Preliminary Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
American Biogenetic Sciences, 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>
Preliminary Proxy Statement
AMERICAN BIOGENETIC SCIENCES, INC.
1375 Akron Street
Copiague, New York 11726
--------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
--------------------
November 11, 1998
--------------------
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of
American Biogenetic Sciences, Inc., a Delaware corporation (the "Company"), will
be held at the Huntington Hilton, 598 Broad Hollow Road, Melville, New York, on
Wednesday, November 11, 1998 at 10:30 a.m., Eastern Standard Time. The following
matters are to be presented for consideration at the meeting:
1. Authorization of an Amendment to the Company's Restated Certificate
of Incorporation in order to effect a combination (reverse split) pursuant to
which the Company's outstanding shares of Class A Common Stock and Class B
Common Stock would be exchanged for new shares of Class A Common Stock and Class
B Common Stock, respectively, in an exchange ratio to be approved by the Board
of Directors, ranging from one newly issued share for each three outstanding
shares to one newly issued share for each six outstanding shares; and
2. To approve the issuance, in addition to the up to 4,000,000 shares
of Class A Common Stock which the Company has agreed to issue, of all shares of
Class A Common Stock which the Company would be entitled to issue upon
conversion of the Company's 5% Convertible Debentures due May 20, 2001.
3. The transaction of such other business as may properly come before
the meeting or any adjournments or postponements thereof.
The close of business on September 25, 1998 has been fixed as the
record date for the determination of stockholders entitled to notice of, and to
vote at, the meeting and any adjournments or postponements thereof. A list of
such stockholders will be open for examination by any stockholder for any
purpose germane to the meeting, during ordinary business hours, for a period of
at least ten days prior to the meeting at the offices of the Company, 1375 Akron
Street, Copiague, New York.
By Order of the Board of Directors,
/s/ Timothy J. Roach
Timothy J. Roach
Secretary
Copiague, New York
October 2, 1998
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO
ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE IS NEEDED IF MAILED IN THE
UNITED STATES.
<PAGE>
Preliminary Proxy Statement
AMERICAN BIOGENETIC SCIENCES, INC.
1375 Akron Street
Copiague, New York 11726
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PROXY STATEMENT
--------------------
This Proxy Statement is furnished to the holders of Class A Common
Stock ("Class A Common Stock") and to the sole holder of Class B Common Stock
("Class B Common Stock" and, together with Class A Common Stock, "Common Stock")
of American Biogenetic Sciences, Inc. (the "Company") in connection with the
solicitation by the Board of Directors of the Company of proxies in the
accompanying form ("Proxy" or "Proxies") to be used at a Special Meeting of
Stockholders of the Company (the "Meeting") to be held on Wednesday, November
11, 1998, at 10:30 a.m., Eastern Standard Time, at the Huntington Hilton, 598
Broad Hollow Road, Melville, New York, and at any adjournments and postponements
thereof, for the purposes set forth in the accompanying Notice of Special
Meeting. It is anticipated that this Proxy Statement and the Proxies will be
mailed to stockholders on or about October 2, 1998. Proxies properly executed
and received in time for the Meeting will be voted. A stockholder who signs and
returns a Proxy has the power to revoke it at any time before it is exercised by
giving written notice of revocation to the Company, 1375 Akron Street, Copiague,
New York 11726, Attention: Secretary, by a duly executed proxy of later date, or
by voting in person at the Meeting.
The close of business on September 25, 1998 has been fixed as the
record date for the determination of stockholders entitled to notice of, and to
vote at, the Meeting (the "Record Date"). There were outstanding, as of the
close of business on that date, 20,710,538 shares of Class A Common Stock and
1,775,500 shares of Class B Common Stock. A majority of the total of such
outstanding shares of Class A Common Stock and Class B Common Stock, represented
in person or by Proxy at the Meeting, is required to constitute a quorum for the
transaction of business at the Meeting. Holders of Class A Common Stock have one
vote for each share thereof held of record and the holder of Class B Common
Stock has ten votes for each share thereof held of record. The Class A Common
Stock and Class B Common Stock will vote as one class on all matters proposed
herein to be submitted to stockholders at the Meeting.
Unless otherwise specified, all Proxies received will be voted in favor
of each of (i) authorization of the proposed Amendment to the Company's Restated
Certificate of Incorporation ( the "Amendment") in order to effect a combination
(the "Reverse Split") of each of the Company's outstanding Class A Common Stock
and Class B Common Stock (the "Reverse Split Proposal") and (ii) approval of the
issuance, in addition to the shares which the Company has agreed to issue, of
all shares of Class A Common Stock which the Company would be entitled to issue
upon conversion of the Company's 5% Convertible Debentures due May 20, 2001 (the
"Additional Issuance Proposal"). The Board of Directors does not intend to bring
before the Meeting any matter other than those specifically described above and
knows of no matters other than the foregoing to come before the Meeting. If any
other matters or motions come before the Meeting, it is the intention of the
persons named in the accompanying Proxy to vote such Proxy in accordance with
their judgment on such matters or motions, including any matters dealing with
the conduct of the Meeting.
Proxies submitted which contain abstentions or broker nonvotes will be
deemed present at the Meeting in determining the presence of a quorum. Shares
subject to abstentions with respect to any matter are considered shares entitled
to, and voted, with respect to that matter. Shares subject to broker nonvotes
with respect to any matter are not considered as shares entitled to vote with
respect to that matter. Since, to adopt the Reverse Split Proposal requires the
affirmative vote of a majority of the votes represented by all outstanding
shares of Class A Common Stock and Class B Common Stock, voting together as a
single class, abstentions and broker non-votes will effectively serve as votes
"against" the Reverse Split Proposal. With respect to the Additional Issuance
Proposal, abstentions will, in effect, be deemed negative votes, but broker
nonvotes will not affect the results of the vote thereon.
<PAGE>
SECURITY HOLDINGS OF CERTAIN
STOCKHOLDERS, MANAGEMENT AND NOMINEES
The following table sets forth information as at the Record Date with
respect to the beneficial ownership of the Company's Class A Common Stock and
Class B Common Stock by (i) each person known by the Company to beneficially own
more than 5% of the outstanding shares of Class A Common Stock or Class B Common
Stock, (ii) each director of the Company, (iii) the Company's Chief Executive
Officer and each other executive officer whose annual cash compensation for 1997
exceeded $100,000 and (iv) all executive officers and directors of the Company
as a group. Each share of Class A Common Stock is entitled to one vote per share
while each share of Class B Common Stock is entitled to ten votes per share. The
Company understands that, except as noted below, each beneficial owner has sole
voting and investment power with respect to all shares attributable to such
owner.
<TABLE>
<CAPTION>
Class A Common Stock(1) Class B Common Stock
----------------------- --------------------
Percent Percent
Beneficial Owner No. Shares of Class No. Shares of Class
- ----------------- ------------ -------- ---------- --------
<S> <C> <C> <C> <C>
Alfred J. Roach (2) 3,870,750 (2) 16.4% 1,775,500 100%
Stephen H. Ip 105,001 (3) * --- ---
Ellena M. Byrne 212,500 (3)(4) 1.0% --- ---
Timothy J. Roach 617,500 (3) 2.9% --- ---
Josef C. Schoell 127,750 (3) * --- ---
Gustav V. R. Born 23,750 (3) * --- ---
Joseph C. Hogan 50,000 (3) * --- ---
William G. Sharwell 45,000 (3) * --- ---
All executive officers and directors
as a group (11 persons, including
the foregoing) 5,239,251 (5) 21.0% 1,775,500 100%
- ----------------------------
</TABLE>
(1) Asterisk indicates less than one percent. Shares of Class A Common
Stock subject to issuance upon conversion of Class B Common Stock into
Class A Common Stock and upon exercise of options that were exercisable
on, or become exercisable within 60 days after, the Record Date are
considered owned by the holder thereof and outstanding for purposes of
computing the percentage of outstanding Class A Common Stock that would
be owned by such person, but (except for the computation of beneficial
ownership by all executive officers and directors as a group) are not
considered outstanding for purposes of computing the percentage of
outstanding Class A Common Stock owned by any other person.
(2) The address of Mr. Roach is Route 2 - Kennedy Avenue, Guaynabo, Puerto
Rico 00657. Beneficial ownership of Class A Common Stock includes
1,775,500 shares of Class A Common Stock issuable upon conversion of
the same number of shares of Class B Common Stock on a share for share
basis and 1,160,000 shares of Class A Common Stock subject to
outstanding options.
(3) Includes shares of Class A Common Stock subject to options as follows:
Stephen H. Ip, 100,001; Ellena M. Byrne, 172,500 (including 15,000
shares subject to options held by her husband); Timothy J. Roach,
607,500; Josef C. Schoell, 118,750; Gustav V.R. Born, 23,750; Joseph C.
Hogan, 30,000; and William G. Sharwell, 35,000.
(4) Includes 15,000 shares owned by Ms. Byrne's son. The inclusion of these
amounts should not be construed as an admission that Ms. Byrne is the
beneficial owner of these shares.
(5) Includes 1,775,500 shares of Class A Common Stock issuable upon
conversion of the same number of shares of Class B Common Stock and
2,405,001 shares of Class A Common Stock subject to outstanding
options.
-2-
<PAGE>
PROPOSAL 1.
TO AUTHORIZE AN AMENDMENT TO THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION TO
ENABLE THE BOARD OF DIRECTORS TO EFFECT
A REVERSE SPLIT OF EACH CLASS OF COMMON STOCK
General
The Company's Board of Directors has unanimously adopted resolutions
proposing, declaring advisable and recommending that stockholders authorize an
Amendment to the Company's Restated Certificate of Incorporation (the
"Amendment") to (i) effect a combination (reverse stock split) of the Company's
issued shares of Class A Common Stock and Class B Common Stock (the "Reverse
Split") and (ii) provide for the payment of cash in lieu of fractional shares
otherwise issuable in connection therewith. There will be no change in the
number of the Company's authorized shares of Class A Common Stock or Class B
Common Stock and no change in the par value of either class.
If the Reverse Split is approved, the Board will have authority without
further stockholder approval to effect the Reverse Split pursuant to which the
Company's outstanding shares (the "Old Shares") of Class A Common Stock and
Class B Common Stock would be exchanged for new shares (the "New Shares") of
Class A Common Stock and Class B Common Stock, respectively, in an exchange
ratio to be approved by the Board of Directors, ranging from one New Share for
each three Old Shares to one New Share for each six Old Shares. The number of
Old Shares for which each New Share is to be exchanged is referred to as the
"Exchange Number". The Exchange Number may, within such range, be a whole number
or a whole number and fraction of a whole number. The Reverse Split will be
effected simultaneously for each of Class A Common Stock and Class B Common
Stock and Exchange Number will be the same for each class.
In addition, the Board will have the authority to determine the exact
timing of the effective date of the Reverse Split, which may be any time prior
to June 30, 1999, without further stockholder approval. Such timing and Exchange
Number will be determined in the judgment of the Board of Directors, with the
intention of maximizing the Company's ability to remain in compliance with the
continued listing maintenance requirements of The Nasdaq Stock Market, Inc.
("Nasdaq") and other intended benefits of the Reverse Split to stockholders and
the Company. See "--Purpose of the Reverse Split," below. The text of the
proposed Amendment (subject to inserting the effective date of the Reverse
Split, the Exchange Number and the per share amount to be paid for fractional
shares) is set forth in Exhibit A to this Proxy Statement.
The Board of Directors also reserves the right, notwithstanding
stockholder approval and without further action by the stockholders, to not
proceed with the Reverse Split, if, at any time prior to filing the Amendment
with the Secretary of State of the State of Delaware, the Board of Directors, in
its sole discretion, determines that the Reverse Split is no longer in the best
interests of the Company and its stockholders. The Board of Directors may
consider a variety of factors in determining whether or not to implement the
Reverse Split and in determining the Exchange Number including, but not limited
to, overall trends in the stock market, recent changes and anticipated trends in
the per share market price of the Company's Class A Common Stock, business and
transactional developments and the Company's actual and projected financial
performance.
The Reverse Split will not change the proportionate equity interests of
the Company's stockholders, nor will the respective voting rights and other
rights of stockholders be altered, except for possible immaterial changes due to
the Company's purchase of fractional shares. The Common Stock issued pursuant to
the Reverse Split will remain fully paid and nonassessable. The Company will
continue to be subject to the periodic reporting requirements of the Securi ties
Exchange Act of 1934.
-3-
<PAGE>
Purposes of the Reverse Split
The Company's Class A Common Stock is quoted on Nasdaq's National
Market ("Nasdaq/NMS"). In order for the Class A Common Stock to continue to be
quoted thereon, the Company and its Class A Common Stock are required to
continue to comply with various listing maintenance standards established by
Nasdaq. Among other things, as such requirements pertain to the Company, the
Company is required to maintain an adjusted tangible net worth of at least
$4,000,000 and its Class A Common Stock must have an aggregate market value of
shares held by persons other than officers and directors ("public float") of at
least $5,000,000, at least 400 persons who own at least 100 shares and a minimum
bid price of at least $1.00 per share.
Under Nasdaq's listing maintenance standards, if the closing bid price
of the Class A Common Stock is under $1.00 per share for a thirty consecutive
business days and does not thereafter regain compliance for a minimum of ten
consecutive business days during the ninety calendar days following notification
by Nasdaq, Nasdaq may delist the Class A Common Stock from trading on the
Nasdaq/NMS. If this were to occur, the Class A Common Stock would trade on the
OTC Bulletin Board or in the "pink sheets" maintained by the National Quotation
Bureau, Inc. Such alternatives are generally considered to be less efficient
markets. While the Company has not received any such notification from Nasdaq,
the closing bid price of its Common Stock has been below $1.00 per share for
thirty consecutive days prior to September 30, 1998. The Company understands
that it is Nasdaq's position that an ability to demonstrate sustained compliance
is also required to achieve compliance with this requirement. Giving the Board
authority to implement the Reverse Split will avoid the need to call a special
meeting of, or seek consents from, stockholders under time constraints to
authorize a reverse split should Nasdaq at a later date request the Company to
effectuate a reverse split. There can be no assurance that, even after
effectuating the Reverse Split, the Company will continue to meet the minimum
bid price and other requirements of Nasdaq for continued inclusion for trading
on Nasdaq/NMS.
The Company also believes that effectuating the Reverse Split will
result in a broader market for the Company's Class A Common Stock and facilitate
the use of the Class A Common Stock in acquisitions and financing transactions
in which the Company may engage. Many investors, including institutions, are
reluctant to invest in, and many brokerage firms are reluctant to recommend to
their clients, lower-priced stocks. Additionally, the policies and practices of
a number of brokerage houses tend to discourage individual brokers within those
firms from dealing in lower-priced stocks. Some of these policies and practices
pertain to the payment of broker's commissions and to time-consuming procedures
that render the handling of lower-priced stocks unattractive to brokers from an
economic perspective. Moreover, the structure of trading commissions also tends
to have an adverse impact upon holders of lower-priced stocks because the
brokerage commission payable on the sale of a lower-priced stock generally
represents a higher percentage of the sales price than the commission on a
relatively higher-priced issue. Furthermore, the policy of many brokerage houses
is not to make margin loans against lower priced stocks.
The Board of Directors hopes that the decrease in the number of shares
of Common Stock outstanding as a consequence of the Reverse Split will result in
an anticipated corresponding increased price per share, enabling the Class A
Common Stock to meet the requirements for continued listing on Nasdaq/NMS, while
becoming more attractive to potential investors. There can be no assurance,
however, that the Reverse Split will increase the market price of the Class A
Common Stock by a multiple equal to the Exchange Number or result in the
permanent increase in the market price (which is dependent upon many factors,
including the Company's performance and prospectus).
-4-
<PAGE>
Certain Effects of the Reverse Split
The following tables illustrate the principal effects of the Reverse
Split on the Company's Common Stock:
<TABLE>
<CAPTION>
Prior to After 1-for-3 After 1-for-4 After 1-for-5 After 1-for-6
Reverse Stock Reverse Stock Reverse Stock Reverse Stock Reverse Stock
Number of Shares Split Split Split Split Split
- ---------------- ------------- -------------- -------------- ------------- -------------------
<S> <C> <C> <C> <C> <C>
Class A Common Stock, .001 par
value Authorized................ 50,000,000 50,000,000 50,000,000 50,000,000 50,000,000
Outstanding (1)................. 20,710,538 6,903,512 5,177,634 4,142,107 3,451,756
Available for Future Issuance... 29,289,462 43,096,488 44,822,366 45,857,893 46,548,244
Class B Common Stock
Authorized...................... 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000
Outstanding..................... 1,775,500 591,833 443,875 355,100 295,916
Available for Future Issuance... 1,224,500 2,408,167 2,556,125 2,644,900 2,704,084
Financial Data (2)
Stockholders' Equity
Class A Common Stock............ $ 21,000 $ 7,000 $ 5,000 $ 4,000 $ 3,000
Class B Common Stock............ 2,000 1,000 1,000 1,000 1,000
Additional Paid-in Capital 58,773,000 58,788,000 58,790,000 58,791,000 58,792,000
Deficit Accumulated During
Development Stage............... (52,328,000) (52,328,000) (52,328,000) (52,328,000) (52,328,000)
------------ ------------ ------------ ------------ ------------
Total Stockholders' Equity...... $ 6,468,000 $ 6,468,000 $ 6,468,000 $ 6,468,000 $ 6,468,000
============ ============== ============== ============ ==============
Net (Loss) per share:
Six months ended June 30, 1998 $(0.14) $(0.41) $(0.54) $(0.68) $(0.81)
Year ended December 31, 1997 $(0.35) $(1.06) $(1.41) $(1.77) $(2.12)
Book Value Per Common
Share......................... $0.31 $0.94 $1.25 $1.56 $1.87
-----------------------------
</TABLE>
(1) Gives effect to the Reverse Split as if it occurred on the Record Date,
subject to adjustment resulting from the repurchase of fractional
shares. Excludes, on a pre-Reverse Split basis, 1,775,500 shares of
Class A Common Stock subject to potential issuance upon conversion of
the outstanding shares of Class B Common Stock; 4,678,541 shares of
Class A Common Stock which were subject to outstanding options and
warrants;; 1,405,750 additional shares of Class A Common Stock which
were available for the grant of future options under the Company's
stock option plans; up to 4,000,000 shares of Class A Common Stock
which were subject to potential issuance upon conversion of the
Debentures (see "APPROVAL OF ISSUANCE OF ADDITIONAL SHARES UPON
CONVERSION OF 5% CONVERTIBLE DEBENTURES"); and 1,332,910 shares of
Class A Common Stock reserved for potential issuance upon conversion of
other debentures. Upon effectiveness of the Reverse Split, each option,
warrant and conversion right would entitle the holder to acquire a
number of shares equal to the number of shares which the holder was
entitled to acquire prior to the Reverse Split divided by the Exchange
Number at the exercise or conversion price in effect immediately prior
to the Reverse Split multiplied by the Exchange Number.
(2) Balance sheet data gives effect to the Reverse Split as if it occurred
on June 30, 1998, subject to adjustment resulting from the repurchase
of fractional shares.
-5-
<PAGE>
Stockholders should recognize that if the Reverse Split is effectuated
they will own a fewer number of shares than they presently own - a number equal
to the number of shares owned immediately prior to the filing of the Amendment
divided by the Exchange Number and that there can be no assurance that the
market price of the Company's Common Stock will, in fact, correspondingly
increase by a multiple equal to the Exchange Number following consummation of
the Reverse Split or, even if such price increases by a multiple equal to the
Exchange Number, that such post Reverse Split price will be sustained. The
Reverse Split will increase the number of stockholders of the Company who own
odd-lots (less than 100 shares). Stockholders who hold odd-lots typically will
experience an increase in the cost of selling their shares, as well as greater
difficulty in effecting such sales. Also, the possibility does exist that
liquidity could be adversely affected by the reduced number of shares that would
be outstanding after the Reverse Split. Consequently, there can be no assurance
that the Reverse Split will achieve the desired results that have been outlined
above.
Procedure for Effecting Reverse Split and Exchange of Stock Certificates
If the Amendment is approved by the Company's stockholders, and if the
Board of Directors still believes that the Reverse Split is in the best
interests of the Company and its stockholders, the Company will file the
Amendment with the Secretary of State of the State of Delaware at such time as
the Board has determined the appropriate Exchange Number and the appropriate
effective time for such split. The Board may delay effecting the Reverse Split
until June 30, 1999 without resoliciting such stockholder approval. The Reverse
Split will become effective on the date of filing the Amendment (the "Effective
Date"). Beginning on the Effective Date, each certificate representing Old
Shares will be deemed for all corporate purposes to evidence ownership of New
Shares. To the extent a stockholder would otherwise be entitled to a fraction of
a share, the Company will pay cash for fractional interests as described below.
As soon as practicable after the Effective Date, stockholders will be
notified that the Reverse Split has been effected and of the exact Exchange
Number. The Company's transfer agent will act as the Company's exchange agent
(the "Exchange Agent") to act for holders of Common Stock in implementing the
exchange of their certificates. Holders of Old Shares will be asked to surrender
to the Exchange Agent certificates representing Old Shares in exchange for
certificates representing New Shares in accordance with the procedures to be set
forth in a letter of transmittal to be sent by the Company. No new certificates
will be issued to a stockholder until such stockholder has surrendered such
stockholders outstanding certificate(s) together with the properly completed and
executed letter of transmittal to the Exchange Agent. Stockholders should not
destroy any stock certificate and should not submit any certificates until
requested to do so.
Fractional Shares
No scrip or fractional certificates will be issued in connection with
the Reverse Split. Stockholders who otherwise would be entitled to receive
fractional shares because they hold a number of Old Shares not evenly divisible
by the Exchange Number, will be entitled, upon surrender to the Exchange Agent
of certificates representing such shares, to a cash payment in lieu thereof at a
price equal to the fraction to which the stockholder would otherwise be entitled
multiplied by the closing price of the Class A Common Stock, as reported in The
Wall Street Journal, on the Effective Date (or if such price is not available,
the average of the last bid and ask prices of the Class A Common Stock on such
day or other price determined by the Board of Directors). The ownership of a
fractional interest will not give the holder thereof any voting, dividend, or
other rights except to receive payment therefor as described herein.
Stockholders should be aware that, under the escheat laws of the
various jurisdictions where stockholders reside, where the Company is domiciled,
and where the funds will be deposited, sums due for fractional interests that
are not timely claimed after the Effective Date may be required to be paid to
the designated agent for each such jurisdiction, unless correspondence has been
received by the Company or the Exchange Agent concerning ownership of such funds
within the time permitted in such jurisdiction. Thereafter, stockholders
otherwise entitled to receive such funds will have to seek to obtain them
directly from the state to which they were paid.
-6-
<PAGE>
No Dissenter's Rights
Under Delaware law, stockholders are not entitled to dissenter's rights
with respect to the proposed Amendment.
Federal Income Tax Consequences of the Reverse Split
The following is a summary of certain material U.S. federal income tax
consequences of the Reverse Split to a U.S. citizen or individual resident in
the U.S. for federal income tax purposes, a corporation or partnership organized
under the laws of the U.S. or a state of the U.S., a trust in which one or more
U.S. persons have the authority to control all substantial decisions of the
trust and a U.S. court is able to exercise primary supervision over the
administration of the trust, or an estate subject to U.S. federal income tax on
all of its income regardless of source (each, a "U.S. Holder"), who holds such
stockholder's Old Shares as a capital asset. The discussion is based on the
provisions of the U.S. federal income tax law as of the date hereof, which is
subject to change retroactively as well as prospectively. The discussion is for
general information only and does not purport to address all relevant concerns
to a U.S. Holder. In addition, it does not discuss any state, local, foreign or
minimum income or other U.S. federal tax consequences. The following discussion
is not tax advice. Each stockholder should consult with such stockholder's own
tax advisor with respect to the consequences of the Reverse Split.
No gain or loss should be recognized by a stockholder of the Company
upon such stockholder's exchange of Old Shares for New Shares pursuant to the
Reverse Split (except to the extent of any cash received in lieu of a fraction
of a New Share). Cash payments in lieu of a fractional New Shares should be
treated as if the fractional share were issued to the stockholder and then
redeemed by the Company for cash. A Company stockholder receiving such payment
should recognize gain or loss equal to the difference, if any, between the
amount of cash received and the stockholder's basis in the fractional share
(determined as provided below). Such gain or loss will be capital gain or loss
if the payment of cash in lieu of the fractional share is a mere mechanical
rounding off of fractions and not separately bargained for consideration, and
the payment is "not essentially equivalent to a dividend" with respect to the
stockholder under the federal income tax law. For this purpose, a payment is not
essentially equivalent to a dividend if it results in a "meaningful reduction"
in the stockholder's percentage interest in the Company, taking into account the
constructive ownership rules and redemptions of fractional shares from all the
stockholders. The Internal Revenue Service has ruled publicly that any reduction
in the percentage interest of a small minority stockholder in a publicly-held
corporation who exercises no control over corporate affairs should constitute a
meaningful reduction.
The aggregate tax basis of the New Shares received in the Reverse Split
(including any fraction of a New Share deemed to have been received) will be the
same as the stockholder's aggregate tax basis in the Old Shares exchanged
therefor. The stockholder's holding period for the New Shares will include the
period during which the stockholder held the Old Shares surrendered in the
Reverse Split.
Required Vote
Authorization of the proposed Amendment requires the affirmative vote
of the holders of a majority of all outstanding shares of Class A Common Stock
and Class B Common Stock, voting together as one class, with Class A Common
Stock having one vote per share and Class B Common Stock having ten votes per
share.
The Board of Directors unanimously recommends that stockholders vote
FOR this proposal.
-7-
<PAGE>
PROPOSAL 2.
APPROVAL OF ISSUANCE OF ADDITIONAL SHARES
UPON CONVERSION OF 5% CONVERTIBLE DEBENTURES
General
On May 20, 1998, the Company completed a private placement to three
unaffiliated investors (the "Investors") of an aggregate of $4,000,000 of 5%
Convertible Debentures due May 20, 2001 (the "Debentures") and three series of
Warrants to purchase up to an aggregate of 261,228 shares (subject to reduction
in certain instances) of the Company's Class A Common Stock at an exercise price
of $1.9194 per share (the "Warrants").
The Debentures have been convertible to the extent of 25% of the
principal amount thereof commencing on September 17, 1998, with an additional
25% of the principal amount of the Debentures becoming first convertible on each
of October 17, 1998, November 16, 1998 and December 16, 1998 (subject to
potential acceleration in certain instances) at a conversion price equal to 87%
(if converted before November 17, 1998), 86% (if converted between November 17,
1998 and February 14, 1999), 85% (if converted between February 15, 1999 and May
20, 1999) or 84% (if converted after May 20, 1999), respectively, of the average
of the closing bid prices of the Company's Class A Common Stock for the five
consecutive trading days immediately preceding the date of conversion of the
Debentures; provided, however, that in no event may the conversion price be
greater than $1.9375 per share, which was 125% of such average price over the
five consecutive trading days prior to the consummation of the transaction.
Interest on the Debentures is payable only on maturity, conversion, redemption
or when other payment is made on the Debentures in cash or, if registered for
resale under the Securities Act of 1933, as amended (the "Securities Act"), in
shares of the Company's Class A Common Stock valued at the applicable Debenture
conversion price. Any Debenture outstanding on May 20, 2001 will be
automatically converted as of that date. In addition, the Company may require
conversion of outstanding Debentures after May 20, 2000 if the closing bid price
of its Class A Common Stock on the trading day immediately preceding its giving
of notice of conversion to Debentureholders is at least $3.0625.
Purpose of the Additional Issuance Proposal
The rules of Nasdaq require companies, the stocks of which are quoted
thereon, to obtain stockholder approval prior to issuing, in a transaction other
than in a public offering, a number of shares of common stock equal to 20% or
more of its common stock or voting power outstanding before the issuance at a
price less than the greater of the book or market value of the stock.
To meet this requirement, the Company and the Investors agreed that in
the event the Company would be required to issue more than 4,000,000 shares of
its Class A Common Stock upon conversion of all of the Debentures (the
"Conversion Limit"), the Company will have the option of: (i) issuing additional
shares of Common Stock but only if (x) stockholder approval (being sought
herein) has been obtained or stockholder approval is not required in order to
comply with applicable rules of the market upon which its Class A Common Stock
is traded and (y) the additional shares are registered for resale under the
Securities Act or (ii) paying cash to the holder in an amount equal to the
principal amount of Debentures being converted plus an amount equal to the
number of shares of Class A Common Stock that would be otherwise issuable upon
conversion of the Debentures multiplied by the difference between the highest
sales price of the Company's Common Stock on the date of conversion and the
applicable Debenture conversion price.
The purpose of the Additional Issuance Proposal is to enable the
Company (upon registering such additional shares under the Securities Act), to
enable the Company to utilize its option to issue shares of Class A Common Stock
upon conversion of the Debentures should the Conversion Limit be reached, thus
enabling the Company to utilize its available cash for operations and to develop
products.
-8-
<PAGE>
A vote against the Additional Issuance Proposal by stockholders will
not effect the rights of the Investors, who would, if the Company would
otherwise be required to issue in excess of 4,000,000 shares, be able to require
the Company to redeem Debentures otherwise convertible at a redemption price
equal to, in effect, that which the Investors could have received if they had
been able to convert the Debentures and, at the time of their election to
convert the Debentures, sold the shares otherwise issuable to them.
Required Vote
The affirmative vote of a majority of the shares of Class A Common
Stock and Class B Common Stock present, in person or by proxy, at the Meeting
and entitled to vote on this proposal, voting together as one class, with Class
A Common Stock having one vote per share and Class B Common Stock having ten
votes per share, will be required to adopt this proposal. The Board of Directors
recommends that stockholders vote FOR approval of this proposal.
MISCELLANEOUS
Stockholder Proposals
From time to time stockholders may present proposals which may be
proper subjects for inclusion in the proxy statement and form of proxy relating
to that meeting. In order to be considered, such proposals must be submitted in
writing on a timely basis. Stockholder proposals intended to be included in the
Company's proxy statement and form of proxy relating to the Company's next
Annual Meeting of Stockholders must be received at 1375 Akron Street, Copiague,
New York 11726, by January 15, 1999. Any such proposals, as well as any
questions relating thereto, should be directed to the Secretary of the Company.
Solicitation of Proxies
The cost of preparing, assembling and mailing the Notice of Special
Meeting, this Proxy Statement and Proxies is to be borne by the Company. The
Company will also reimburse brokers who are holders of record of Class A Common
Stock for their expenses in forwarding Proxies and Proxy soliciting materials to
the beneficial owners of such shares. In addition to the use of the mails,
Proxies may be solicited without extra compensation by directors, officers and
employees of the Company by telephone, telecopy, telegraph or personal
interview. The Company has retained W.F. Doring & Co., Inc., 150 Bay Street,
Jersey City, New Jersey 07302 to aid in the solicitation of Proxies. For its
services, W.F. Doring & Co., Inc. will receive a fee of $2,500 plus
reimbursement for certain out-of-pocket expenses.
By Order of the Board of Directors,
/s/ Timothy J. Roach
Timothy J. Roach
Secretary
October 2, 1998
-9-
<PAGE>
Exhibit A
Section of the Company's Restated Certificate of Incorporation
is to be amended to add the following immediately after the present first
paragraph thereof (which sets forth the number and par value of the Company's
authorized capital stock, none of which is being amended):
"Effective 12:01 a.m. on , 19 , each ( ) shares of
Class A Common Stock then issued shall be automatically
combined into one share of Class A Common Stock of the
Corporation and each ( ) shares of Class B Common Stock then
issued shall be automatically combined into one share of Class
B Common Stock of the Corporation. There shall be no
fractional shares issued. In lieu thereof, each fraction of a
share that would otherwise be issued to holders of record
thereof shall be entitled to receive payment of $ per full
share (after giving effect to the combination) multiplied by
such fraction (rounded to the nearest cent)."
-10-
<PAGE>
AMERICAN BIOGENETIC SCIENCES, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS - NOVEMBER 11, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints, as proxies for the undersigned, AIDA
PADILLA, TIMOTHY J. ROACH and LEONARD W. SUROFF, or any one or more of them,
with full power of substitution, to vote all shares of the capital stock of
American Biogenetic Sciences, Inc. (the "Company") which the undersigned is
entitled to vote at the Special Meeting of Stockholders of the Company to be
held on Wednesday, November 11, 1998, at 10:30 a.m. Eastern Standard Time, at
the Huntington Hilton, 598 Broad Hollow Road, Melville, New York and at any
adjournments or postponements thereof, receipt of Notice of which meeting and
the Proxy Statement accompanying the same being hereby acknowledged by the
undersigned, upon the matters described in the Notice of Meeting and Proxy
Statement and upon such other business as may properly come before the meeting
and any adjournments or postponements thereof, hereby revoking any proxies
heretofore given.
Each properly executed proxy will be voted in accordance with the
specifications made on the reverse side hereof. If no specifications are made,
the proxies will be voted FOR each of Proposals 1 and 2.
(continued and to be signed on reverse side)
<PAGE>
A vote FOR each of Proposals 1 and 2 is recommended by the Board of
Directors.
1. To authorize an Amendment to the Company's Restated Certificate of
Incorporation in order to effect a combination (reverse split) of the
Company's outstanding Class A Common Stock and Class B Common Stock.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. To approve the issuance of additional shares of Class A Common Stock
upon conversion of the Company's 5% Convertible Debentures.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Dated:________________, 1998
_____________________________
(SIGNATURE OF STOCKHOLDER)
_____________________________
(SIGNATURE OF STOCKHOLDER)
NOTE: Please sign your name
or names exactly as set forth
hereon. For jointly owned
shares, each owner should
sign. If signing as attorney,
executor, administrator,
trustee or guardian, please
indicate the capacity in
which you are acting. Proxies
executed by corporations
should be signed by a duly
authorized officer and should
bear the corporate seal.
PLEASE DATE AND SIGN THIS PROXY AND MAIL IT PROMPTLY
IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED
IN THE UNITED STATES.
