dollar amounts shall be to United States dollars.
<page 17>
<PAGE>
CUSIP No. 92829S104 13D Page 43 of 47 Pages
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement on the day, month and year first above written.
VISIBLE GENETICS INC.
By:
--------------------------
Richard T. Daly
President
[____________________________]
By:
--------------------------
Name:
Title:
<page 18>
<PAGE>
CUSIP No. 92829S104 13D Page 44 of 47 Pages
WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE COMMON SHARES
OR OTHER SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN (A) REGISTERED
PURSUANT TO THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER
SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SAID ACT OR SUCH LAWS, OR AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT A
REGISTRATION STATEMENT IS NOT REQUIRED OR (B) QUALIFIED FOR SALE UNDER THE
SECURITIES LAWS OF ANY CANADIAN PROVINCE AND MAY BE SOLD IN SUCH PROVINCES
ONLY PURSUANT TO AN EXEMPTION FROM THE REGISTRATION AND PROSPECTUS PROVISIONS
OF SUCH SECURITIES LAWS.
EXERCISABLE AT ANY TIME FROM AND AFTER 9:00 A.M. TORONTO TIME
ON THE DATE HEREOF UNTIL 5:00 P.M., TORONTO TIME, ON ,
----- ---
[ ] Warrants
------
VISIBLE GENETICS INC.
WARRANT CERTIFICATE
THIS CERTIFIES THAT, for value received, [ ], or its
------------
registered assigns (the "Holder"), is the owner of the number of Warrants set
forth above, each of which entitles the owner thereof to purchase at any time
from and after 9:00 a.m. Toronto time, on the date hereof until 5:00 p.m.
Toronto time on , , one fully paid and non-assessable common share
----- -- ----
(a "Warrant Share") of Visible Genetics Inc., a corporation organized under
the laws of Ontario (the "Company"), at the initial purchase price of U.S.
$12.60 (the "Warrant Price") per share. The number of Warrant Shares and the
Warrant Price are subject to adjustment pursuant to the terms of the Warrant
Agreement dated as of , (the "Warrant Agreement") between the
----- --- ----
Company and the Holder. Payment of the Warrant Price may be made in accordance
with the terms of the Warrant Agreement. Outstanding Warrants not exercised
prior to 5:00 p.m., Toronto time, on , shall become void and all
---- -- ----
rights thereunder and all rights in respect thereof shall cease as of such
time, except as set forth in the Warrant Agreement.
This Warrant Certificate is subject to, and entitled to the
benefits of, all of the terms, provisions and conditions of the Warrant
Agreement, which Warrant Agreement is hereby incorporated herein by reference
and made a part hereof and to which Warrant Agreement reference is hereby made
for a full description of the rights, limitations of rights, obligations,
duties and immunities hereunder of the Company and the holders of the Warrant
Certificates. Copies of the Warrant Agreement are on file at the principal
office of the Company. Except as provided in Section 2 of the Warrant
Agreement, the Holder hereof may be treated by the Company and all other
persons dealing with this Warrant Certificate as the absolute owner hereof for
any purpose and as the person entitled to exercise the rights represented
hereby, or to the transfer hereof on the books of the Company, any notice to
the contrary notwithstanding, and until such transfer on such books, the
Company may treat the Holder hereof as the owner for all purposes.
<page 19>
<PAGE>
CUSIP No. 92829S104 13D Page 45 of 47 Pages
The Warrant Certificate, with or without other Warrant
certificates, upon surrender at the principal office of the Company, may be
exchanged for another Warrant certificate or Warrant certificates of like
tenor and date evidencing Warrants entitling the Holder to purchase a like
aggregate number of Common Shares as the Warrants evidenced by the Warrant
Certificate or Warrant Certificates surrendered entitled such Holder to
purchase. If this Warrant Certificate shall be exercised in part, the Holder
shall be entitled to receive upon surrender hereof, another Warrant
certificate or certificates for the number of whole Warrants not exercised.
No fractional Warrant Shares will be issued upon the exercise or
conversion of any Warrant or Warrants evidenced hereby, but in lieu thereof a
cash payment will be made, as provided in the Warrant Agreement.
No Holder of a Warrant shall be entitled to vote or receive
dividends or be deemed the holder of Common Shares or any other securities of
the Company which may at any time be issuable on the exercise or conversion
hereof for any purpose, nor shall anything contained in the Warrant Agreement
or herein be construed to confer upon such Holder, as such, any of the rights
of a shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issue of shares, reclassification of shares, consolidation,
merger, conveyance, or otherwise) or except as provided in the Warrant
Agreement, to receive notice of meetings or other notices, or to receive
dividends or subscription rights or otherwise, until the Warrant or Warrants
evidenced by this Warrant Certificate shall have been exercised as provided in
the Warrant Agreement.
IN WITNESS WHEREOF, Visible Genetics Inc., has caused its
Chairman, President or Vice President and its Secretary or one of its
Assistant Secretaries to execute this Warrant Certificate (or such officers'
facsimile signatures to be printed hereon).
Dated: ,
----- --- ---
VISIBLE GENETICS INC.
By:
-------------------
Richard T. Daly
President
<page 20>
<PAGE>
CUSIP No. 92829S104 13D Page 46 of 47 Pages
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
FOR VALUE RECEIVED, hereby sells, assigns and
-------------------
transfers unto the within Warrant Certificate, together with
---------------
all right, title and interest therein, and does hereby irrevocably constitute
and appoint attorney, to transfer said Warrant Certificate on
----------------
the books of the within-named company, with full power of substitution in the
premises.
DATED this day of , .
------------ ------------ ----
--------------------------
NOTE: The above signature
should correspond exactly
with the name on the face
of this Warrant Certificate
<page 21>
<PAGE>
CUSIP No. 92829S104 13D Page 47 of 47 Pages
PURCHASE FORM
(To be executed upon exercise of Warrant)
TO: Visible Genetics Inc.
The undersigned, the holder of the within Warrant (the "Holder"),
hereby irrevocably elects to exercise the purchase right represented by such
Warrant for, and to purchase thereunder, Common Shares of Visible
-------
Genetics, Inc. and herewith [makes payment of U.S. $ therefor in full
--------
payment of the Warrant Price][tenders securities having a Market Price of
$ in full payment of the Warrant Price] or [elects to receive a
---------
payment equal to the difference between (i) the Market Price (as defined in
the Warrant) multiplied by (the number of Warrant Shares as to which
------
the payment is being elected) and (ii) , which is the current Warrant
-------
Price multiplied by such number of Warrant Shares, in full payment of the
Warrant Price, payable by the Company to the Holder only in Common Shares
valued at the Market Price in accordance with the terms of the Warrant
Agreement], and requests that the certificates for such shares be issued in
the name of, and be delivered to , whose address is
----------- ---------------
- --------------.
-------------------------
NOTE: The above signature
should correspond exactly
with the name on the face
of this Warrant Certificate
or with the name of
assignee appearing in the
assignment form above.
And, if said number of Common Shares shall not be all the Common Shares
purchasable under the within Warrant Certificate, a new Warrant Certificate is
to be issued in the name of said undersigned for the balance remaining of the
Common Shares purchasable thereunder less, any fraction of a Common Share paid
in cash.
DATED this day of , .
--------- --------------- ----
<page 22 end>
