<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
AMBI INC.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
AMBI INC.
NOTICE OF AN ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the Annual Meeting of Shareholders of
AMBI Inc. (the "Company") will be held at the Rye Town Hilton, 699 Westchester
Avenue, Rye Brook, New York at 10:00 AM on December 17, 1998 for the following
purposes as set forth in the accompanying Proxy Statement:
1. To elect six directors to serve for a term of one year;
2. To approve the creation of a new 1998 Stock Option Plan
authorizing the Company to issue options to acquire up to
2,500,000 shares of Common Stock to directors, officers,
employees and others who render services to the Company;
3. To approve the issuance of certain shares of Common Stock
upon conversion of Series C Convertible Preferred Stock;
4. To ratify the selection and appointment by the Company's
Board of Directors of KPMG Peat Marwick LLP, independent
certified public accountants, as auditors for the Company
for the fiscal year ending June 30, 1999; and
5. To transact such other business as may properly come before
the meeting or any adjournments thereof.
Holders of record of the Company's Common Stock at the close of
business on October 30, 1998 will be entitled to vote at the meeting.
By Order of the Board of Directors
BENJAMIN T. SPORN, Secretary
Dated: November 3, 1998
Whether or not you plan to attend the meeting, please date and sign
the enclosed proxy and return it in the envelope provided. Any person giving a
proxy has the power to revoke it at any time prior to its exercise and if
present at the meeting may withdraw it and vote in person. Attendance at the
meeting is limited to shareholders, their proxies and invited guests of the
Company.
<PAGE>
AMBI INC.
4 Manhattanville Road
Purchase, New York 10577
--------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 17, 1998
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of proxies to be voted at the Annual Meeting of
Shareholders of the Company to be held at the Rye Town Hilton, 699 Westchester
Avenue, Rye Brook, New York at 10 A.M. on December 17, 1998, and at any
adjournments thereof. The shares represented by proxies that are received in
the enclosed form and properly filled out will be voted in accordance with the
specifications made thereon. In the absence of specific instructions, proxies
will be voted in accordance with the recommendations made herein with respect
to the proposals described in this Proxy Statement. Proxies may be revoked by
shareholders by written notice received by the Secretary of the Company at the
address set forth above, at any time prior to the exercise thereof.
Shareholders of record at the close of business on October 30, 1998 are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof. As of October 30, 1998 the Company's voting securities outstanding
totaled 26,725,062 shares of Common Stock.
Item 1 -- Election of Directors
It is the intention of the persons named in the enclosed form of
proxy, unless such proxy specifies otherwise, to nominate and to vote the
shares represented by such proxy for the election of the nominees listed below
to hold office until the next Annual Meeting of Shareholders or until their
respective successors shall have been duly elected and qualified. The Company
has no reason to believe that any of the nominees will become unavailable to
serve as directors for any reason before the Annual Meeting. However, in the
event that any of them shall become unavailable, the person designated as
proxy reserves the right to substitute another person of his choice when
voting at the Annual Meeting. Certain information regarding each nominee is
set forth in the table and text below. The number of shares, if any,
beneficially owned by each nominee is listed below under "Principal
Shareholders and Share Ownership of Directors and Officers."
The directors serve for a term of one year and until their successors
are duly elected and qualified. The Board of Directors held five meetings in
the fiscal year ended June 30, 1998. All directors attended all meetings of
the Board during the fiscal year, except for one director who attended four
meetings. Sheldon G. Gilgore, MD resigned from the office of Chairman of the
Board on October 9, 1997, and Robert E. Flynn was elected Chairman of the
Board on October 9, 1997. Marvin Moser, MD was elected to the Board effective
October 13, 1997. Colin Kop resigned from the Board on December 10, 1997. Dr.
Gilgore resigned from the Board on June 22, 1998, and P. George Benson, PhD
was elected to the Board effective July 1, 1998. The vacancy created by Mr.
Kop's resignation has not been filled to date. The Board can elect a new
director to fill this vacancy at any time. Non-management Directors each
receive a quarterly director's fee of $1,800 and the Chairman of the Board
receives a quarterly director's fee of $3,600. Each also receives $500 for
each meeting of the Board attended in person, $250 for each meeting of the
Board attended telephonically, and each receives annually options to acquire
10,000 shares of Common Stock. The Company has an Audit Committee of the Board
which consists of Mr. Flynn and Dr. Moser. There are no arrangements as to
compensation of members of this committee in such capacity. The Audit
Committee held one meeting during the fiscal year ended June 30, 1998.
1
<PAGE>
The Company has a Compensation Committee of the Board which currently consists
of Dr. Cross, Mr. Flynn and Dr. Pollack. There are no arrangements as to
compensation of members of this committee in such capacity. The Compensation
Committee held two meetings during the fiscal year ended June 30, 1998.
Officers serve at the pleasure of the Board of Directors. There are no family
relationships among directors, nominees or executive officers, nor are there
any arrangements or understandings between any such director or nominee and
any other person pursuant to which any director or nominee was selected as
such other than as described below.
On December 12, 1996, the Company completed the sale of its UK-based
subsidiary, Aplin & Barrett Limited ("A&B") to Burns, Philp & Company Limited
("BP") in accordance with the terms of a Share Purchase Agreement for $13.5
million in cash and the payment to the Company of 2.42 million shares of the
Company's Common Stock held by BP. In connection with the transaction, the
Company and BP entered into an Investors' Rights Agreement pursuant to which
BP agreed until December 11, 1998, not to acquire, directly or indirectly, the
Company's securities, and to refrain from selling the Company's Common Stock,
except under certain circumstances through underwritten public offerings and
private placement transactions. Until December 11, 1998 and so long as BP owns
at least 10% of the Company's outstanding common stock, BP will vote its
shares in favor of Fredric D. Price and one nominee of Fredric D. Price for
election to the Company's Board. So long as BP owns at least 20% of the
Company's outstanding common stock, BP is entitled to nominate one member for
election to the Company's Board. As of the date of sale, two of the Company's
Board members were representatives of BP. BP's Board representatives did not
participate in the vote of the Company's Board which approved the sale of A&B
to BP. As a result of the sale, BP's representation on Registrant's Board of
Directors was reduced from two members to one member. Colin Kop was serving as
the Director designated by BP. Mr. Kop resigned from the Board on December 10,
1997, and BP has not designated a replacement. See also "Certain Relationships
and Related Transactions."
All of the nominees are currently serving as directors. The name, age
and term of office as director of each nominee for election as director and
his or her present position(s) with the Company and other principal
affiliations are:
Nominee for Election Director Since Position(s)
- -------------------- -------------- -----------
Fredric D. Price (52) 1994 President and Chief Executive
Officer
Robert E. Flynn (65) 1996 Chairman of the Board
P. George Benson, PhD (52) 1998 Dean, Terry College of
Business, University of Georgia
Audrey T. Cross, PhD (52) 1995 Associate Clinical Professor,
School of Public Health,
Columbia University
Marvin Moser, MD (74) 1997 Clinical Professor of Medicine,
Yale University School of
Medicine
Robert E. Pollack, PhD (57) 1995 Professor of Biological Science,
Columbia University
Fredric Price has been President, Chief Executive Officer and a
Director of the Company since September 1994. From July 1991 to September
1994, he was Vice President, Finance and Administration and Chief Financial
Officer of Regeneron Pharmaceuticals, Inc. For more than five years prior to
joining Regeneron, he was head of RxFDP, a consulting firm which provided
strategic planning, market development, and new product introduction services
to pharmaceutical
2
<PAGE>
and other health care businesses. From 1973 to 1986 he was at Pfizer
Pharmaceuticals, where he was a Vice President with both line and staff
responsibilities. He has a BA from Dartmouth College and an MBA from the
Wharton School of the University of Pennsylvania.
Robert E. Flynn was elected a Director of the Company in October 1996
and Chairman of the Board of Directors in October 1997. Mr. Flynn is a Senior
Advisor to CSC Index, management consultants. He served as Chairman of the
NutraSweet Company from June 1990 until he retired in December 1995. Mr. Flynn
also served as Chief Executive Officer of the NutraSweet Company from June
1990 until March 1995. From 1981 to 1990, he served in various executive
capacities with Fisher Controls International Inc., including Chairman and
Chief Executive Officer. Prior thereto from 1957 to 1981, Mr. Flynn held
positions of increasing importance with The Carborundum Co. Mr. Flynn is also
a member of the Board of Stanley Technology Group. He received a BSc from
Loyola College, a BEE from McGill University and an MBA from Rutgers
University.
P. George Benson, PhD, was elected a Director of the Company in July
1998. Dr. Benson is Dean of the Terry College of Business and holds the Simon
S. Selig, Jr. Chair for Economic Growth at the University of Georgia. Dr.
Benson was previously the Dean of the Faculty of Management at Rutgers
University and a professor of decision sciences at the Carlson School of
Management of the University of Minnesota. In 1997, he was appointed by the
U.S. Secretary of Commerce to a three year term as one of the nine judges for
the Malcolm Baldrige National Quality Award. In 1996, Business News New Jersey
named Dr. Benson one of New Jersey's "Top 100 Business People". He received a
BS from Bucknell University and a PhD in decision sciences from the University
of Florida.
Audrey T. Cross, PhD, was elected a Director of the Company in
January 1995. Dr. Cross has been Associate Clinical Professor at the Institute
of Human Nutrition at the School of Public Health of Columbia University since
1988. She also works as a consultant in the areas of nutrition and health
policy. She has served as a special assistant to the United States Secretary
of Agriculture as Coordinator for Human Nutrition Policy and has worked with
both the United States Senate and the California State Senate on nutrition
policy matters. Dr. Cross received a BS in dietetics, a Master of Public
Health in nutrition and a PhD from the University of California at Berkeley,
and a JD from the Hastings College of Law at the University of California at
San Francisco.
Marvin Moser, MD was elected to the Board of Directors in October
1997. He is clinical professor of medicine at Yale and senior medical
consultant at the National High Blood Pressure Education Program of the
National Heart, Lung and Blood Institute. Dr. Moser's work has focused on non
pharmacological approaches to the prevention and control of hypertension and
he has published extensively on this subject with over 300 publications. He
has contributed to over 30 books and numerous physician and patient education
programs. Dr. Moser is also a member of the Board of The Third Avenue Value
Funds. Dr. Moser holds a BA from Cornell University and an MD from Downstate
University College of Medicine.
Robert E. Pollack, PhD, was elected a Director of the Company in
January 1995. Dr. Pollack has been a Professor of Biological Sciences at
Columbia University since 1978. In addition, from 1982 to 1989 he was Dean of
Columbia College. Prior thereto he was Professor of Microbiology at the State
University of New York School of Medicine at Stony Brook, Senior Scientist at
Cold Spring Harbor Laboratory, Special NIH fellow at the Weizmann Institute in
Israel, and NIH Fellow in the Department of Pathology at New York University
School of Medicine. He is the author of more than one hundred research papers
on the molecular biology of viral oncogenesis, a dozen articles in the popular
press, and three books. He received a BA in physics from Columbia University
and a PhD in biology from Brandeis University.
3
<PAGE>
Executive Officers
The name, age and position(s) of each executive officer of the Company are:
Name Position(s)
---- -----------
Fredric D. Price (52) President, Chief Executive Officer and
Director
Benjamin T. Sporn (60) Senior Vice President, General Counsel and
Secretary
Gerald A. Shapiro (51) Vice President, Finance and Administration,
and Chief Financial Officer
Jonathan de la Harpe, PhD (53) Vice President, Technical Operations
Alan V. Gallantar (40) Treasurer and Controller
Victor Moreno, PhD (60) Vice President, and President of Nutrition 21
Steven Morvey (44) Vice President, Marketing and Sales
----------------------------
Officers of the Company serve at the pleasure of the Board of
Directors subject to any contracts of employment. See the biographical
descriptions under nominees for election as directors for additional
information on Mr. Price.
Benjamin T. Sporn has been legal counsel to the Company since 1990
and has served as Secretary of the Company since 1986, and was appointed
Senior Vice President and General Counsel in February 1998. He was an attorney
with AT&T from 1964 until December 1989 when he retired from AT&T as a General
Attorney for Intellectual Property Matters. Mr. Sporn was a director of the
Company from 1986 until 1994. He received a BSE degree from Rensselaer
Polytechnic Institute and a JD degree from American University.
Jonathan de la Harpe, PhD, was appointed Vice President, Technical
Operations, of the Company in February 1998. Dr. de la Harpe has been on the
staff at AMBI since 1989, holding positions as Group Leader, Analytical and
Biochemistry; Program Manager; Senior Manager, Product Development; and
Director of Technical Operations, Pharmaceutical Products. In the years 1981
to 1988, Dr. de la Harpe held positions as Post-doctoral Fellow and later
Research Associate at The Rockefeller University, and as Assistant Professor
at Cornell University Medical College. During this period, Dr. de la Harpe
also held positions as a Visiting Scientist at Genentech Inc., and Scientist
at the Friedrich Miescher Institute in Basel, Switzerland. Dr. de la Harpe
holds a BSc (Hons) and PhD from the University of Cape Town, South Africa.
Alan Gallantar was appointed Treasurer and Controller of the Company
in March 1998. For the five years prior to joining the Company, he was Chief
Financial Officer of Bradley Pharmaceuticals, Inc. Previously, he held a
series of increasingly important financial positions with PaineWebber, Inc.
and the Chase Manhattan Bank, N.A. He holds a BA from Queens College and is a
Certified Public Accountant.
Victor Moreno, PhD, was appointed Vice President of the Company in
February 1998. Dr. Moreno is currently and has been for the four years prior,
President of Nutrition 21. From 1991 to 1993, he was Vice President
responsible for worldwide research and development for Mead Johnson
Nutritional Group, a division of Bristol Myers Squibb. From 1969 to 1991, he
4
<PAGE>
held senior management positions with Proctor & Gamble, Richardson Vicks,
Nestle and General Foods. Dr. Moreno received a BS and a PhD in Food Science
and Biochemistry from Cornell University.
Steven Morvay was appointed Vice President, Marketing and Sales of
the Company in July 1998. Prior to joining the Company, Mr. Morvay was
President of Collier Newfield Publications and has spent more than 20 years in
consumer marketing, including direct marketing as well as general marketing
management. His experience encompasses senior positions at "brand name"
companies such as Waldenbooks and Home Box Office as well as advertising
agencies such as Saatchi & Saatchi Direct and Olgilvy & Mather Direct. He hold
a BSc from the Newhouse School of Public Communication at Syracuse University.
Gerald A. Shapiro was appointed Vice President, Finance and
Administration & Chief Financial Officer of the Company in March 1998. From
1996 to 1998, Mr. Shapiro was Managing Director in the Corporate Finance
practice at KPMG Peat Marwick LLP, specializing in merger and acquisition
activities . From 1995 to 1996, he was a Vice President in the Equity Capital
Group of GE Capital Services and also served as Chief Operating Officer and
Director of Shoe-Town, Inc., a GE Capital unit. From 1991 to 1995, Mr. Shapiro
was a Managing Director in the healthcare investment banking group at Furman
Selz LLC, concentrating on pharmaceuticals and medical devices. Prior to that,
he held senior executive positions at Equitable Capital Management Corporation
and ITT Corporation with primary focus on mergers and acquisitions. Mr.
Shapiro received a BSEE from City College of New York and an MBA from the
Columbia University Graduate School of Business.
5
<PAGE>
Executive Compensation
The following table sets forth the compensation paid or accrued by
the Company during the three fiscal years ended June 30, 1998 (i) to its Chief
Executive Officer and (ii) to the four highest paid employees of the Company
whose cash compensation exceeded $100,000 per year in any such year:
SUMMARY COMPENSATION TABLE (1)(2)
<TABLE>
<CAPTION>
==================================================================================================
Name and Principal Annual Compensation Long-Term
Position Compensation
(a)
--------------------------------------------------------------
Period Salary ($) (c) Bonus ($) Securities
(b) (d) Underlying
Options/SARs
(#)(e)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fredric D. Price, President, 7/1/95 -6/30/96 260,000 21,000 -
Chief Executive Officer and
Director
--------------------------------------------------------------
7/1/96 - 6/30/97 275,000 90,000 35,000
--------------------------------------------------------------
7/1/97 - 6/30/98 275,000 75,000 465,000
- --------------------------------------------------------------------------------------------------
Jonathan de la Harpe, 7/1/95 -6/30/96 85,000 - -
Vice President - Technical
Operations
--------------------------------------------------------------
7/1/96 - 6/30/97 89,000 - 10,000
--------------------------------------------------------------
7/1/97 - 6/30/98 113,000 - 10,000
- --------------------------------------------------------------------------------------------------
Victor Moreno, 8/1/97 - 6/30/98 137,000 - 90,000
Vice President, and President
Nutrition 21 (3)
- --------------------------------------------------------------------------------------------------
Solomon Mowshowitz, 1/15/96 - 6/30/96 62,000 - 46,000
Vice President - Research and
Development (4)
--------------------------------------------------------------
7/1/96 - 6/30/97 140,000 - 15,000
--------------------------------------------------------------
7/1/96 - 6/30/97 106,000 - 10,000
- --------------------------------------------------------------------------------------------------
Benjamin T. Sporn, Senior 7/1/95 -6/30/96 120,000 - -
Vice President, General
Counsel, and Secretary
--------------------------------------------------------------
7/1/96 - 6/30/97 127,500 5,000 42,500
--------------------------------------------------------------
7/1/97 - 6/30/98 147,000 - 15,000
==================================================================================================
</TABLE>
(1)The above compensation does not include the use of an automobile and other
personal benefits, the total value of which do not exceed as to any named
officer or director or group of executive officers, the lesser of $50,000 or
10% of such person's or persons' cash compensation.
(2)Pursuant to the regulations promulgated by the Securities and Exchange
Commission (the "Commission"), the table omits a number of columns reserved
for types of compensation not applicable to the Company.
(3)Dr. Moreno joined the Company on August 11, 1997.
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<PAGE>
(4)Dr. Mowshowitz's employment with the Company terminated June 28, 1998.
None of the individuals listed above received any long-term incentive plan
awards during the fiscal year.
Employment Agreement
The Company entered into an employment agreement, effective September
1994, with Fredric Price, which was amended and restated on April 1, 1998. The
agreement has a three year term which ends on March 31, 2001, and provides for
an annual salary of $275,000 and the forgiveness of one-third of a $59,500
loan on March 31 of each year of the term so long as Mr. Price is then
employed by the Company. See table of Option/SAR Grants in Last Fiscal Year
for information on certain stock options which have been granted to Mr. Price
under the employment agreement. Although employment under the agreement is at
will, if employment is terminated by the Company under certain circumstances,
Mr. Price will receive one year's salary in a single payment, certain benefits
will continue for twelve months after termination, and all of Mr. Price's
stock options will vest.
Stock Option Plans
The Board of Directors has adopted and the shareholders have approved
four Stock Option Plans (the "Plan(s)"):
1. The Incentive Stock Option Plan provides for the grant of
qualified incentive stock options to officers and key employees.
2. The Non-qualified Stock Option Plan provides for the grant of
options to various persons who render certain services to the Company.
3. The 1989 Stock Option Plan provides for the grant of options to
either group which, in the case of employees, may be incentive stock options.
4. The 1991 Stock Option Plan provides for the grant of options to
either group which, in the case of employees, may be incentive stock options.
Each of the Incentive and Non-qualified Stock Option Plans permits
the purchase of an aggregate of up to 250,000 shares of Common Stock. The 1989
Stock Option Plan permits the purchase of an aggregate of up to 500,000 shares
of Common Stock. The 1991 Stock Option Plan permits the purchase of an
aggregate of up to 3,000,000 shares of Common Stock. The purpose of the Plans
is to attract and retain competent executive personnel and other key employees
and consultants and to provide incentives to all such persons to use their
effort and skill for the advancement and betterment of the Company by
permitting them to participate in the ownership of the Company.
Options granted as qualified incentive stock options are intended to
qualify as Incentive Stock Options within the meaning of Section 422A of the
Internal Revenue Code of 1986, as amended. The exercise price of Incentive
Stock Options granted under the Plans shall not be less than the fair market
value (110% of the fair market value for 10% or greater shareholders) of the
Common Stock on the date of grant. Incentive Stock Options may not be
exercised later than ten years from the date of grant (five years for 10% or
greater shareholders). Determinations as to recipients of stock options under
the Plans and other terms of such grants are made by the Company's Board of
Directors.
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<PAGE>
The following table sets forth information as of June 30, 1998 with
regard to options granted (i) to the Company's Chief Executive Officer, and
(ii) to other officers of the Company named in the Summary Compensation Table.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Individual Grants Potential Realizable Value
at Assumed Annual Rates of
Stock Appreciation For
Option Term
- -------------------------------------------------------------------------------------------------------------------
Name Number of Percent of Exercise or Expiration Date 5% ($) 10% ($)
Securities Total Options Base Price
Underlying Granted to ($/Sh)
Options Granted Employees in
(#) Fiscal Year
(c)
(b) (d) (e)
(a) (f) (g)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fredric D. Price 465,000 32.42 $1.9375 (1) $367,778 $860,055
- -------------------------------------------------------------------------------------------------------------------
Jonathan de la 10,000 0.69 $2.25 (2) $10,822 $26,170
Harpe
- -------------------------------------------------------------------------------------------------------------------
Victor Moreno 90,000 6.27 $2.4375 (2) $105,514 $255,158
- -------------------------------------------------------------------------------------------------------------------
Solomon 10,000 0.69 $2.25 (3) $1,708 $3,458
Mowshowitz
- -------------------------------------------------------------------------------------------------------------------
Benjamin T. 15,000 1.05 $2.25 (2) $16,233 $39,255
Sporn
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Vesting 33.33% per year; expiration the earlier of 5 years from vesting or
89 days after termination of employment.
(2) Vesting 20% per year; expiration the earlier of 5 years from vesting or 89
days after termination of employment.
(3) Fully Vested; expiration December 31, 1998.
The following table sets forth information with regard to aggregated
option values at June 30, 1998 of options granted (i) to the Company's Chief
Executive Officer, and (ii) to the highest paid employees of the Company whose
cash compensation exceeded $100,000 per year in such year.
8
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
Individual Grants
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Name Shares Value Number of Unexercised Options at Value of Unexercised
Acquired Realized FY-End (#) In-the-Money Options at
on ($) FY-End ($)
Exercise
(#)
-------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fredric D. 0 0 307,000 693,000 0 0
Price
- ---------------------------------------------------------------------------------------------------------
Jonathan 0 0 25,000 18,000 0 0
de la Harpe
- ---------------------------------------------------------------------------------------------------------
Victor 0 0 0 90,000 0 0
Moreno
- ---------------------------------------------------------------------------------------------------------
Solomon 0 0 71,000 0 0 0
Mowshowitz
- ---------------------------------------------------------------------------------------------------------
Benjamin T. 0 0 83,500 49,000 0 0
Sporn
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Pension Plans
Eligible employees of the Company are entitled to participate in the
Burns Philp Inc. ("Burns Philp") Retirement Plan for Non-Bargaining Unit
Employees, a non-contributory pension plan (the "Pension Plan") maintained by
Burns Philp as long as Burns Philp maintains the Pension Plan and owns at
least 20% of the Company's outstanding Common Stock. Burns Philp currently
holds approximately 31% of the Company's outstanding Common Stock. Assuming
retirement at age 65, the Pension Plan provides benefits equal to the greater
of (a) 1.1% of the employee's final average earnings multiplied by the
employee's final average earnings in excess of the average of the contribution
and the benefit basis in effect under Section 230 of the Social Security Act
for each year in the 35-year period ending with the year of Social Security
retirement age, multiplied by the employee's years of credited service up to
35, minus any predecessor plan benefit in the case of an employee who
participated in a predecessor plan or (b) $24 multiplied by the number of
years of credited service up to 25 years plus $12 multiplied by the years of
employment from 26-40 years, minus any predecessor plan benefit in the case of
an employee who participated in a predecessor plan. The "final average
earnings" are the average monthly earnings during the five highest-paid
consecutive calendar years within the last ten calendar years of credited
service with the Company. Earnings include the salary and bonus listed in the
summary compensation table. Earnings which may be considered under the Pension
Plan are limited to $160,000 per year subject to annual cost of living
adjustments as determined by the IRS.
9
<PAGE>
The following table sets forth estimated annual benefits payable upon
retirement, assuming retirement at age 65 in 1998 and a single life annuity
benefit, according to years of credited service and final average earnings.
The benefits listed are not subject to any deduction for Social Security or
other offset amounts.
Years of Credited Service
Final Average
Earnings 15 20 25 30 35
- ---------------------------------------------------------------------
$ 25,000 $ 4,320 $ 5,760 $ 7,200 $ 8,160 $9,600
$ 50,000 $10,080 $13,440 $16,800 $20,160 $23,500
$ 75,000 $16,560 $22,000 $27,720 $33,240 $38,760
$100,000 $23,160 $30,840 $38,640 $46,320 $54,120
$150,000 $36,240 $48,360 $60,480 $72,600 $84,720
$160,000 $38,880 $51,840 $64,720 $77,880 $90,840
and up
Fredric D. Price, Jonathan de la Harpe, Victor Moreno, Solomon
Mowshowitz, and Benjamin T. Sporn each have 3.75, 6.0, 0.875, 2.5, and 6.0
years, respectively, of credited service under the Pension Plan as of June 30,
1998, and, at age 65, would have approximately 17, 18, 5, 12, and 10 years of
credited service, respectively.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission. Officers, directors and greater than ten-percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on review of the copies of such forms furnished to the
Company, or written representations that no Forms 5 were required, the Company
believes that during the period from July 1, 1996 through June 30, 1998 all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were complied with.
10
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return on a
hypothetical investment made on June 30, 1993 through June 30, 1998 (assuming
reinvestment of dividends) in: (a) the Company's Common Stock; (b) all NASDAQ
stocks and (c) all pharmaceutical companies listed on NASDAQ. Pharmaceutical
companies represent the industry grouping for which information was readily
available which is most comparable to the Company. The graph shows how a $100
investment would increase or decrease in value over time, based on dividends
(stock or cash) and increases or decreases in the market price of the stock
and each of the indexes.
[LINE CHART]
Performance Graph -
Date AMBI NASDAQ NASDAQ Pharmaceuticals
6/30/93 100 100 100
6/30/94 73.24 100.51 83.64
6/30/95 33.80 133.30 111.35
6/28/96 118.31 170.09 163.93
6/30/97 58.52 206.69 166.80
6/30/98 31.69 270.63 171.15
Compensation Committee Interlocks and Insider Participation
The Board of Directors determines executive compensation taking into
consideration recommendations of the Compensation Committee. No member of the
Company's Board of Directors is an executive officer of a company whose
compensation committee or board of directors includes an executive officer of
the Company.
Board of Directors Report on Executive Compensation
The process of determining the compensation of the executive officers
of the Company includes, among other things, evaluations of its executive
officers performance against certain objective and subjective assessments and
takes into consideration the performance of Company against planned
objectives. In March 1998 the Board of Directors approved a new three-year
employment agreement with Mr. Price. See "Employment Agreement." The new
employment agreement was negotiated to reward Mr. Price for his successful
efforts in repositioning the Company and to incentivize him to move the
Company forward successfully in its new business.
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Principal Shareholders and Share Ownership of Directors and Officers.
The following table sets forth, as of October 8, 1998, information
regarding the beneficial ownership of the Company's Common Stock based upon
the most recent information available to the Company for (i) each person known
by the Company to own beneficially more than five (5%) percent of the
Company's outstanding Common Stock, (ii) each of the Company's officers and
directors and (iii) all officers and directors of the Company as a group.
Unless otherwise indicated, each stockholder's address is c/o the Company, 4
Manhattanville Road, Purchase, New York 10577.
Shares Owned Beneficially and of Record (1)
-------------------------------------------
Name and Address No. of Shares % of Total
- ---------------- ------------- ----------
Fredric D. Price (2) 444,651 1.72
Robert E. Flynn (3) 82,000 *
P. George Benson (4) 10,000 *
Audrey T. Cross (5) 44,000 *
Jonathan de la Harpe (4) 27,000 *
Alan Gallantar 0 0
Marvin Moser (4) 55,000 *
Victor Moreno (4) 18,000 *
Robert E. Pollack (4) 50,000 *
Gerald A. Shapiro 0 0
Benjamin Sporn (6) 117,125 *
Burns Philp & Company 7,763,837 30.48
Limited (7)
7 Bridge Street
Sydney, NSW 2000
Australia
American Home Products 3,478,261 13.66
Corporation
5 Giralda Farms
Madison, NJ 07940
All Officers and Directors 847,776 3.23
as a Group (10 persons)
(2)(3)(4)(5) and (6)
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* Less than 1%
(1) Includes shares issuable within 60 days upon the exercise of all options
and warrants. Shares issuable under options or warrants are owned
beneficially but not of record.
(2) Includes 414,000 shares issuable upon exercise of currently exercisable
options under the Company's Stock Option Plans.
(3) Includes 80,000 shares issuable upon exercise of currently exercisable
options under the Company's Stock Option Plans.
(4) Consists of shares issuable upon exercise of currently exercisable
options under the Company's Stock Option Plans.
(5) Includes 40,000 shares issuable upon exercise of currently exercisable
options under the Company's Stock Option Plans.
(6) Includes 88,000 shares issuable upon exercise of currently exercisable
options under the Company's Stock Option Plans.
(7) Consists of shares owned by subsidiaries.
Certain Relationships and Related Transactions
As of June 30, 1998 and the date hereof, BP owns 7,763,837 shares of
Common Stock, which were acquired as a result of several transactions from
1989 through 1996.
On December 12, 1996, the Company completed the sale of its UK-based
subsidiary, A&B to BP in accordance with the terms of a Share Purchase
Agreement. As part of this transaction, BP has provided the Company with a
revolving line of credit of up to $2.5 million. Any borrowings under this line
of credit can be forgiven under certain circumstances. As of the date hereof,
no amount has been drawn under this line of credit.
In connection with the transaction, the Company and A&B entered into
two License Agreements. Pursuant to the first License Agreement, the Company
is exclusively licensed by A&B for the use of nisin generally in
pharmaceutical products and animal healthcare products. Pursuant to the second
License Agreement, A&B is exclusively licensed by the Company generally for
the use of nisin as a food preservative and for food preservation. In
addition, the Company entered into a Supply Agreement with A&B pursuant to
which A&B was required to sell nisin to the Company while the Company was
establishing its own source of supply. The Company established its own source
of supply for nisin, and sent notice of termination of the Supply Agreement
effective September 26, 1997.
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Also, in connection with the transaction, the Company and BP entered
into an Investors' Rights Agreement pursuant to which BP agreed until December
11, 1998, not to acquire, directly or indirectly, the Company's securities,
and to refrain from selling the Company's Common Stock, except under certain
circumstances through underwritten public offerings and private placement
transactions. Until December 11, 1998 and so long as BP owns at least 10% of
the Company's outstanding common stock, BP will vote its shares in favor of
Fredric D. Price and one nominee of Fredric D. Price for election to the
Company's Board. So long as BP owns at least 20% of the Company's outstanding
common stock, BP is entitled to nominate one member for election to the
Company's Board. BP's designee resigned from the Board on December 10, 1997,
and BP has not designated a replacement.
As of the date of sale of A&B to BP, two of the Company's Board
members were representatives of BP. BP's Board representatives did not
participate in the vote of the Company's Board which approved the sale of A&B
to BP. As a result of the sale, BP's representation on Registrant's Board of
Directors is reduced from two members to one member. Colin Kop served as the
Director designated by BP until his resignation on December 10, 1997. The
vacancy created by Mr. Kop's resignation has not been filled to date. The
Board can elect a new director to fill this vacancy at any time. The amount of
consideration for the sale was arrived at through arms-length negotiation and
a fairness opinion was obtained.
Item 2 -- Approval of the AMBI Inc. 1998 Stock Option Plan
The Board has determined that the Company should adopt a new Stock
Option Plan in order to make options available to employees, officers,
directors and others who render services to the Company. Accordingly, the
Board has adopted the 1998 Stock Option Plan (the "1998 Plan") and recommends
to the stockholders that the 1998 Plan be approved.
Summary of the 1998 Plan
The Company may grant to its directors, officers, employees,
consultants and others who render services to the Company, options to purchase
("Options") up to 2,500,000 shares of the Company's Common Stock at a price
which may not be less than the fair market value per share in the case of
incentive stock options, or 110% of the fair market value per share in the
case of incentive stock options to a 10% Shareholder. As of October 27, 1998
the closing bid price as reported by NASDAQ for a share of Common Stock was
$1.00. Payment of the exercise price shall be made in cash, or, with the
consent of the Board, in whole or in part, in shares of Common Stock or with a
full recourse interest bearing promissory note of the Optionee secured by a
pledge of the shares received upon exercise of such Option, or by delivering a
properly executed exercise notice together with irrevocable instructions to a
broker to sell shares acquired upon exercise of the Option and promptly to
deliver to the Company a portion of the proceeds thereof equal to the exercise
price. If an option granted under the 1998 Plan shall expire, terminate or be
canceled for any reason without being exercised in full, the corresponding
number of unpurchased shares shall again be available for the purposes of the
1998 Plan. Options may be granted in the form of incentive stock options or
options which do not qualify for treatment as incentive stock options.
The 1998 Plan will be administered by the Board of Directors or by
committees of the Board ("Board"). The Board determines the persons who are to
be granted Options based upon the contribution of such persons to the Company.
The 1998 Plan contains no
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preset criteria determining the identity or amount of options to be granted to
any person or group of persons. Therefore, no determinations can be made at
the present time as to the benefits or amounts that will be or would have been
issued to any specific person or group of persons under the 1998 Plan. No
Option may be exercised after the expiration of 10 years from the date of
grant. No Option may be granted under the 1998 Plan after November 30, 2008.
Incentive stock options are also subject to the following
limitations: (i) The aggregate fair market value (determined at the time an
option is granted) of stock with respect to which incentive stock options are
exercisable for the first time by an optionee during any calendar year (under
all such plans of the Company, its parent or subsidiaries) shall not exceed
$100,000, and (ii) if the individual to whom the incentive stock options were
granted is considered as owning stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company, then (A) the
option price at the time of grant may not be less than 110% of the fair market
value per share for such Common Stock and (B) the option period must be no
more than five years from the date of grant.
An individual whose employment terminates by reason other than death
may generally exercise an Option within an eighty nine-day (89) period, or if
termination is by reason of death, within the twelve month period after such
termination, and then only if and to the extent that such Option was
exercisable at the date of termination of employment.
The Board of Directors may, at any time, alter, suspend or terminate
the 1998 Plan, except that the Board of Directors may not, without further
approval of the stockholders, (1) increase the maximum number of shares for
which Options may be granted under the 1998 Plan or which may be acquired by
an individual employee, (2) decrease the minimum purchase price provided in
the 1998 Plan for shares of Common Stock to be issued upon exercise of
incentive stock options, or (3) change the class of persons eligible to
receive Options. Except in limited circumstances, the Board may not make any
change which would have a material adverse affect upon any Option previously
granted unless the consent of the Optionee is obtained. No person may be
divested of ownership of shares already issued under the 1998 Plan.
The foregoing summary of the 1998 Plan is qualified in its entirety
by, and reference is made to, the 1998 Plan, a copy of which is attached
hereto as Exhibit A.
The grant or exercise of an incentive stock option will not generally
cause recognition of income by the Optionee; however, the amount by which the
fair market value of a share of Common Stock at the time of exercise of an
incentive stock option exceeds the option price, is a "tax preference item"
for purposes of the alternative minimum tax. In the event of a sale of the
shares received upon exercise of an incentive stock option more than two years
from the date of grant and more than one year from the date of exercise, any
appreciation of the shares received above the exercise price should qualify as
long-term capital gain. However, if shares of Common Stock acquired pursuant
to the exercise of an incentive stock option are sold by the Optionee before
the completion of such holding periods, so much of the gain as does not exceed
the difference between the option price and the lesser of the fair market
value of the shares at the date of exercise or the fair market value at the
date of disposition will be taxable as ordinary income for the taxable year in
which the sale occurs. Any additional gain realized on the sale should qualify
as a capital gain. Although the Tax Reform Act of 1986 has eliminated the
difference in tax rates between long term capital gains and ordinary income,
the concept of long term capital gains remains and may, in certain
circumstances be relevant.
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The grant of an Option that is not an incentive stock option (a
"non-qualified option") should not result in recognition of income by the
Optionee. Upon exercise of a non-qualified option by an employee who is not an
officer or director or who is not otherwise subject to the provisions of
Section 16(b) of the Exchange Act ("Section 16(b)"), the excess of the fair
market value of the shares on the exercise date over the option price should
be considered compensation taxable as ordinary income to the employee. If the
Optionee is subject to the restrictions of Section 16(b), income will be
recognized at the time the restrictions lapse and should be measured by the
excess of the fair market value of the shares at such time over the option
price unless the Optionee elects to be taxed at the time of exercise. In the
event of a sale of the shares, any appreciation after the date of exercise or
lapse of the restriction of Section 16(b), as the case may be, should qualify
as capital gain.
In connection with incentive stock options and non-qualified options,
the Company will be entitled to a deduction for federal income tax purposes at
the same time and in the same amount as the ordinary income recognized by the
employee provided any Federal income tax withholding requirements are
satisfied. If applicable holding period requirements in connection with an
incentive stock option are not satisfied, no deduction will be available to
the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
YOU VOTE FOR THE AMBI INC. 1998 STOCK OPTION PLAN
Item 3 -- Approval of the Issuance of Certain Shares
of Common Stock on Conversion of Series C Preferred Stock
Background
Creation of C Preferred and Warrants
The Board of Directors on October 18, 1995 created a new series of
1,000 shares of Series C Preferred Stock (the "C Preferred"). A copy of the
amendment to the Company's Certificate of Incorporation (the "Preferred
Amendment") which created the C Preferred is attached hereto as Exhibit B. The
summary of the terms of the C Preferred in this Proxy Statement is qualified
in its entirety by the terms set forth in the Preferred Amendment.
Each share of C Preferred has a face value of $10,000 per share, and
accrues a premium at 8% per annum for conversion purposes. The C Preferred is
fully convertible at the present time. The conversion price per share is the
lesser of (i) $2.75 or (ii) the average closing bid price of the Common Stock
for the five trading days prior to conversion less a discount 15%. The C
Preferred automatically converts into Common Stock on October 13, 1999 if a
Registration Statement is then effective for the resale of the Common Stock
issuable upon conversion.
In order to effectuate the placement the transaction referred to
above, the Board also authorized the issuance of five-year warrants in the
form of Exhibit C to purchase 136,381 shares of Common Stock at $6.30 per
share (the "Warrants"). The Warrants provide for anti-dilution adjustments in
certain events. The summary of the terms of the Warrants set forth herein is
qualified in its entirety by reference to the actual form of the Warrants set
forth in Exhibit C.
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Nasdaq Rule 4460(i) and Certain Required Redemptions
NASDAQ Rule 4460(i) (the "Rule") provides (with certain exceptions
not relevant here) that, without shareholder approval, a National Market
System company may not in any transaction issue a number of shares equal to
more than 20% of the number of shares of Common Stock then outstanding. As of
October 20, 1995, there were outstanding 18,215,683 shares of Common Stock of
the Company, so that the Company on that date could issue 3,643,136 shares
under the Rule. Accordingly, the C Preferred provides that, unless the Company
obtains the approval of its stockholders to issue more than 3,643,136 shares
under the Rule, the Company is to redeem, and is not to permit conversion of,
any shares of C Preferred whose conversion would otherwise cause the Company
to issue a total number of shares of Common Stock in excess of that permitted
by the Rule. The Company is required to give to each holder notice of
redemption (a "notice of redemption") of the shares which are to be redeemed
and not converted. The redemption price for each such attempted conversion is
a cash amount equal to the product of the number of shares of Common Stock
which would otherwise then be issued on conversion, times the highest bid
price of the Common Stock during the period from the date of the notice of
redemption and ending on the date of redemption. The Company cannot at this
time determine the number of shares of C Preferred which it may be required to
redeem, because the number of shares of Common Stock issuable on conversion of
the C Preferred depends in part on the market price of the Common Stock at the
time of conversion. Redemptions under this paragraph are referred to in this
Proxy Statement as Rule 4460(i) Redemptions.
The Company is seeking shareholder approval for the issuance of all
shares issuable on conversion of the C Preferred in order that the Company not
be required to make the redemption referred to in the preceding paragraph.
Proxies for such approval are being solicited hereby.
Issuance of C Preferred and Warrants
On October 20, 1995, the Company issued 895 shares of C Preferred to
16 purchasers (the "Purchasers") and 136,381 Warrants to Swartz Investments,
Inc., the placement agent. Each share was sold for $10,000. The aggregate
purchase price for all shares was $8,950,000. The Company paid a placement fee
of $648,875 and the Warrants. A copy of the Subscription Agreement is attached
hereto as Exhibit D.
Proposal and Considerations
The Company proposes that the shareholders approve the issuance of
all shares of Common Stock which are issuable on conversion of the C Preferred
in order that the Company not be required to make Rule 4460(i) Redemptions.
Such redemptions would require the expenditure of cash which could otherwise
be applied by the Company for corporate purposes.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR THIS PROPOSAL.
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Item 4 -- Ratification Of Appointment Of Independent Accountants
Subject to the approval by the shareholders, the Board of Directors
has appointed KPMG Peat Marwick as the Company's independent public
accountants to audit its financial statements for the fiscal year ending June
30, 1999. KPMG Peat Marwick also audited the Company's financial statements
since the fiscal years ended June 30, 1993. It is expected that a
representative of KPMG Peat Marwick will be present at the Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS YOU VOTE FOR
RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK AS
INDEPENDENT ACCOUNTANTS FOR FISCAL 1999.
Vote Required
Under New York law, the affirmative vote of a majority of the votes
cast at the Annual Meeting is required ratify adoption of the 1998 Stock
Option Plan, the issuance of Common Stock upon conversion of the C Preferred,
and the appointment of the independent accountants. The affirmative vote of a
plurality of the votes cast at the Annual Meeting is required to elect
directors.
Expense Of Solicitation
The cost of soliciting proxies, which also includes the preparation,
printing and mailing of this Proxy Statement, will be borne by the Company.
Solicitation will be made by the Company primarily through the mail, but
regular employees of the Company may solicit proxies personally, by telephone
or telegram. The Company will request brokers and nominees to obtain voting
instructions of beneficial owners of stock registered in their names and will
reimburse them for any expenses incurred in connection therewith.
Proposals Of Shareholders
Shareholders of the Company who intend to present a proposal for
action at the 1999 Annual Meeting of Shareholders of the Company, must notify
the Company's management of such intention by notice received at the Company's
principal executive offices not later than September 15, 1999 for such
proposal to be included in the Company's proxy statement and form of proxy
relating to such Meeting.
Financial Statements
The Company's Annual Report to Shareholders for the year ended June
30, 1998 is being delivered with this Proxy Statement to the Company's
shareholders.
Other Matters
The Board of Directors knows of no matters that are expected to be
presented for consideration at the Annual Meeting which are not described
herein. However, if other matters properly come before the meeting, it is
intended that the person named in the accompanying proxy will vote thereon in
accordance with his best judgment.
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PLEASE DATE, SIGN AND RETURN THE PROXY CARD AT YOUR EARLIEST CONVENIENCE IN
THE ENCLOSED RETURN ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES. A PROMPT RETURN OF YOUR PROXY CARD WILL BE APPRECIATED AS IT WILL SAVE
THE EXPENSE OF FURTHER MAILINGS.
Dated: Purchase, New York
November 3, 1998
By Order of the Board of Directors
BENJAMIN T. SPORN, Secretary
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LIST OF EXHIBITS
EXHIBIT A 1998 Stock Option Plan
EXHIBIT B Certificate of Amendment of the Certificate of Incorporation
creating the Series C Convertible Preferred Stock
EXHIBIT C Form of Stock Purchase Warrant
EXHIBIT D Form of Securities Subscription Agreement between the Company
and the Purchasers
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EXHIBIT A
AMBI INC.
1998 STOCK OPTION PLAN
There is hereby established a 1998 Stock Option Plan (the "Plan").
The Plan provides for the grant to directors, officers, and employees of AMBI
Inc. (the "Company") or its subsidiaries and consultants and others who
perform services for the Company or its subsidiaries of options ("Options") to
purchase shares of common stock of the Company ("Common Stock").
1. Purpose. The purpose of the Plan is to provide additional
incentive to the directors, officers, employees, consultants and others who
render services to the Company, who are responsible for the management and
growth of the Company, or otherwise contribute to the conduct and direction of
its business, operations and affairs. It is intended that Options granted
under the Plan strengthen the desire of such persons to join and remain in the
employ of (or in the rendering of services to) the Company and stimulate their
efforts on behalf of the Company.
2. The Stock. The aggregate number of shares of Common Stock which
may be subject to Options shall not exceed 2,500,000. Such shares may be
either authorized and unissued shares, or treasury shares. If any Option
granted under the Plan shall expire, terminate or be canceled for any reason
without having been exercised in full, the corresponding number of unpurchased
shares shall again be available for the purposes of the Plan. The preceding
sentence shall apply only for purposes of determining the aggregate number of
shares of Common Stock subject to options, but shall not apply for purposes of
determining the maximum number of shares of Common Stock with respect to which
Options that may be granted to any person participating in the Plan.
3. Administration of the Plan.
(a) The Plan shall be administered by a committee or committees (the
"Committee") which shall be appointed by the Board of Directors of the Company
(the "Board") from among its members. With regard to options to be granted to
directors and officers, the Committee shall be comprised solely of not less
than two members, the majority of whom shall be (i) "Non-Employee Directors"
within the meaning of Rule 16b-3(b)(3) (or any successor rule) promulgated
under the Securities Exchange Act of 1934, as amended, and (ii) unless
otherwise determined by the Board, "outside directors" within the meaning of
Treasury Regulation Section 1.162-27(e)(3) under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"). Subject to the express
provisions of the Plan, the Committee shall have authority, in its discretion,
to determine the individuals to receive Options, the times when they shall
receive them and the number of shares of Common Stock to be subject to each
Option, and other terms relating to the grant of Options.
(b) Subject to the express provisions of the Plan, the Committee
shall have authority to construe the respective option agreements and the
Plan, to prescribe, amend and rescind rules and regulations relating to the
Plan, to determine the terms and provisions of the respective option
agreements (which need not be identical) and, as specified in this Plan, the
fair market value of the Common Stock, and to make all other determinations
necessary or advisable for administering the Plan. The Committee may correct
any defect or supply any omission or reconcile any inconsistency in the Plan
or in any option agreement in the manner and to the extent it shall deem
expedient to carry it into effect, and it shall be the sole and final judge of
such expediency. The determinations of the Committee on the matters referred
to in this Section 3 shall be conclusive.
(c) The Committee may, in its sole discretion, and subject to such
terms and conditions as it may adopt, accelerate the date or dates on which
some or all outstanding Options may be exercised.
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(d) The Committee may require that any Option Shares issued be
legended as necessary to comply with applicable federal and state securities
laws.
4. Types of Options. Options granted under the Plan shall be in the form of
(i) incentive stock options ("ISOs"), as defined in Section 422 of the Code,
or (ii) non-statutory options which do not qualify under such Section
("NSOs"), or both, in the discretion of the Committee. The status of each
Option shall be identified in the option agreement, or if not identified, the
status of each Option shall be an ISO to the extent permitted by law.
5. Eligibility.
(a) ISOs may be granted to employees of the Company, and such
directors and officers who are employees of the Company, as the Committee
shall select from time to time.
(b) NSOs may be granted to directors, officers, employees,
consultants and others who render services to the Company as the Committee
shall select from time to time.
(c) In no event shall the number of shares which are subject to
Options awarded under the Plan to any one person (including any Options which
have been exercised, expired, terminated or canceled for any reason without
having been exercised in full) exceed 1,500,000.
6. Option Price.
(a) The price or prices per share of Common Stock to be sold pursuant
to an Option (the "Exercise Price") shall be such as shall be fixed by the
Committee but shall in any case not be less than:
(i) the fair market value per share for such Common
Stock on the date of grant in the case of ISOs
other than to a 10% Shareholder, and
(ii) 110% of the fair market value per share for
such Common Stock on the date of grant in the case
of ISOs to a 10% Shareholder.
(b) A "10% Shareholder" means an individual who within the meaning of
Section 422(b)(6) of the Code owns stock possessing more than 10 percent of
the total combined voting power to all classes of stock of the Company or of
its parent or any subsidiary corporation.
7. Period of Option Vesting.
(a) The Committee shall determine for each Option the period during
which such Option shall be exercisable in whole or in part, provided, however,
that an ISO shall not be exercisable after the expiration of ten years from
the date of grant of such ISO and provided further that an ISO granted to a
10% Shareholder shall not be exercisable after the expiration of five years
from the date of grant of such ISO.
(b) Special Rule for ISOs. The aggregate fair market value
(determined at the time the ISO is granted and ISOs will be taken into account
in the order in which they were granted) of the stock with respect to which
ISOs are exercisable for the first time by an Optionee (as defined below)
during any calendar year (under all such plans of the Company, its parent or
subsidiaries) shall not exceed $100,000, and any excess shall be considered an
NSO.
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8. Effect of Termination of Employment.
(a) The Committee shall determine for each Option the extent, if any,
to which such Option shall be exercisable in the event of the termination of
the person to whom such Option was granted ("Optionee") from employment with
or rendering of other services to the Company.
(b) However, any such Option which is an ISO shall in all events
lapse unless exercised by the Optionee:
(i) prior to the 89th day after the date on which
employment terminated, if termination was other
than by reason of death; and
(ii) within the twelve-month period next succeeding
the death of the Optionee, if termination is by
reason of death.
(c) The Committee shall have the right, at any time, and from time to
time, with the consent of the Optionee, to modify the lapse date of an Option
and to convert an ISO into an NSO to the extent that such modification in
lapse date increases the life of the ISO beyond the dates set forth above or
beyond dates otherwise permissible for an ISO.
9. Payment for Shares of Common Stock. Upon exercise of an Option, the
Optionee shall make full payment of the Option Price in cash, or, with the
consent of the Committee and to the extent permitted by it:
(a) with Common Stock of the Company valued at fair market value on
date of exercise, but only if held by the Optionee for a period of time
sufficient to prevent a pyramid exercise that would create a charge to the
Company's earnings;
(b) with a full recourse interest bearing promissory note of the
Optionee, secured by a pledge of the shares of Common Stock received upon
exercise of such Option, and having such other terms and conditions as
determined by the Committee;
(c) by delivering a properly executed exercise notice together with
irrevocable instructions to a broker to sell shares acquired upon exercise of
the Option and promptly to deliver to the Company a portion of the proceeds
thereof equal to the exercise price; or
(d) any combination of any of the foregoing.
10. Option Exercises. Options shall be exercised by submitting to the Company
a signed copy of notice of exercise in a form to be supplied by the Company.
The exercise of an Option shall be effective on the date on which the Company
receives such notice at its principal corporate offices. The Company may
cancel such exercise in the event that payment is not effected in full,
subject to the other terms of this Plan.
11. Limited Transferability of Option. No Option shall be assignable or
transferable by the Optionee to whom it is granted, other than by will or laws
of descent and distribution, except that, upon approval by the Committee, the
Optionee may transfer an Option that is not intended to constitute an ISO (a)
pursuant to a qualified domestic relations order as defined for purposes of
the Employee Retirement Income Security Act of 1974, as amended, or (b) by
gift: to a member of the "Family" (as defined below) of the Optionee, to or
for the benefit of one or more organizations qualifying under Code Sec.
501(c)(3) and 170(c)(2) (a "Charitable Organization") or to a trust for the
exclusive benefit of the Optionee, one or more members of the Optionee's
Family, one or more Charitable Organizations, or any combination of the
foregoing, provided that any such transferee shall enter into a written
agreement to be bound by the terms of this Plan and the option agreement.
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<PAGE>
For this purpose, "Family" shall mean the ancestors, spouse, siblings, spouses
of siblings, lineal descendants and spouses of lineal descendants of the
Optionee. During the lifetime of an Optionee to whom an ISO is granted, only
such Optionee (or, in the event of legal incapacity or incompetence, the
Optionee's guardian or legal representative) may exercise the ISO.
12. Other Plan Terms.
(a) The Committee may grant more than one Option to an individual,
and, subject to the requirements of Section 422 of the Code with respect to
ISOs, such Option may be in addition to, in tandem with, or in substitution
for, Options previously granted under the Plan or of another corporation and
assumed by the Company.
(b) The Committee may permit the voluntary surrender of all or a
portion of any Option granted under the Plan or otherwise to be conditioned
upon the granting to the employee of a new Option for the same or a different
number of shares of Common Stock as the Option surrendered, or may require
such voluntary surrender as a condition precedent to a grant of a new Option
to such employee. Such new Option shall be exercisable at the price, during
the period, and in accordance with any other terms or conditions specified by
the Committee at the time the new Option is granted, all determined in
accordance with the provisions of the Plan without regard to the price, period
of exercise, or any other terms or conditions of the Option surrendered.
(c) Options under the Plan may be granted at any time after the Plan
has been approved by the shareholders of the Company. However, no Option shall
be granted under the Plan after November 30, 2008.
(d) In the event of a reorganization, recapitalization, liquidation,
stock split, stock dividend, combination of shares, merger or consolidation,
or the sale, conveyance, lease or other transfer by the Company of all or
substantially all of its property, or any change in the corporate structure or
shares of common stock of the Company, pursuant to any of which events the
then outstanding shares of the common stock are split up or combined or
changed into, become exchangeable at the holder's election for, or entitle the
holder thereof to other shares of common stock, or in the case of any other
transaction described in Section 424(a) of the Code, the Committee may change
the number and kind of shares of Common Stock available under the Plan and any
outstanding Option (including substitution of shares of common stock of
another corporation) and the price of any Option and the fair market value
determined under this Plan in such manner as it shall deem equitable in its
sole discretion.
(e) An Optionee or a legal representative thereof shall have none of
the rights of a stockholder with respect to shares of Common Stock subject to
Options until such shares shall be issued or transferred upon exercise of the
Option.
(f) The Company shall effect the grant of Options under the Plan, in
accordance with determinations made by the Committee, by execution of
instruments in writing in a form approved by the Committee. Each Option shall
contain such terms and conditions (which need not be the same for all Options,
whether granted at the time or at different times) as the Committee shall deem
to be appropriate and not inconsistent with the provisions of the Plan, and
such terms and conditions shall be agreed to in writing by the Optionee.
A-4
<PAGE>
13. Certain Definitions.
(a) Fair Market Value. As used in the Plan, the term "fair
market value" shall mean as of any date:
(i) if the Common Stock is not traded on any
over-the-counter market or on a national securities
exchange, the value determined by the Committee
using the best available facts and circumstances;
(ii) if the Common Stock is traded in the
over-the-counter market, based on most recent
closing prices for the Common Stock on the date the
calculation thereof shall be made; or
(iii) if the Common Stock is listed on a national
securities exchange, based on the most recent
closing prices for the Common Stock of the Company
on such exchange.
(b) Subsidiary and Parent. The terms "subsidiary" and "parent" as
used in the Plan shall have the respective meanings set forth in Sections
424(f) and (e) of the Code.
14. Not an Employment Contract. Nothing in the Plan or in any Option or stock
option agreement shall confer on any Optionee any right to continue in the
service of the Company or any parent or subsidiary of the Company or interfere
with the right of the Company to terminate such Optionee's employment or other
services at any time.
15. Withholding Taxes.
(a) Whenever the Company proposes or is required to issue or transfer
shares of Common Stock under the Plan, the Company shall have the right to
require the Optionee to remit to the Company an amount sufficient to satisfy
any federal, state and/or local withholding tax requirements prior to the
delivery of any certificate or certificates for such shares. Alternatively,
the Company may, in its sole discretion from time to time, issue or transfer
such shares of Common Stock net of the number of shares sufficient to satisfy
the withholding tax requirements. For withholding tax purposes, the shares of
Common Stock shall be valued on the date the withholding obligation is
incurred.
(b) In the case of shares of Common Stock that an Optionee receives
pursuant to his exercise of an Option which is an ISO, if such Optionee
disposes of such shares of Common Stock within two years from the date of the
granting of the ISO or within one year after the transfer of such shares of
Common Stock to him, the Company shall have the right to withhold from any
salary, wages, or other compensation for services payable by the Company to
such Optionee, amounts sufficient to satisfy any withholding tax obligation
attributable to such disposition.
(c) In the case of a disposition described in paragraph (b), the
Optionee shall give written notice to the Company of such disposition within
30 days following the disposition, which notice shall include such information
as the Company may reasonably request to effectuate the provisions hereof.
16. Agreements and Representations of Optionees. As a condition to the
exercise of an Option, unless counsel to the Company opines that it is not
necessary under the Securities Act of 1933, as amended (the "Securities Act"),
and the pertinent rules thereunder, as the same are then in effect, the
Optionee shall represent in writing that the shares of Common Stock being
purchased are being purchased only for investment and without any present
intent at the time of the acquisition of such shares of Common Stock to sell
or otherwise dispose of the same.
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<PAGE>
17. Amendment and Discontinuance of the Plan. The Board may at any time alter,
suspend or terminate the Plan, but no change shall be made which will have a
materially adverse effect upon any Option previously granted, unless the
consent of the Optionee is obtained; provided, however, that the Board may not
without further approval of the shareholders, (i) increase the maximum number
of shares of Common Stock for which Options may be granted under the Plan or
which may be purchased by an individual Optionee, (ii) decrease the minimum
option price provided in the Plan for ISOs, or (iii) change the class of
persons eligible to receive Options.
18. Other Conditions.
(a) If at any time counsel to the Company shall be of the opinion
that any sale or delivery of shares of Common Stock pursuant to an Option
granted under the Plan is or may in the circumstances be unlawful under the
statutes, rules or regulations of any applicable jurisdiction, the Company
shall have no obligation to make such sale or delivery, and the Company shall
not be required to make any application or to effect or to maintain any
qualification or registration under the Securities Act or otherwise with
respect to shares of Common Stock or Options under the Plan, and the right to
exercise any such Option may be suspended until, in the opinion of said
counsel, such sale or delivery shall be lawful.
(b) At the time of any grant or exercise of any Option, the Company
may, if it shall deem it necessary or desirable for any reason connected with
any law or regulation of any governmental authority relative to the regulation
of securities, condition the grant and/or exercise of such Option upon the
Optionee making certain representations to the Company and the satisfaction of
the Company with the correctness of such representations.
19. Approval; Effective Date; Governing Law. This Plan shall become effective
upon the approval by the stockholders of the Company at an annual meeting or
any special meeting of the stockholders of the Company. This Plan shall be
interpreted in accordance with the internal laws of the State of New York.
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
APPLIED MICROBIOLOGY, INC.
(Pursuant to Sections 502 and 805 of the Business Corporation Law)
1. The name of the corporation is Applied Microbiology, Inc. The name
under which it was formed is Applied Microbiology, Inc.
2. The date its certificate of incorporation was filed by the
Department of State is June 29, 1983.
3. The certificate of incorporation is hereby amended by the addition
of the following new Article Fifteenth, which states the number, designation,
relative rights, preferences, and limitations which have been fixed by
resolution of the corporation's board of directors for shares of the 1992
Redeemable Preferred Stock:
"ARTICLE Fifteenth: There is hereby created a series of the Preferred
Stock of this corporation to consist of 1,000 shares of Preferred
Stock, $.01 par value per share, which this corporation now has
authority to issue.
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series C Preferred Stock" (the "Series C Preferred Stock") and
the number of shares constituting the Series C Preferred Stock shall be 1,000.
Such number of shares may be increased or decreased by resolution of the Board
of Directors; provided, that no decrease shall reduce the number of shares of
Series C Preferred Stock to a number less than the number of shares then
outstanding plus the number shares reserved for issuance upon the exercise of
outstanding options, rights or warrants or upon the conversion of any
outstanding securities issued by the Corporation convertible into Series C
Preferred Stock.
Section 2. Rank. The Series C Preferred Stock shall rank: (i) prior
to all of the Corporation's Common Stock, par value $.005 per share ("Common
Stock"); (ii) prior to any class or series of capital stock of the Corporation
hereafter created specifically ranking by its terms junior to any Series C
Convertible Preferred Stock of whatever subdivision (collectively, with the
Common Stock, "Junior Securities"); (iii) on parity with any class or series
of capital stock of the Corporation hereafter created specifically ranking by
its terms on parity with the Series C Preferred Stock ("Parity Securities") in
each case as to distributions of assets upon liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary (all such
distributions being referred to collectively as "Distributions"), and (iv)
junior to the 1992 Preferred Stock and any class or series of capital stock of
the Corporation which is hereafter created and is not specifically ranked
junior to or in parity with the Series C Preferred Stock.
Section 3. Dividends. The Series C Preferred Stock will bear no
dividends, and the holders of the Series C Preferred Stock shall not be
entitled to receive dividends on the Series C Preferred Stock.
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<PAGE>
Section 4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding
up of the Corporation, either voluntary or involuntary, the holders of each
share of Series C Preferred Stock shall be entitled to receive, immediately
after any distributions to Senior Securities required by the Corporation's
Certificate of Incorporation or any certificate of designation of preferences,
and prior and in preference to any distribution to Junior Securities but in
parity with any distribution of Parity Securities, an amount per share equal
to the sum of (i) $10,000 for each such share of Series C Preferred Stock (the
"Original Series C Issue Price") and (ii) an amount equal to 8% of the
Original Series C Issue Price per annum for the period that has passed since
the date of issuance of such share (such amount being referred to herein as
the "Premium"). If upon the occurrence of such event, the assets and funds
thus distributed among the holders of the Series C Preferred Stock and Parity
Securities shall be insufficient to permit the payment to such holders of the
full preferential amounts due to the holders of the Series C Preferred Stock
and the Parity Securities, respectively, then the entire assets and funds of
the Corporation legally available for distribution shall be distributed among
the holders of the Series C Preferred Stock and the Parity Securities, pro
rata, based on the respective liquidation amounts to which each such series of
stock is entitled by the Corporation's Certificate of Incorporation and any
certificate of designation of preferences.
(b) Upon the completion of the distribution required by
subsection 4(a), if assets remain in this Corporation, they shall be
distributed to holders of Parity Securities (unless holders of Parity
Securities have received distributions pursuant to subsection (a) above) and
Junior Securities in accordance with the Corporation's Certificate of
Incorporation including any duly adopted certificate(s) of designation of
preferences.
(c) A consolidation or merger of the Corporation with or
into any other corporation or corporations, or a sale, conveyance or
disposition of all or substantially all of the assets of the Corporation or
the effectuation by the Corporation of a transaction or series of related
transactions in which more than 50% of the voting power of the Corporation is
disposed of, shall not be deemed to be a liquidation, dissolution or winding
up within the meaning of this Section 4, but shall instead be treated pursuant
to Section 7 hereof.
Section 5. Conversion and Registration. The record Holders of this
Series C Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
(a) Right to Convert. The record Holder of this Series C Preferred
Stock shall be entitled, at the times and in the amounts set forth below, and,
subject to the Company's right of redemption set forth in Section 6(a), at the
office of the Company or any transfer agent for the Series C Preferred Stock,
to convert portions of the aggregate number of shares of Series C Preferred
Stock held by such Holder into that number of fully-paid and non-assessable
shares of the $.005 par value common stock of the Company (the "Common Stock")
at the Conversion Rate as set forth below. The number of shares of Common
Stock into which this Series C Preferred Stock may be converted is hereinafter
referred to as the "Conversion Rate" for such Series C Preferred Stock. The
record Holder of this Series C Preferred Stock shall be entitled, at the
option of the Holder, subject to the Company's right of redemption set forth
in Section 6(a), to convert such Preferred Stock as follows:
I. one-third (the "First 1/3") of the shares of Series C Preferred Stock
issued to such Holder is convertible, pursuant to the Registration Statement,
at any time beginning on the later of (i) 45 days following the date of the
Last Closing and (ii) the date upon which the Registration Statement becomes
effective (the "Registration Effective Date"), but is in any event
convertible, pursuant to Regulation S and applicable exemptions, at any time
beginning 90 days following the date of the Last Closing if the Registration
Statement has not yet become effective, and
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<PAGE>
II. an additional one-third (the "Second 1/3") of the shares of Series C
Preferred Stock issued to such Holder is convertible, pursuant to the
Registration Statement, at any time beginning on the later of (i) 75 days
following the date of the Last Closing and (ii) the Registration Effective
Date, but is in any event convertible, pursuant to Regulation S and applicable
exemptions, at any time beginning 90 days following the date of the Last
Closing if the Registration Statement has not yet become effective, and
III. all remaining shares (the "Final 1/3") of Series C Preferred Stock issued
to such Holder are convertible at any time beginning 90 days following the
date of the Last Closing, pursuant to the Registration Statement, if it has
become effective, or pursuant to Regulation S and applicable exemptions, if
the Registration Statement has not become effective.
The shares shall be convertible at the office of the Company or any transfer
agent for the Series C Preferred Stock, into that number of fully-paid and
non-assessable shares of Common Stock of the Company calculated in accordance
with the following formula:
Number of shares issued upon conversion of one share of Preferred Stock
= [(.08) (N/365) (10,000)] + 10,000 + Late Registration Penalty (if applicable)
- -------------------------------------------------------------------------------
Conversion Price
o N = the number of days between (i) the date that, in
connection with the consummation of the initial purchase by
Subscriber of shares of shares of Series C Preferred Stock
from the Company, the escrow agent first had in its
possession funds representing full payment for the shares of
Series C Preferred Stock for which conversion is being
elected, and (ii) the applicable date of conversion for the
Series C Preferred Stock for which conversion is being
elected (the "Date of Conversion"), and
o Conversion Price = the lesser of (x) the Closing Bid
Price, as that term is defined below, on October 13, 1995
(the "Fixed Conversion Price"), or (y) 85% of the average
Closing Bid Price, as that term is defined below, of the
Company's Common Stock for the five (5) trading days
immediately preceding the Date of Conversion, as defined
below. For purposes hereof, the term "Closing Bid Price"
shall mean the closing bid price of the Company's Common
Stock as reported by Nasdaq (or, if not reported by Nasdaq,
as reported by such other exchange or market where traded).
o Late Registration Penalty
= (1/3 x [.025 x (A/30) x $10,000] )+ (1/3 x [.025 x (B/30) x $10,000]), where
- A (the number of days registration is late for
the First 1/3 of shares of Series C Preferred Stock
issued to Holder) equals the number of days between
(i) the 45th day following the date of the Last
Closing, and (ii) the date that the Registration
Effective Date, but in no event shall the value of
A exceed 45, and
- B (the number of days registration is late for
the Second 1/3 of shares of Series C Preferred
Stock issued to Holder) equals the number of days
between (i) the 75th day following the date of the
Last Closing, and (ii) the Registration Effective
Date, but in no event shall the value of B exceed
15.
B-3
<PAGE>
(b) Mechanics of Conversion. No fractional shares of Common
Stock shall be issued upon conversion of this Series C Preferred Stock. In
lieu of any fractional share to which the Holder would otherwise be entitled,
the Company shall pay cash to such Holder in an amount equal to such fraction
multiplied by the Conversion Price then in effect. In the case of a dispute as
to the calculation of the Conversion Rate, the Company's calculation shall be
deemed conclusive absent manifest error. In order to convert Series C
Preferred Stock into full shares of Common Stock, the Holder shall surrender
the certificate or certificates therefor, duly endorsed, by either overnight
courier or 2-day courier, to the office of the Company or of any transfer
agent for the Series C Preferred Stock, and shall give written notice ("Notice
of Conversion") to the Company at such office that he elects to convert the
same, the number of shares of Series C Preferred Stock so converted and a
calculation of the Conversion Rate (with an advance copy of the certificate(s)
and the notice by facsimile); provided, however, that the Company shall not be
obligated to issue certificates evidencing the shares of Common Stock issuable
upon such conversion unless either the certificates evidencing such Series C
Preferred Stock are delivered to the Company or its transfer agent as provided
above, or the Holder notifies the Company or its transfer agent that such
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such certificates.
The Company shall use reasonable efforts to issue and deliver within
three (3) business days after delivery to the Company of such certificates, or
after such agreement and indemnification, to such Holder of Series C Preferred
Stock at the address of the Holder on the books of the Company, a certificate
or certificates for the number of shares of Common Stock to which the Holder
shall be entitled as aforesaid. The date on which conversion occurs (the "Date
of Conversion") shall be deemed to be the date set forth in such Notice of
Conversion, provided (i) that the advance copy of the Notice of Conversion is
faxed to the Company before midnight, New York City time, on the Date of
Conversion and (ii) that the stock certificates (the "Preferred Stock
Certificates") representing the Series C Preferred Stock to be converted are
received by the transfer agent or the Company within five business days
thereafter. The person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date. If the
original Preferred Stock Certificates to be converted are not received by the
transfer agent or the Company within five business days after the Date of
Conversion, the Notice of Conversion shall become null and void.
(c) Reservation of Stock Issuable Upon Conversion. The Company shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the Series C Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all then
outstanding shares of Series C Preferred Stock; and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of Series C Preferred
Stock, the Company will take such corporate action as may be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
(d) Automatic Conversion. Each share of Series C Preferred Stock
outstanding on October 13 1998 automatically shall be converted into Common
Stock on each date at the Conversion Price then in effect and October 13, 1998
shall be deemed the Date of Conversion with respect to such Conversion.
(e) Adjustment to Fixed Conversion Price.
(i) If, prior to the conversion of all of the Series C
Preferred Stock, the number of outstanding shares of Common Stock is increased
by a stock split, stock dividend, or other similar
B-4
<PAGE>
event, the Fixed Conversion Price shall be proportionately reduced, or if the
number of outstanding shares of Common Stock is decreased by a combination or
reclassification of shares, or other similar event, the Fixed Conversion Price
shall be proportionately increased.
(ii) If, prior to the conversion of all Series C Preferred
Stock, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a result of which
shares of Common Stock of the Company shall be changed into the same or a
different number of shares of the same or another class or classes of stock or
securities of the Company or another entity, then the Holders of Series C
Preferred Stock shall thereafter have the right to purchase and receive upon
conversion of Series C Preferred Stock, upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such shares of stock and/or
securities as may be issued or payable with respect to or in exchange for the
number of shares of Common Stock immediately theretofore purchasable and
receivable upon the conversion of Series C Preferred Stock held by such
Holders had such merger, consolidation, exchange of shares, recapitalization
or reorganization not taken place, and in any such case appropriate provisions
shall be made with respect to the rights and interests of the Holders of the
Series C Preferred Stock to the end that the provisions hereof (including,
without limitation, provisions for adjustment of the Fixed Conversion Price
and of the number of shares issuable upon conversion of the Series C Preferred
Stock) shall thereafter be applicable, as nearly as may be practicable in
relation to any shares of stock or securities thereafter deliverable upon the
exercise hereof. The Company shall not effect any transaction described in
this subsection 5(e) unless the resulting successor or acquiring entity (if
not the Company) assumes by written instrument the obligation to deliver to
the Holders of the Series C Preferred Stock such shares of stock and/or
securities as, in accordance with the foregoing provisions, the Holders of the
Series C Preferred Stock may be entitled to purchase.
(iii) If any adjustment under this Section 5(e) would create
a fractional share of Common Stock or a right to acquire a fractional share of
Common Stock, such fractional share shall be disregarded and the number of
shares of Common Stock issuable upon conversion shall be the next higher
number of shares.
As used herein, the term "Registration Statement" shall mean a shelf
registration statement for the Common Stock under the Securities Act of 1933
and the term "Last Closing" shall mean the date of the last closing for the
sale by the Company of any Series C Preferred Stock.
Section 6. Redemption by Company.
(a) Company's Right to Redeem. The Company shall have the right, in
its sole discretion, upon receipt of a Notice of Conversion pursuant to
Section 5, to redeem in whole or in part any Series C Preferred Stock
submitted for conversion, immediately prior to conversion. If the Company
elects to redeem some, but not all, of the Series C Preferred Stock submitted
for conversion, the Company shall redeem from among the Series C Preferred
Stock submitted by the various shareholders for conversion on the applicable
date, a pro-rata amount from each shareholder so submitting Series C Preferred
Stock for conversion.
(b) Mechanics of Redemption. The Company shall effect each such
redemption by giving notice of its election to redeem, by facsimile within 1
business day following receipt of a Notice of Conversion from a Holder, with a
copy by 2-day courier, to (A) the Holder of Series C Preferred Stock submitted
for conversion at the address and facsimile number of such Holder appearing in
the Company's register for the Series C Preferred Stock and (B) the Company's
Transfer Agent. Such redemption notice shall indicate whether the Company will
redeem all or part of the Series C Preferred Stock submitted for conversion
and the applicable redemption price. The Company shall not be entitled to send
any notice of redemption and begin the redemption procedure unless it has (i)
the full amount of the redemption price, in cash, available in a demand or
other immediately
B-5
<PAGE>
available account in a bank or similar financial institution or (ii)
immediately available credit facilities, in the full amount of the redemption
price, with a bank or similar financial institution on the date the redemption
notice is sent to shareholders.
The redemption price per share of the Series C Preferred Stock shall
be calculated in accordance with the following formula:
<TABLE>
<S> <C>
[[(.08)(N/365) (10,000)] + 10,000 + Late Registration Penalty ] x Closing Bid price on Date of Conversion
---------------------------------------
Conversion Price
</TABLE>
For the purposes of the above formula, "N", "Closing Bid Price",
"Conversion Price" and "Late Registration Penalty" shall have the meanings set
forth in Section 5.
The redemption price shall be paid to the Holder of Series C Preferred Stock
redeemed within 10 business days of the delivery of the notice of such
redemption to such Holder; provided, however, that the Company shall not be
obligated to deliver any portion of such redemption price unless either the
certificates evidencing the Series C Preferred Stock redeemed are delivered to
the Company or its transfer agent as provided in Section 4(b), or the Holder
notifies the Company or its transfer agent that such certificates have been
lost, stolen or destroyed and executes an agreement satisfactory to the
Company to indemnify the Company from any loss incurred by it in connection
with such certificates.
Section 7. Corporate Change. The Closing Bid Price used to determine
the Conversion Price shall be appropriately adjusted to reflect, as deemed
equitable and appropriate by the Corporation, any stock dividend, stock split
or share combination of the Common Stock. In the event of a merger,
reorganization, recapitalization or similar event of or with respect to the
Company (a "Corporate Change") (other than a Corporate Change in which all or
substantially all of the consideration received by the holders of the
Company's equity securities upon such Corporate Change consists of cash or
assets other than securities issued by the acquiring entity or any affiliate
thereof), this Series C Preferred Stock shall be assumed by the acquiring
entity and thereafter this Series C Preferred Stock shall be convertible into
such class and type of securities as the Holder would have received had the
Holder converted this Series C Preferred Stock immediately prior to such
Corporate Change.
Section 8. Voting Rights. Except as otherwise provided by law, the
holders of the Series C Preferred Stock shall have no voting power whatsoever,
and no holder of Series C Preferred Stock shall vote or otherwise participate
in any proceeding in which actions shall be taken by the Corporation or the
shareholders thereof or be entitled to notification as to any meeting of the
Board of Directors or the shareholders.
To the extent that under New York law the vote of the holders of the
Series C Preferred Stock, voting separately as a class, is required to
authorize a given action of the Corporation, the affirmative vote or consent
of the holders of at least a majority of the outstanding shares of the Series
C Preferred Stock shall constitute the approval of such action by the class.
To the extent that under New York law the holders of the Series C Preferred
Stock are entitled to vote on a matter with holders of Common Stock, voting
together as one class, each share of Series C Preferred Stock shall be
entitled to a number of votes equal to the number of shares of Common Stock
into which it is then convertible using the record date for the taking of such
vote of stockholders as the date as of which the Conversion Price is
calculated. Holders of the Series C Preferred Stock shall be entitled to
notice of all shareholder meetings or written consents with respect to which
they would be entitled to vote, which notice would be provided pursuant to the
Corporation's by-laws and applicable statutes.
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<PAGE>
Section 9. Protective Provisions. So long as shares of Series C
Preferred Stock are outstanding, the Corporation shall not without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of at least a majority of the then outstanding shares of Series C
Preferred Stock alter or change the rights, preferences or privileges of the
shares of Series C Preferred Stock or any Senior Securities so as to affect
adversely the Series C Preferred Stock.
Section 10. Status of Redeemed or Converted Stock. In the event any
shares of Series C Preferred Stock shall be redeemed or converted pursuant to
Section 5 or Section 6 hereof, the shares so converted or redeemed shall be
canceled, shall return to the status of authorized but unissued Preferred
Stock of no designated series, and shall not be issuable by the Corporation as
Series C Preferred Stock.
Section 11. Preference Rights. Nothing contained herein shall be
construed to prevent the Board of Directors of the Corporation from issuing
one or more series of preferred stock with dividend and/or liquidation
preferences equal to or greater than the dividend and liquidation preferences
of the Series C Preferred Stock."
IN WITNESS WHEREOF, we hereunto sign our names and affirm that the
statements made herein are true under penalties of perjury this 18 day of
October, 1995.
/s/ Stephen Benoit
-----------------------------------
Stephen Benoit, Vice President
/s/ Benjamin T. Sporn
-----------------------------------
Benjamin T. Sporn, Secretary
B-7
<PAGE>
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Preferred Stock)
The undersigned hereby irrevocably elects to convert _________ shares of
Series C Preferred Stock, represented by stock certificate No(s). _______ (the
"Preferred Stock Certificates") into shares of common stock ("Common Stock")
of Applied Microbiology (the "Company") according to the conditions of the
Certificate of Designation of Series C Preferred Stock, as of the date written
below. If shares are to be issued in the name of a person other than
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates. No fee will be charged
to the Holder for any conversion, except for transfer taxes, if any.
The undersigned represents and warrants that all offers and sales by the
undersigned of the shares of Common Stock issuable to the undersigned upon
conversion of the share of Series C Preferred Stock represented by the
Preferred Stock Certificates shall be made in compliance with Regulation S,
pursuant to registration of the Common Stock under the Act or pursuant to an
exemption from registration under the Act.
Conversion Calculations:
------------------------------
Date of Conversion
------------------------------
Applicable Conversion Price
------------------------------
Signature
------------------------------
Name
Address:
------------------------------
------------------------------
* No shares of Common Stock will be issued until the original preferred Stock
Certificate(s) to be converted and the Notice of Conversion are received by
the Company's Attorney or Transfer Agent. The original certificate
representing the Series C Preferred Stock to be converted and the Notice of
Conversion must be received by the Company's Attorney or Transfer Agent by the
fifth business day following the Date of Conversion, or such Notice of
Conversion shall become null and void.
B-8
<PAGE>
THIS CERTIFICATE AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL EITHER (i) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) THE CORPORATION SHALL HAVE
RECEIVED AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION AND ITS COUNSEL
THAT AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR APPLICABLE
STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR
TRANSFER.
Warrant to Purchase
136,381 shares
Warrant to Purchase Common Stock
of
APPLIED MICROBIOLOGY, INC.
THIS CERTIFIES that Swartz Investments, Inc. ("Holder") or any
subsequent holder hereof, has the right to purchase from Applied Microbiology,
Inc., a New York Corporation (the "Company"), not more than 136,381 fully paid
and nonassessable shares of the Company's Common Stock, $.005 par value
("Common Stock"), at a price of $6.30 per share subject to adjustment as
provided below (the "Exercise Price"), at any time on or before 5:00 p.m.,
Atlanta, Georgia time, on September 29, 2000.
The holder of this Warrant agrees with the Company that this Warrant
is issued and all rights hereunder shall be held subject to all of the
conditions, limitations and provisions set forth herein.
1. Exercise.
This Warrant may be exercised as to all or any lesser number of full
shares of Common Stock covered hereby upon surrender of this Warrant, with the
Subscription Form attached hereto duly executed, together with the full
Exercise Price (as hereinafter defined) in cash, or by certified or official
bank check payable in New York Clearing House Funds for each share of Common
Stock as to which this Warrant is exercised, at the office of the Company,
Applied Microbiology, Inc., 771 Old Saw Mill River Road, Tarrytown, NY 10591,
or at such other office or agency as the Company may designate in writing, by
overnight mail, with an advance copy of the Subscription Form by facsimile
(such surrender and payment hereinafter called the "Exercise of this
Warrant"). The "Date of Exercise" of the Warrant shall be defined as the date
that the advance copy of the Subscription Form is sent by facsimile to the
Company, provided that the original Warrant and Subscription Form are received
by the Company within five business days thereafter. The original Warrant and
Subscription Form must be received within 5 business days of the Date of
Exercise, or the Subscription Form shall be considered void.
C-1
<PAGE>
This Warrant shall be canceled upon its Exercise, and, as soon as practical
thereafter, the holder hereof shall be entitled to receive a certificate or
certificates for the number of shares of Common Stock purchased upon such
Exercise and a new Warrant or Warrants (containing terms identical to this
Warrant) representing any unexercised portion of this Warrant. Each person in
whose name any certificate for shares of Common Stock is issued shall, for all
purposes, be deemed to have become the holder of record of such shares on the
Date of Exercise of this Warrant, irrespective of the date of delivery of such
certificate. Nothing in this Warrant shall be construed as conferring upon the
holder hereof any rights as a shareholder of the Company.
2. Payment of Warrant Exercise Price.
Payment of the Exercise Price may be made by any of the following, or
a combination thereof, at the election of Holder:
(i) cash, certified check or cashiers check or wire transfer; or
(ii) surrender of this Warrant at the principal office of the Company
together with notice of election, in which event the Company shall issue
Holder a number of shares of Common Stock computed using the following
formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder (not to
exceed the number of shares set forth on the cover page of this
Warrant, as adjusted pursuant to the provisions of Section 4 of this
Warrant).
Y = the number of shares of Common Stock for which this Warrant
is being exercised.
A = the Market Price of one share of Common Stock (for
purposes of this Section 2(ii), the "Market Price" shall be
defined as the average closing bid price of the Common Stock
for the five trading days prior to the Date of Exercise of
this Warrant (the "Average Closing Bid Price"), as reported
by the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), or if the Common Stock is not
traded on NASDAQ, the Average Closing Bid Price in the
over-the-counter market; provided, however, that if the
Common Stock is listed on a stock exchange, the Market Price
shall be the Average Closing Bid Price on such exchange).
B = the Exercise Price.
C-2
<PAGE>
3. Transfer and Registration.
Subject to the provisions of Section 7 of this Warrant, this Warrant
may be transferred on the books of the Company, wholly or in part, in person
or by attorney, upon surrender of this Warrant properly endorsed, with
signature guaranteed. This Warrant shall be canceled upon such surrender and,
as soon as practicable thereafter, the person to whom such transfer is made
shall be entitled to receive a new Warrant or Warrants as to the portion of
this Warrant transferred, and the holder of this Warrant shall be entitled to
receive a new Warrant or Warrants as to the portion hereof retained.
4. Anti-Dilution Adjustments.
(a) If the Company shall at any time declare a dividend payable in
shares of Common Stock, then the holder hereof, upon Exercise of this Warrant
after the record date for the determination of holders of Common Stock
entitled to receive such dividend, shall be entitled to receive upon Exercise
of this Warrant, in addition to the number of shares of Common Stock as to
which this Warrant is Exercised, such additional shares of Common Stock as
such holder would have received had this Warrant been Exercised immediately
prior to such record date.
(b) If the Company shall at any time effect a recapitalization or
reclassification of such character that the shares of Common Stock shall be
changed into or become exchangeable for a larger or smaller number of shares,
then upon the effective date thereof, the number of shares of Common Stock
which the holder hereof shall be entitled to purchase upon Exercise of this
Warrant shall be increased or decreased, as the case may be, in direct
proportion to the increase or decrease in the number of shares of Common Stock
by reason of such recapitalization or reclassification, and the Exercise Price
shall be, in the case of an increase in the number of shares, proportionately
decreased and, in the case of a decrease in the number of shares,
proportionally increased.
(c) If the Company shall at any time distribute to holders of Common
Stock cash, evidences of indebtedness or other securities or assets (other
than cash dividends or distributions payable out of earned surplus or net
profits for the current or preceding year) then, in any such case, the holder
of this Warrant shall be entitled to receive, upon exercise of this Warrant,
with respect to each share of Common Stock issuable upon such Exercise, the
amount of cash or evidences of indebtedness or other securities or assets
which such holder would have been entitled to receive with respect to each
such share of Common Stock as a result of the happening of such event had this
Warrant been Exercised immediately prior to the record date or other date
fixing shareholders to be affected by such event (the "Determination Date")
or, in lieu thereof, if the Board of Directors of the Company should so
determine at the time of such distribution, a reduced Exercise Price
determined by multiplying the Exercise Price on the Determination Date by a
fraction, the numerator of which is the result of such Exercise Price reduced
by the value of such distribution applicable to one share of Common Stock
(such value to be determined by the Board in its discretion) and the
denominator of which is such Exercise Price.
(d) If the Company shall at any time consolidate or merge with any
other corporation or transfer all or substantially all of its assets, then the
Company shall deliver
C-3
<PAGE>
written notice to the Holder of such merger, consolidation or sale of assets
at least thirty (30) days prior to the closing of such merger, consolidation
or sale of assets and this Warrant shall terminate and expire immediately
prior to the closing of such merger, consolidation or sale of assets.
(e) As used in this Warrant, the term "Exercise Price" shall mean the
purchase price per share specified in this Warrant until the occurrence of an
event stated in subsection (b) or (c) of this Section 4 and thereafter shall
mean said price as adjusted from time to time in accordance with the
provisions of said subsection. No such adjustment shall be made unless such
adjustment would change the Exercise Price at the time by $.01 or more;
provided, however, that all adjustments not so made shall be deferred and made
when the aggregate thereof would change the Exercise Price at the time by $.01
or more. No adjustment made pursuant to any provision of this Section 4 shall
have the effect of increasing the total consideration payable upon Exercise of
this Warrant in respect of all the Common Stock as to which this Warrant may
be exercised.
(f) In the event that at any time, as a result of an adjustment made
pursuant to this Section 4, the holder of this Warrant shall, upon Exercise of
this Warrant, become entitled to receive shares and/or other securities or
assets (other than Common Stock) then, wherever appropriate, all references
herein to shares of Common Stock shall be deemed to refer to and include such
shares and/or other securities or assets; and thereafter the number of such
shares and/or other securities or assets shall be subject to adjustment from
time to time in a manner and upon terms as nearly equivalent as practicable to
the provisions of this Section 4.
5. Fractional Interests.
No fractional shares or scrip representing fractional shares
shall be issuable upon the Exercise of this Warrant, but on Exercise of this
Warrant, the holder hereof may purchase only a whole number of shares of
Common Stock. The Company shall make a payment in cash in respect of any
fractional shares which might otherwise be issuable upon Exercise of this
Warrant, calculated by multiplying the fractional share amount by the market
price of the Company's Common Stock on the Date of Exercise as reported by the
Nasdaq National Market or such other exchange as Company's Common Stock is
traded on.
6. Reservation of Shares.
The Company shall at all times reserve for issuance such
number of authorized and unissued shares of Common Stock (or other securities
substituted therefor as herein above provided) as shall be sufficient for
Exercise of this Warrant. The Company covenants and agrees that upon Exercise
of this Warrant, all shares of Common Stock issuable upon such Exercise shall
be duly and validly issued, fully paid, nonassessable and not subject to
preemptive rights of any shareholders..
C-4
<PAGE>
7. Restrictions on Transfer.
This Warrant and the Common Stock issuable on Exercise
hereof have not been registered under the Securities Act of 1933, as amended,
and may not be sold, transferred, pledged, hypothecated or otherwise disposed
of in the absence of registration or the availability of an exemption from
registration under said Act, and, in the event a holder believes an exemption
from the registration requirements of the Act is available, the holder must
deliver a legal opinion satisfactory in form and substance, to the Issuer and
its counsel, stating that such exemption is available. All shares of Common
Stock issued upon Exercise of this Warrant shall bear an appropriate legend to
such effect.
8. Benefits of this Warrant.
Nothing in this Warrant shall be construed to confer upon
any person other than the Company and the holder of this Warrant any legal or
equitable right, remedy or claim under this Warrant and this Warrant shall be
for the sole and exclusive benefit of the Company and the holder of this
Warrant.
9. Applicable Law.
This Warrant is issued under and shall for all purposes be
governed by and construed in accordance with the laws of the state of
Minnesota. Jurisdiction for any dispute regarding this Warrant lies in
Minnesota.
10. Loss of Warrant.
Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of indemnity or security reasonably satisfactory to the Company,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver a new Warrant of like tenor and date.
11. Notice to Company.
Notices or demands pursuant to this Warrant to be given or made by the holder
of this Warrant to or on the Company shall be sufficiently given or made if
sent by certified or registered mail, return receipt requested, postage
prepaid, and addressed, until another address is designated in writing by the
Company, Applied Microbiology, Inc., 771 Old Saw Mill River Road, Tarrytown
New York, 10591, Attention: Chief Executive Officer. Notices or demands
pursuant to this Warrant to be given or made by the Company to or on the
holder of this Warrant shall be sufficiently given or made if sent by
certified or registered mail, return receipt requested, postage prepaid, and
addressed, until another address is designated in writing by the holder, Attn:
Mr. Eric Swartz, Swartz Investments, Inc., 200 Market Place, Suite 250,
Roswell, GA 30075 until another address is designated in writing by Swartz
Investments, Inc.
C-5
<PAGE>
IN WITNESS WHEREOF, this Warrant is hereby executed effective as of
the date set forth below.
Dated as of: October ___, 1995
APPLIED MICROBIOLOGY, INC.
By:
--------------------------------------
Print Name:
------------------------------
Title:
------------------------------------
C-6
<PAGE>
SUBSCRIPTION FORM
TO: APPLIED MICROBIOLOGY, INC.
The undersigned hereby irrevocably exercises the right to purchase
____________ of the shares of Common Stock of Applied Microbiology, Inc., a
New York corporation, evidenced by the attached Warrant, and herewith makes
payment of the Exercise Price with respect to such shares in full, all in
accordance with the conditions and provisions of said Warrant.
The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any of such Common Stock, except in accordance with the provisions
of Section 7 of the Warrant, and consents that the following legend may be
affixed to the certificates for the Common Stock hereby subscribed for, if
such legend is applicable:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities law, and may not be sold,
transferred, pledged, hypothecated or otherwise disposed of until
either (i) a registration statement under the Securities Act and
applicable state securities laws shall have become effective with
regard thereto, or (ii) the corporation shall have received an
opinion of counsel acceptable to the corporation and its counsel that
an exemption from registration under the Securities Act or applicable
state securities laws is available in connection with such offer,
sale or transfer."
The undersigned requests that certificates for such shares be issued,
and a warrant representing any unexercised portion thereof be issued, pursuant
to the Warrant in the name of the Registered Holder and delivered to the
undersigned at the address set forth below:
Dated:
- ------------------------------------------------------------------------
Signature of Registered Holder
- ------------------------------------------------------------------------
Name of Registered Holder (Print)
- ------------------------------------------------------------------------
Address
- ------------------------------------------------------------------------
The attached Warrant and the securities issuable on exercise thereof have not
been registered under the Securities Act of 1933, as amended, and may not be
sold, transferred, pledged, hypothecated or otherwise disposed of in the
absence of registration or the availability of an exemption from registration
under said Act.
- ------------------------------------------------------------------------
C-7
<PAGE>
ASSIGNMENT
(To be executed by the registered holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned holder of the attached Warrant hereby
sells, assigns and transfers unto the person or persons below named the
right to purchase ___________ shares of the Common Stock of APPLIED
MICROBIOLOGY, INC. evidenced by the attached Warrant and does hereby
irrevocably constitute and appoint _______________________ attorney to
transfer the said Warrant on the books of the Company, with full power
of substitution in the premises.
Dated:
----------------------------------
Signature
Fill in for new Registration of Warrant:
- -----------------------------------------
Name
- -----------------------------------------
Address
- -----------------------------------------
Please print name and address of assignee
(including zip code number)
- ------------------------------------------------------------------------
NOTICE
The signature to the foregoing Subscription Form or Assignment must correspond
to the name as written upon the face of the attached Warrant in every
particular, without alteration or enlargement or any change whatsoever.
- ------------------------------------------------------------------------
C-8
<PAGE>
APPLIED MICROBIOLOGY, INC.
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE SECURITIES
LAW. THEY ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER
REGULATION S ("REGULATION S") PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). THE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN
REGULATION S) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO
AN AVAILABLE EXEMPTION OR SAFE HARBOR FROM THE REGISTRATION REQUIREMENTS OF
THOSE LAWS.
THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY BY OR TO
ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. IN
MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND THE RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT REVIEWED, CONFIRMED OR DETERMINED THE ACCURACY OR ADEQUACY
OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Regulation S Securities Subscription Agreement (the "Agreement")
is executed by the undersigned (the "Subscriber") in connection with the offer
and subscription by the undersigned for shares of Series C Preferred Stock (the
"Preferred Stock") of Applied Microbiology, Inc. a New York corporation (the
"Company"), and offered in units of not less than five (5) shares and integral
multiples of not less than one (1) share in excess thereof. The Company is
offering an aggregate amount of up to 1,000 shares of Preferred Stock in this
offering at a purchase price of $10,000 U.S. per share. The rights and
preferences of the Preferred Stock, including the terms on which the Preferred
Stock may be converted into Common Stock of the Company ("Shares"), are set
forth in the Certificate of Amendment of the Certificate of Incorporation of the
Company, a copy of which is attached hereto as Exhibit A (the "Certificate of
Designation"). The solicitation of this Subscription and, if accepted by the
Company, the offer and sale of Preferred Stock, are being made in reliance upon
the provisions of Regulation S ("Regulation S") promulgated under the United
States Securities Act of 1933, as amended (the "Act"). The Preferred Stock and
the Common Stock issuable upon conversion thereof are sometimes referred to
herein as the "Securities." The Subscriber wishes to subscribe for the number of
shares of Preferred Stock set forth in Section 14 in accordance with the terms
and conditions of the Certificate of Designation and this Agreement. It is
agreed as follows:
D-1
<PAGE>
1. Offer to Subscribe; Purchase Price
The Subscriber hereby offers to purchase and subscribe for the number
of shares of Preferred Stock, and at the price, set out in Section 14 of this
Agreement. The Closing shall be deemed to occur when this Agreement has been
executed by both the Subscriber and the Company (the "Closing") and payment
shall have been made by the Subscriber, by wire transfer, as directed in writing
by the Company, to the Company's escrow account against the Company's delivery
of certificates representing the Preferred Stock subscribed for.
2. Representations; Access to Information; Independent Information;
Independent Investigation
2.1 Offshore Transaction; Lock Up. The Subscriber represents and
warrants to the Company that (i) the Subscriber is not a "U.S.
person" as that term is defined in Rule 902(o) of Regulation S
(a copy of which definition is attached as Exhibit B) and the
Subscriber was not formed by a "U.S person" for the purpose of
investing in securities not registered under the Act, unless
the Subscriber is or was organized or incorporated by "U.S.
persons" who are accredited investors (as defined in Rule
501(a) under the Act) and who are not natural persons, estates
or trusts "Institutional Investors"); (ii) the Preferred Stock
was not offered to the Subscriber in the United States and at
the time of execution of this Subscription Agreement and the
time of any offer to the Subscriber to purchase the Preferred
Stock hereunder, the Subscriber was physically outside the
United States; (iii) the Subscriber is purchasing the
Securities for its own account and not on behalf of or for the
benefit of any U.S. person and the sale and resale of the
Securities have not been prearranged with any buyer in the
United States; (iv) the Subscriber and to the best knowledge
of the Subscriber each distributor, if any, participating in
the offering of the Securities, has agreed and the Subscriber
hereby agrees that, unless a registration statement is
effective, no offers and sales of the Securities shall be made
prior to the expiration of a period commencing on the Closing
of all Preferred Stock offered and ending ninety days
thereafter (the "Restricted Period"), and, unless a
registration statement is effective, all offers and sales
thereafter, shall not be made to U.S. persons or for the
account or benefit of U.S. persons and shall otherwise be made
in compliance with the provisions of Regulation S. Subscriber
has not been engaged as a distributor or dealer with respect
to this transaction.
2.2 Independent Investigation. The Subscriber, in offering to
subscribe for the Securities hereunder, has relied solely upon
an independent investigation made by it and its
representatives, if any, and has, prior to the date hereof,
been given access to and the opportunity to examine all books
and records of the Company, all public filings of the Company
and all material contracts and documents of the Company. In
making its investment decision to purchase the Preferred
Stock, the Subscriber is not relying on any oral or written
representations or assurances from the Company or any other
person or any representation of the Company or any other
person other than as set forth in this Agreement, or in public
filings and
D-2
<PAGE>
press releases of the Company. The Subscriber has such
experience in business and financial matters that it is
capable of evaluating the risk of its investment and
determining the suitability of its investment. The Subscriber
is a sophisticated investor, as defined in Rule 506(b)(2)(ii)
of Regulation D, and an accredited investor as defined in Rule
501 of Regulation D, a copy of which definition is attached
hereto as Exhibit C.
2.3 Economic Risk. The Subscriber understands and acknowledges
that an investment in the Preferred Stock involves a high
degree of risk. The Subscriber represents that the Subscriber
is able to bear the economic risk of an investment in the
Preferred Stock, including a possible total loss of
investment. In making this statement the Subscriber hereby
represents and warrants to the Company that the Subscriber has
adequate means of providing for the Subscriber's current needs
and contingencies; the Subscriber is able to afford to hold
the Preferred Stock for an indefinite period and the
Subscriber further represents that the Subscriber has such
knowledge and experience in financial and business matters
that the Subscriber is capable of evaluating the merits and
risks of the investment in the Preferred Stock to be received
by the Subscriber. Further, the Subscriber represents that the
Subscriber is able to bear the economic risks of an investment
in the Preferred Stock; the Subscriber has no present need for
liquidity in such Preferred Stock; the Subscriber can afford a
complete loss of such investment in the Preferred Stock; and
the Subscriber is willing to accept such investment risks.
2.4 No Government Recommendation or Approval. The Subscriber
understands that no United States federal or state agency or
similar agency of any other country, has reviewed, passed upon
or made any recommendation or endorsement of the Company, this
transaction or the subscription of the Securities.
2.5 No Directed Selling Efforts in Regard to this Transaction. To
the best of the knowledge of the Subscriber and Company
neither the Company nor any distributor, if any, participating
in the offering of the Securities nor any person acting for
the Company or any such distributor has conducted any
"directed selling efforts" as that term is defined in Rule 902
of Regulation S. Such activity includes, without limitation,
the mailing of printed material to investors residing in the
United States, the holding of promotional seminars in the
United States, the placement of advertisements with radio or
television stations broadcasting in the United States or in
publications with a general circulation in the United States,
which discuss the offering of Preferred Stock.
2.6 Reliance on Representation. This Agreement is made by the
Company with each Subscriber in reliance upon such
Subscriber's representations and covenants made in this
Section 2, which reliance by his execution of this Agreement
the Subscriber hereby confirms. If the Subscriber represents
more than one person or entity, the obligations of the
Subscriber shall be joint and several and the representations
and warranties herein contained shall be deemed to be made by
and be binding upon each such person or entity and their
respective heirs, executors, administrators, successors and
assigns.
D-3
<PAGE>
2.7 No Registration. Subscriber understands that the Preferred
Stock and the Common Stock issuable upon conversion of the
Preferred Stock have not been registered under the Act and are
being offered and sold pursuant to a safe harbor from
registration contained in the Act based in part upon the
representations of Subscriber contained herein. The Common
Stock does, however, carry certain registration rights as set
forth in the Section 7.4 hereof.
2.8 No Public Solicitation. Subscriber knows of no public
solicitation or advertisement of an offer in connection with
the proposed issuance and sale of the Preferred Stock.
2.9 Investment Intent. Subscriber is acquiring the Preferred Stock
to be issued and sold hereunder (and the Shares issuable upon
conversion of the Preferred Stock) for his or its own account
(or a trust account if such Subscriber is a trustee) for
investment and not as a nominee and not with a view to the
distribution thereof. Subscriber understands that Subscriber
must bear the economic risk of this investment indefinitely
unless sale of such Preferred Stock or of such Shares is
registered pursuant to the Act, or an exemption or safe harbor
from such registration is available, and that, except as set
forth below, the Company has no present intention of
registering any such sale of the Preferred Stock or such
Shares. Subscriber represents and warrants to the Company that
it intends to hold the Preferred Stock and the Shares
indefinitely, and that Subscriber has no present plan or
intention to sell the Preferred Stock or the Shares in the
United States at any predetermined time, and has made no
predetermined arrangements to sell the Preferred Stock or the
Shares. Subscriber covenants that neither Subscriber nor its
affiliates nor any person acting on its or their behalf,
directly or indirectly, has the intention of entering, or will
enter during the Restricted Period, into any put option, short
position or other similar instrument or position in the U.S.
with respect to the Preferred Stock or common stock of the
Company, and neither Subscriber nor any of its affiliates nor
any person acting on its or their behalf will use at any time
Shares acquired pursuant to this agreement, directly or
indirectly, to settle any put option, short position or other
similar instrument or position that may have been entered into
prior to the execution of this Agreement.
2.10 No Sale in Violation of the Securities Laws. Subscriber
covenants that he or she will not knowingly make any sale,
transfer or other disposition of the Preferred Stock or the
Shares in violation of the Act (including Regulation S), the
Securities and Exchange Act of 1934, as amended (the "Exchange
Act") or the rules and regulations of the Securities and
Exchange Commission (the "Commission") promulgated thereunder.
2.11 Authority. Subscriber has the full power and authority to
execute, deliver and perform this Agreement. This Agreement,
when executed and delivered by Subscriber, will constitute a
valid and legally binding obligation of Subscriber,
enforceable in accordance with its terms.
2.12 No Reliance on Tax Advice. Subscriber has reviewed with his,
her or its own tax advisors the foreign, U.S. federal, state
and local tax consequences of this
D-4
<PAGE>
investment, where applicable, and the transactions
contemplated by this Agreement. Subscriber is relying solely
on such advisors and not on any statements or representations
of the Company or any of its agents and understands that
Subscriber (and not the Company) shall be responsible for the
Subscriber's own tax liability that may arise as a result of
this investment or the transactions contemplated by this
Agreement.
2.13 No Legal Advice from Company. Subscriber acknowledges that he
or she has had the opportunity to review this Agreement and
the transactions contemplated by this Agreement with his or
her own legal counsel. Subscriber is relying solely on such
counsel and not on any statements or representations of the
Company or any of its agents for legal advice with respect to
this investment or the transactions contemplated by this
Agreement, except for the representations, warranties and
covenants set forth herein and in the opinion provided for in
paragraph 7.3 herein.
3. Resales
Subscriber acknowledges, covenants and agrees that the Securities may
and will only be resold by it (a) in compliance with Regulation S; or (b)
pursuant to an exemption from registration under the Act other than Regulation
S; or (c) pursuant to a Registration Statement under the Act. In addition, in
connection with any resale of the Securities in accordance with clause (a) or
(b), above, the Subscriber will deliver to the Company a certificate in
accordance with Section 3.1 or Section 3.2, as appropriate.
3.1. Certificate to be Delivered for Regulation S Resales. If the
Securities are being resold in compliance with Regulation S,
the Subscriber shall provide a certificate to the Company to
the following effect:
The undersigned (i) acknowledges that the sale of securities
to which this declaration relates is being made in reliance on
Rule 904 of Regulation S under the United States Securities
Act of 1933, (ii) certifies that (A) the offer of such
securities was not made to a person in the United States and
either (1) at the time the buy order was originated, the buyer
was outside the United States, or the seller and any person
acting on its behalf reasonably believe that the buyer was
outside the United States, or (2) the transaction was executed
on or through the facilities of a designated offshore
securities market, and neither the seller nor any persons
acting on its behalf knows that the transaction has been
prearranged with a buyer in the United States, and (B) neither
the seller nor any affiliate of the seller nor any person
acting on its or their behalf has engaged or will engage in
any directed selling efforts in connection with the offer and
sale of such securities. Terms used herein have the meanings
given to them by Regulation S.
3.2 Certificate to be Delivered for other Resales Without
Registration. If the Securities are being resold pursuant to
an exemption from registration under the Act other than
Regulation S, the Subscriber shall provide a certificate to
the Company to the following effect:
D-5
<PAGE>
The undersigned acknowledges that (i) the securities to which
this declaration relates have not been registered under the
Securities Act of 1933, as amended (the "Act") and that
resales of such securities must be made in compliance with
Regulation S promulgated under the Act, pursuant to
registration under the Act or pursuant to an available
exemption from registration, (ii) the undersigned has not
knowingly made any offers, and is not knowingly making a sale,
transfer or other disposition of such securities, in violation
of the Act (including Regulation S), the Securities and
Exchange Act of 1934, as amended, or the rules and regulations
of the Securities and Exchange Commission.
4. Legends
The certificates representing the Securities shall bear the first
legend set forth on the first page of this Agreement and any other legend or
legends are reasonably required to comply with the state, U.S. federal or
foreign law. As to any Securities transferred after the Restricted Period,
subject to receipt of a certificate in form and substance reasonably
satisfactory to the Company in compliance with the Section 3.1, the certificates
delivered to the transferee shall not bear a legend and shall not be subject to
any "stop transfer" order. Subject to receipt of a properly executed conversion
notice, in the form attached hereto, the Common Stock into which the Preferred
Stock are converted after the Restricted Period shall not bear a legend and
shall not be subject to any "stop transfer" order.
5. Notice of Issuance of Securities
The Company will not issue any debt or equity securities for cash in
public or private capital raising transactions ("Offerings") for a period of
seventy five (75) days after the Closing without obtaining the prior written
approval of Swartz Investments, Inc. (the "Placement Agent"), which approval
shall not be unreasonably withheld. Furthermore, the Company will not issue any
debt or equity securities for cash in public or private capital raising
transactions ("Offerings") for a period of two hundred and forty (240) days
after the Closing without delivering to the Placement Agent, at least seven (7)
days prior to the closing of such issuance, written notice describing the
proposed issuance and the terms upon which such securities are being issued, and
providing the Subscriber the option during such seven (7) day period, to
purchase the securities being offered in the Offerings on the same terms as
contemplated by such Offerings and in the amount set forth below. The
restrictions in the preceding two sentences are referred to herein as the
"Capital Raising Limitation". The Capital Raising Limitation shall not apply to
any transaction involving the Company's banking, institutional lending or
leasing arrangements or arrangements with affiliates or issuances of debt or
equity securities to companies which have business relationships with the
Company or who propose to enter into such relationships or issuances of
securities other than for cash or in connection with a merger, consolidation,
sale of assets, joint ventures or other acquisition or disposition of a
business, a product or a license by the Company. The Capital Raising Limitation
also shall not apply to the issuance of securities upon exercise or conversion
of the Company's options, warrants or other convertible securities outstanding
as of October 13, 1995, to the grant or conversion of additional options or
warrants, or the issuance of additional securities, under any Company stock
option or restricted stock plan. The dollar amount of
D-6
<PAGE>
securities which a Subscriber is entitled to purchase in such an Offering shall
be a number obtained by multiplying the aggregate dollar amount of securities
being offered in the Offering by a fraction, the numerator of which is one-half
of the number of shares of Preferred Stock subscribed for by the Subscriber in
the offering governed by this Agreement ("This Offering") and the denominator of
which is the number of shares of Preferred Stock placed in This Offering.
6. Representations and Warranties of Company
Company represents and warrants to Subscriber as follows:
6.1 Organization, Good Standing, and Qualification. The Company is
a corporation duly organized, validly existing and in good
standing under the laws of the State of Minnesota and has all
requisite corporate power and authority to carry on its
business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so
qualify would have a material adverse effect on the business
or properties of the Company and its subsidiaries taken as a
whole. The Company to its knowledge is not the subject of any
pending or threatened investigation or administrative or legal
proceeding by the Internal Revenue Service, the taxing
authorities of any state or local jurisdiction, or the
Securities and Exchange Commission which have not been
disclosed in the reports referred to in Section 6.5 below.
6.2 Corporate Condition. The Company's condition was, in all
material respects, as described in the Company's reports filed
pursuant to the Exchange Act and provided to Subscriber
specified in Section 6.5 below as of the respective dates of
such reports. There have been no material adverse changes in
the Company's financial condition or business since the date
of the latest report, except as described in the Company's
press releases, copies of which have been provided to
Subscriber pursuant to Section 6.5 of this Agreement.
6.3 Authorization. All corporate action on the part of the
Company, its officers, directors and shareholders necessary
for the authorization, execution and delivery of this
Agreement, the performance of all obligations of the Company
hereunder and the authorization, issuance (or reservation for
issuance) and delivery of the Preferred Stock being sold
hereunder and the Common Stock issuable upon conversion of the
Preferred Stock have been taken, and this Agreement
constitutes a valid and legally binding obligation of the
Company, enforceable in accordance with its terms.
6.4 Valid Issuance of Preferred Stock and Common Stock. The
Preferred Stock, when issued, sold and delivered in accordance
with the terms hereof for the consideration expressed herein,
will be validly issued, fully paid and nonassessable and,
based in part upon the representations of the Subscriber in
this Agreement, will be issued in compliance with all
applicable U.S. federal and state securities laws. The Common
Stock issuable upon conversion of the Preferred Stock when
issued in accordance with the terms of the Preferred Stock,
shall be duly and validly issued and outstanding, fully paid
and nonassessable, and based in part on
D-7
<PAGE>
the representations and warranties of Subscriber and any
transferee of the Preferred Stock, will be issued in
compliance with all applicable U.S. federal and state
securities laws.
6.5 Current Public Information. The Company represents and
warrants to the Subscriber that the Company is a "reporting
issuer" as defined in Rule 902(1) of Regulation S and it has a
class of securities registered under Section 12(b) or 12(g) of
the Exchange Act or is required to file reports pursuant to
Section 15(d) of the Exchange Act, and has filed all the
materials required to be filed as reports pursuant to the
Exchange Act for a period of at least twelve months preceding
the date hereof (or for such shorter period as the Company was
required by law to file such material). The Subscriber
represents and warrants to the Company that it has obtained
copies of the Company's Annual Report for the year ended
September 30, 1994, subsequent press releases that have been
sent to it by the Company or by Swartz Investments, Inc.
through the date of this Agreement, and the form 10-Q
quarterly report for the period ended June 30, 1995. The
Company undertakes to furnish the Subscriber with copies of
such other information as may be reasonably requested by the
Subscriber prior to consummation of this Offering.
6.6 No U.S. Offering. The Company represents that it has not
offered the Securities to the Subscriber in the U.S. or, to
the best knowledge of the Company, to any person in the United
States or any U.S. person.
6.7 Capitalization. The Company, as of the date of the Closing,
will have outstanding the number of shares of Common Stock,
Preferred Stock and Warrants as set forth on Exhibit D.
6.8 Termination Date of Offering. In no event shall the last
Closing of a sale of a Preferred Stock ("Last Closing") occur
later than October 24, 1995.
7. Covenants of Company
7.1 Accountants. The Company shall, until at least October 13
1998, maintain as its independent auditors an accounting firm
authorized to practice before the SEC.
7.2 Corporate Existence and Taxes. The Company shall, until at
least October 13, 1998, maintain its corporate existence in
good standing (provided, however, that the foregoing covenant
shall not prevent the Company from entering into any merger or
corporate reorganization as long as the surviving entity in
such transaction, if not the Company, assumes the Company's
obligations with respect to the Preferred Stock) and shall pay
all its taxes when due except for taxes which the Company
disputes.
7.3 Opinion of Counsel. Subscriber shall, upon purchase of the
Preferred Stock, receive an opinion letter from Benjamin
Sporn, counsel to the Company, to the effect that (i) the
Company is duly incorporated and validly existing; (ii) this
Agreement, the issuance of the Preferred Stock, and the
issuance of the Common
D-8
<PAGE>
Stock upon conversion of the Preferred Stock have been duly
approved by all required corporate action, and that all such
securities, upon delivery, shall be validly issued and
outstanding, fully paid and nonassessable; (iii) this
Agreement and the Registration Rights Agreement are valid and
binding obligations of the Company, enforceable in accordance
with their terms, except as enforceability of any
indemnification provisions may be limited by principles of
public policy, and subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors
and rules of laws governing specific performance and other
equitable remedies; and (iv) based upon the representations
and warranties of the Company and each Subscriber in this
offering, the offer and sale of the Preferred Stock and the
Shares underlying the Preferred Stock to the Subscriber are
not subject to the registration requirements of the Securities
Act pursuant to a safe harbor from the registration
requirements; except that with respect to the foregoing
opinions counsel may add such qualifications as are consistent
with firm practice, including an assumption that the
Subscriber is not engaged in a plan or scheme to evade the
registration provisions of the Act.
7.4 Registration Rights. The Company represents and warrants that
it meets all legal requirements and prerequisites entitling it
to successfully file a registration statement on Form S-3. The
Company shall, within 15 days after the Last Closing, file a
registration statement on Form S-3 (the "Registration
Statement") with the Securities and Exchange Commission,
covering all shares of Common Stock issuable on conversion of
the Preferred Stock issued to all Investors in this offering.
If the Company, for whatever reason, cannot complete a
successful S-3 registration, the Company will file another
registration statement as it is allowed by law. The total
number of shares to be registered shall be computed as twice
the aggregate issue price for all Preferred Stock issued in
this offering divided by the closing bid price of the
Company's stock on the day preceding the day that the
Registration Statement is filed. In the event this number is
not sufficient to register all Common Stock actually obtained
on conversion of Preferred Stock, the Company will either
amend the Registration Statement or file a new registration
statement forthwith to effect registration of all such
converted stock. The Company shall use best efforts to have
the Registration Statement declared effective as soon as
possible. The Company shall maintain the Registration
Statement in full force and effect for a period of 3 years
after the Closing, or until 60 days after all shares of
Preferred Stock have been converted into Common Stock,
whichever comes first. If the Registration Statement is not
effective within 45 days after the Last Closing (as that term
is defined in the Certificate of Amendment), the Company shall
pay a penalty to the Subscriber, as set forth in the
Certificate of Amendment. If the Registration Statement is not
effective within 90 days of the Last Closing, the Subscriber
is entitled to convert its Preferred Stock into Common Stock
of the Company pursuant to Regulation S and applicable
exemptions, as set forth in the Certificate of Determination
of Preferences, until such Registration Statement becomes
effective.
D-9
<PAGE>
8. Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, U.S.A., applicable to agreements made in and
wholly to be performed in that jurisdiction, except for matters arising under
the Act or the Exchange Act which matters shall be construed and interpreted in
accordance with such laws. Any action brought to enforce, or otherwise arising
out of, this Agreement shall be heard and determined only in either a federal or
state court sitting in the County of Manhattan in the State of New York, U.S.A.
9. Entire Agreement; Amendment
This Agreement, the Certificate of Amendment and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof,
and no party shall be liable or bound to any other party in any manner by any
warranties, representations or covenants except as specifically set forth herein
or therein. Except as expressly provided herein, neither this Agreement nor any
term hereof may be amended, waived, discharged or terminated other than by a
written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.
10. Notices, Etc.
Any notice, demand or request required or permitted to be given by
either the Company or the Subscriber pursuant to the terms of this Agreement
shall be in writing and shall be deemed given when delivered personally or by
facsimile, with a hard copy to follow by two day courier addressed to the
parties at the addresses of the parties set forth at the end of this Agreement
or such other address as a party may request by notifying the other in writing.
11. Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
12. Severability
In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that no such severability shall be effective if it
materially changes the economic benefit of this Agreement to any party.
13. Titles and Subtitles
The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
D-10
<PAGE>
14. Amount
The undersigned hereby subscribes for ___________ shares of Preferred
Stock, and pays herewith funds in the amount of ______________________________
U.S Dollars ($______________U.S.).
The undersigned acknowledges that this subscription shall not be
effective unless accepted by the Company as indicated below.
Dated this _____ day of October, 1995.
- ------------------------------------ ------------------------------------
Your Signature EXACT NAME YOU WANT THE
SECURITY TO BE REGISTERED
(Please Print Exact Registered Name)
- ------------------------------------ DELIVERY INSTRUCTIONS:
Name: Please Print ----------------------
Please type or print offshore address to
which you want your security to be delivered
- ------------------------------------ ------------------------------------
Title/Representative Capacity Street Address
- ------------------------------------ ------------------------------------
Name of Company You Represent Street Address
- ------------------------------------ ------------------------------------
Place of Execution City, State or Province, Country
------------------------------------
Offshore Postal Code
------------------------------------
Phone Number (For Federal Express)
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE ____ DAY OF OCTOBER
1995.
APPLIED MICROBIOLOGY, INC.
By:
----------------------------------
Print Name:
--------------------------
Title:
-------------------------------
D-11
<PAGE>
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Preferred Stock)
The undersigned hereby irrevocably elects to convert _________ shares of Series
C Preferred Stock, represented by stock certificate No(s). _______ (the
"Preferred Stock Certificates") into shares of common stock ("Common Stock") of
Applied Microbiology, Inc. (the "Company") according to the conditions of the
Certificate of Designation of Series C Preferred Stock, as of the date written
below. If shares are to be issued in the name of a person other than
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates. No fee will be charged to
the Holder for any conversion, except for transfer taxes, if any.
The undersigned represents and warrants that all offers and sales by the
undersigned of the shares of Common Stock issuable to the undersigned upon
conversion of the Preferred Stock shall be made in compliance with Regulation S,
pursuant to registration of the Common Stock under the Act or pursuant to an
exemption from registration under the Act.
Conversion Calculations:
------------------------------
Date of Conversion
------------------------------
Applicable Conversion Price
------------------------------
Signature
------------------------------
Name
Address:
------------------------------
------------------------------
* No shares of Common Stock will be issued until the original preferred Stock
Certificate(s) to be converted and the Notice of Conversion are received by the
Company's Attorney or Transfer Agent. The original certificate representing
Preferred Stock to be converted and the Notice of Conversion must be received by
the Company's Attorney or Transfer Agent by the fifth business day following the
Date of Conversion, or such Notice of Conversion shall become null and void.
D-12
<PAGE>
AMBI INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
December 17, 1998 10 a.m.
The undersigned hereby appoints Fredric D. Price proxy, with full power
of substitution and revocation, to vote on behalf of the undersigned all shares
of Common Stock of AMBI Inc. which the undersigned is entitled to vote at the
Annual Meeting of Shareholders to be held December 17, 1998 or any adjournments
thereof.
1. ELECTION OF DIRECTORS
FOR all the nominees listed below
(except as marked to the contrary below) / /
WITHHOLD AUTHORITY
To vote for all nominees listed below / /
(INSTRUCTION: To WITHHOLD authority to vote for any individual nominee,
mark the box next to the nominee's name below.)
P. George Benson / /
Audrey T. Cross / /
Rebert E. Flynn / /
Marvin Moser / /
Fredric D. Price / /
Robert E. Pollack / /
The Board of Directors recommends a vote FOR the following:
2. APPROVAL OF AMBI INC. 1998 STOCK OPTION PLAN.
FOR / / AGAINST / / ABSTAIN / /
3. APPROVAL OF ISSUANCE OF COMMON STOCK ON CONVERSION OF SERIES C
PREFERRED STOCK.
FOR / / AGAINST / / ABSTAIN / /
D-13
<PAGE>
4. RATIFICATION OF APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE
COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR FISCAL 1999.
FOR / / AGAINST / / ABSTAIN / /
In his discretion, the proxy is authorized to vote upon such other
business as may properly come before the meeting or any adjournment(s) thereof.
(Continued and to be signed on reverse side)
<PAGE>
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED TO
ELECT MS. CROSS AND MESSRS. BENSON, FLYNN, MOSER, POLLACK AND PRICE AS
DIRECTORS, AND TO APPROVE THE AMBI INC. 1998 STOCK OPTION PLAN, THE ISSUANCE OF
COMMON STOCK ON CONVERSION OF SERIES C PREFERRED STOCK, AND THE APPOINTMENT OF
KPMG PEAT MARWICK LLP AS THE COMPANY'S AUDITORS FOR THE FISCAL YEAR 1999.
Dated:
--------------------------
- --------------------------------
Signature
- --------------------------------
Signature if held jointly
(Please sign exactly as ownership appears on this proxy. Where stock is
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized
person.)
Please mark, date, sign and
return this Proxy in the enclosed envelope.
