<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------
SCHEDULE 13D
(RULE 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO 13d-1(a)
AND AMENDMENTS THERETO FILED PURSUANT TO 13d-2(a)
(AMENDMENT NO. __)(1)
AMERICAN BIOGENETIC SCIENCES, INC.
----------------------------------
(Name of Issuer)
COMMON STOCK
------------
(Title of Class of Securities)
024611 10 5
-----------
(CUSIP Number)
Hope Flack
BVF Partners L.P
227 West Monroe Street, Suite 4800
Chicago, Illinois 60606
(312) 263-7777
---------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
February 7, 2000
------------------
(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box
/ /
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. SEE Rule 13d-1(a) for other parties to whom copies are to
be sent.
(Continued on following pages)
(Page 1 of 9 Pages)
- ---------------------------
(1) The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, SEE the
NOTES).
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CUSIP NO. 024611 10 5 13D Page 2 of 9 Pages
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<TABLE>
<CAPTION>
<S><C>
- --------- ----------------------------------------------------------------------
1 NAME OF REPORTING PERSON:
BIOTECHNOLOGY VALUE FUND, L.P.
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY):
- --------- ----------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) /x/ (b) / /
- --------- ----------------------------------------------------------------------
3 SEC USE ONLY
- --------- ----------------------------------------------------------------------
4 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- --------- ----------------------------------------------------------------------
NUMBER 5 SOLE VOTING POWER
OF 0
SHARES -----------------------------------------------
BENEFICIALLY 6 SHARED VOTING POWER
OWNED BY EACH 4,200,000
REPORTING ----------------------------------------------
PERSON 7 SOLE DISPOSITIVE POWER
WITH 0
----------------------------------------------
8 SHARED DISPOSITIVE POWER
4,200,000
- --------- ----------------------------------------------------------------------
9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,200,000
- --------- ----------------------------------------------------------------------
10 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES
CERTAIN SHARES* / /
- --------- ----------------------------------------------------------------------
11 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 9
7.7%
- --------- ----------------------------------------------------------------------
12 TYPE OF REPORTING PERSON*
PN
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</TABLE>
* SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
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CUSIP NO. 024611 10 5 13D Page 3 of 9 Pages
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<TABLE>
<CAPTION>
<S><C>
- --------- ----------------------------------------------------------------------
1 NAME OF REPORTING PERSON:
BIOTECHNOLOGY VALUE FUND II, L.P.
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY):
- --------- ----------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) /X/ (b) / /
- --------- ----------------------------------------------------------------------
3 SEC USE ONLY
- --------- ----------------------------------------------------------------------
4 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- --------- ----------------------------------------------------------------------
NUMBER 5 SOLE VOTING POWER
OF 0
SHARES -----------------------------------------------
BENEFICIALLY 6 SHARED VOTING POWER
OWNED BY EACH 7,200,000
REPORTING ----------------------------------------------
PERSON 7 SOLE DISPOSITIVE POWER
WITH 0
----------------------------------------------
8 SHARED DISPOSITIVE POWER
7,200,000
- --------- ----------------------------------------------------------------------
9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
7,200,000
- --------- ----------------------------------------------------------------------
10 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES
CERTAIN SHARES* / /
- --------- ----------------------------------------------------------------------
11 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 9
13.2%
- --------- ----------------------------------------------------------------------
12 TYPE OF REPORTING PERSON*
PN
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</TABLE>
* SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
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CUSIP NO. 024611 10 5 13D Page 4 of 9 Pages
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<TABLE>
<CAPTION>
<S><C>
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1 NAME OF REPORTING PERSON:
BVF PARTNERS L.P.
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY):
- --------- ----------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) /X/ (b) / /
- --------- ----------------------------------------------------------------------
3 SEC USE ONLY
- --------- ----------------------------------------------------------------------
4 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- --------- ----------------------------------------------------------------------
NUMBER 5 SOLE VOTING POWER
OF 0
SHARES -----------------------------------------------
BENEFICIALLY 6 SHARED VOTING POWER
OWNED BY EACH 12,000,000
REPORTING ----------------------------------------------
PERSON 7 SOLE DISPOSITIVE POWER
WITH 0
----------------------------------------------
8 SHARED DISPOSITIVE POWER
12,000,000
- --------------------------------------------------------------------------------
9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
12,000,000
- --------- ----------------------------------------------------------------------
10 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES
CERTAIN SHARES* / /
- --------- ----------------------------------------------------------------------
11 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 9
21.9%
- --------- ----------------------------------------------------------------------
12 TYPE OF REPORTING PERSON*
PN
- --------- ----------------------------------------------------------------------
</TABLE>
* SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
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CUSIP NO. 024611 10 5 13D Page 5 of 9 Pages
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<TABLE>
<CAPTION>
<S><C>
- --------- ----------------------------------------------------------------------
1 NAME OF REPORTING PERSON:
BVF INC.
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY):
- --------- ----------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) /X/ (b) / /
- --------- ----------------------------------------------------------------------
3 SEC USE ONLY
- --------- ----------------------------------------------------------------------
4 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- -------------------------- ----- -----------------------------------------------
NUMBER 5 SOLE VOTING POWER
OF 0
SHARES -----------------------------------------------
BENEFICIALLY 6 SHARED VOTING POWER
OWNED BY EACH 12,000,000
REPORTING ----------------------------------------------
PERSON 7 SOLE DISPOSITIVE POWER
WITH 0
----------------------------------------------
8 SHARED DISPOSITIVE POWER
12,000,000
- --------------------------------------------------------------------------------
9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
12,000,000
- --------- ----------------------------------------------------------------------
10 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES
CERTAIN SHARES* / /
- --------- ----------------------------------------------------------------------
11 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 9
21.9%
- --------- ----------------------------------------------------------------------
12 TYPE OF REPORTING PERSON*
IA, CO
- --------- ----------------------------------------------------------------------
</TABLE>
* SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
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CUSIP NO. 024611 10 5 13D Page 6 of 9 Pages
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ITEM 1. SECURITY AND ISSUER.
This Statement on Schedule 13D (this "Statement") relates to
Series A Convertible Preferred Stock (the "Preferred Stock) and
Warrants (the "Warrants") of American Biogenetic Sciences, Inc., a
Delaware corporation ("American Biogenetic"). Class A Common Stock, par
value $0.001 per share, (the "Common Stock," and collectively with the
Preferred Stock and the Warrants, the "Securities") underlies both the
Preferred Stock and Warrants. The principal executive office of
American Biogenetic is located at 1375 Akron Street, Copiague, New York
11726.
ITEM 2. IDENTITY AND BACKGROUND.
The persons filing this Statement, the persons enumerated in
Instruction C of Schedule 13D and, where applicable, their respective
places of organization, general partners, directors, executive officers
and controlling persons, and certain information regarding each of
them, are as follows:
(a) Biotechnology Value Fund, L.P., a Delaware limited partnership
("BVF"), Biotechnology Value Fund II, L.P., a Delaware limited
partnership ("BVF2"), BVF Partners L.P., a Delaware limited partnership
("Partners"), BVF Inc., a Delaware corporation ("BVF Inc."), and Mark
N. Lampert, an individual ("Lampert") (collectively, the "Reporting
Persons").
(b) The business address of BVF, BVF2 and Partners is 227 West Monroe
Street, Suite 4800, Chicago, Illinois 60606. The business address of
BVF Inc. and Lampert is One Sansome Street, 39th Floor, San Francisco,
California 94104.
(c) Partners is the general partner of BVF and BVF2, which are
investment limited partnerships. BVF Inc. is an investment advisor to
and general partner of Partners. Lampert is the sole shareholder, sole
director and an officer of BVF Inc.
(d) During the last five years, none of such persons has been convicted
in a criminal proceeding (excluding traffic violations and similar
misdemeanors).
(e) During the last five years, none of such persons was a party to a
civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state
securities laws or finding any violation with respect to such laws.
(f) Lampert is a citizen of the United States of America.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On February 7, 2000, Partners, in its capacity as general
partner of BVF and BVF2 and using funds provided by BVF's working
capital and BVF2's working capital pursuant to the terms of their
respective limited partnership agreements, and in its
<PAGE>
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CUSIP NO. 024611 10 5 13D Page 7 of 9 Pages
- ----------------------------- -----------------------------
capacity as investment advisor for Investment 10 L.L.C., an Illinois
limited liability company ("ILL10") and using funds under management
by Partners pursuant to its investment management agreements with
ILL10, purchased Promissory Notes (the "Notes," attached hereto as
EXHIBIT C) that mature upon the closing of the transaction reported
in this Statement, which will occur no later than March 15, 2000
("the Closing Date"). The Notes are payable in Warrants and either a
new class of preferred stock or Common Stock, as detailed below. The
creation of a new class of preferred stock must be approved by the
shareholders of American Biogenetic, who will vote on or before the
Closing Date. The number of shareholder votes approving the creation
must represent a majority of all then-outstanding shares of all
classes of Common Stock. If such a majority approves the creation of
the Preferred Stock, the Notes will be payable in Warrants and
Preferred Stock. If shareholder approval is not obtained, the Notes
are payable instead in Warrants and Common Stock. The number of
shares of Common Stock that will be issued will equal the number of
shares of Common Stock that underlie the Preferred Stock.
ITEM 4. PURPOSE OF TRANSACTIONS.
The sole purpose of the acquisitions of the Securities
reported herein is and was for investment. The Reporting Persons did
not at the time of such acquisitions of the Securities, and do not
presently, have any plan to acquire control of American Biogenetic. The
Reporting Persons may acquire or dispose of additional Securities from
time to time.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) BVF beneficially owns 4,200,000 shares of Common Stock, which
represents approximately 7.7% of the aggregate number of shares of
common stock outstanding as of February 7, 2000 (as represented to
the Reporting Persons by American Biogenetic pursuant to the
transaction reported in this Statement, the "Outstanding Shares").
BVF2 beneficially owns 7,200,000 shares of Common Stock, which
represents approximately 13.2% of the Outstanding Shares. Partners
beneficially owns 12,000,000 shares of Common Stock, which
represents approximately 21.9% of the Outstanding Shares. BVF Inc.
beneficially owns 12,000,000 shares of Common Stock, which
represents approximately 21.9% of the Outstanding Shares. The number
of shares for each Reporting Person as referred to in this ITEM 5(a)
is based upon the beneficial ownership of Warrants that are first
exercisable on the Closing Date and the beneficial ownership of
Preferred Stock that is also first convertible on the Closing Date
(or Common Stock as provided in lieu thereof, see ITEM 3). Neither
ILL10 nor any of the other managed accounts that are managed by
Partners (together with ILL10, the "Accounts") individually owns
more than 5% of the Outstanding Shares.
(b) BVF shares voting and dispositive power over the 4,200,000 shares
of Common Stock it beneficially owns with Partners. BVF2 shares voting
and dispositive power over the 7,200,000 shares of Common Stock it
beneficially owns with Partners. Partners and BVF Inc. share voting and
dispositive power over the 12,000,000 shares of Common Stock they
beneficially own with, in addition to BVF and BVF2, the managed account
on whose behalf Partners, as investment advisor, purchased such shares.
The managed account on whose behalf Partners owns shares of the Stock
is ILL10. The Accounts specialize in holding biotechnology stocks for
investment purposes and the business address of each is BVF Partners
L.P., 227 West Monroe Street, Suite 4800, Chicago, Illinois 60606.
<PAGE>
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CUSIP NO. 024611 10 5 13D Page 8 of 9 Pages
- ----------------------------- -----------------------------
(c) The only transaction in the Securities by the Reporting Persons
during the past 60 days is the February 7, 2000 purchase by Partners,
on behalf of BVF, BVF2 and ILL10, of Promissory Notes for an aggregate
amount of $3,000,000, to be paid by the issuance of an aggregate number
of: (i) 6,000,000 Warrants (exercisable into 6,000,000 share of Common
Stock) and (ii) 6,000 shares of Preferred Stock (convertible into
6,000,000 share of Common Stock) or, depending upon the outcome of the
American Biogenetic shareholder vote, 6,000,000 shares of Common Stock
(see ITEM 3). No other transaction in the Securities has been effected
by the Reporting Persons during the past 60 days.
(d) The Accounts are entitled to receive dividends and any sale
proceeds with respect to the Securities in proportion to their
respective ownership interests therein.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
Partners is the general partner of both BVF and BVF2
pursuant to limited partnership agreements which authorize Partners,
among other things, to invest the funds of BVF and BVF2 in the
Securities and to vote, exercise or convert and dispose of the
Securities. Pursuant to such limited partnership agreements,
Partners is entitled to allocations based on assets under management
and realized and unrealized gains thereon. Pursuant to investment
management agreements with the Accounts, Partners and BVF Inc. have
the authority, among other things, to invest funds of the Accounts
in the Securities and to vote, exercise or convert and dispose of
the Securities. Pursuant to such agreements, Partners and BVF Inc.
receive fees based on assets under management and realized and
unrealized gains thereon. BVF Inc. is the general partner of
Partners and may be deemed to own beneficially securities over which
Partners exercises voting and dispositive power.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 99A - Agreement Regarding Joint Filing
Exhibit 99B - Securities Purchase Agreement
Exhibit 99C - Promissory Notes
Exhibit 99D - Warrant Certificate
Exhibit 99E - Certificate of Designation
<PAGE>
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CUSIP NO. 024611 10 5 13D Page 9 of 9 Pages
- ----------------------------- -----------------------------
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true,
complete and correct.
Dated: February 28, 2000
BIOTECHNOLOGY VALUE FUND, L.P.
By: BVF Partners L.P., its general partner
By: BVF Inc., its general partner
By: /s/ Mark N. Lampert
---------------------
Mark N. Lampert
President
BIOTECHNOLOGY VALUE FUND II, L.P.
By: BVF Partners L.P., its general partner
By: BVF Inc., its general partner
By: /s/ Mark N. Lampert
---------------------
Mark N. Lampert
President
BVF PARTNERS L.P.
By: BVF Inc., its general partner
By: /s/ Mark N. Lampert
---------------------
Mark N. Lampert
President
BVF INC.
By: /s/ Mark N. Lampert
---------------------
Mark N. Lampert
President
<PAGE>
EXHIBIT 99A
AGREEMENT REGARDING JOINT FILING
The undersigned, Biotechnology Value Fund, L.P., a Delaware limited
partnership, Biotechnology Value Fund II, L.P., a Delaware limited partnership,
BVF Partners L.P., a Delaware limited partnership, and BVF Inc., a Delaware
corporation, hereby agree and acknowledge that the statement containing the
information required by Schedule 13D, to which this Agreement is attached as an
exhibit, is filed on behalf of each of them. The undersigned further agree that
any amendments or supplements thereto shall also be filed on behalf of each of
them.
Dated: February 28, 2000
BIOTECHNOLOGY VALUE FUND, L.P.
By: BVF Partners L.P., its general partner
By: BVF Inc., its general partner
By: /s/ Mark N. Lampert
---------------------
Mark N. Lampert
President
BIOTECHNOLOGY VALUE FUND II, L.P.
By: BVF Partners L.P., its general partner
By: BVF Inc., its general partner
By: /s/ Mark N. Lampert
---------------------
Mark N. Lampert
President
BVF PARTNERS L.P.
By: BVF Inc., its general partner
By: /s/ Mark N. Lampert
---------------------
Mark N. Lampert
President
BVF INC.
By: /s/ Mark N. Lampert
---------------------
Mark N. Lampert
President
<PAGE>
=============================================================================
SECURITIES PURCHASE AGREEMENT
7,000 SHARES OF
SERIES A CONVERTIBLE PREFERRED STOCK
WARRANTS TO PURCHASE
7,000,000 SHARES OF CLASS A COMMON STOCK
OF
AMERICAN BIOGENETIC SCIENCES, INC.
AS OF FEBRUARY 3, 2000
=============================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I - ISSUANCE AND TERMS OF WARRANTS AND PREFERRED SHARES............1
1.1 AUTHORIZATION OF SECURITIES.......................................1
1.2 PURCHASE AND SALE OF PREFERRED SHARES.............................2
1.4 PAYMENT...........................................................2
1.4 AGREEMENT REGARDING WARRANTS......................................3
ARTICLE II - CLOSING.......................................................3
2.1 CLOSING...........................................................3
2.2 LEGEND............................................................3
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY................4
3.1 ORGANIZATION AND STANDING OF THE COMPANY..........................4
3.2 CAPITALIZATION....................................................4
3.3 VALIDITY OF THIS AGREEMENT........................................4
3.4 GOVERNMENTAL CONSENT, ETC.........................................5
3.5 VALID ISSUANCE OF SECURITIES......................................5
3.6 FINANCIAL STATEMENTS..............................................6
3.7 ACCURACY AND COMPLETENESS OF INFORMATION..........................6
3.8 ADVERSE CHANGES...................................................6
3.9 NO VIOLATION......................................................6
3.10 ALL NECESSARY PERMITS.............................................7
3.11 TITLE TO PROPERTIES...............................................7
3.10 SECURITIES LAWS...................................................7
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE INVESTORS...............7
4.1 AUTHORITY OF INVESTORS, VALIDITY OF THIS AGREEMENT................7
4.2 INVESTMENT REPRESENTATIONS........................................8
ARTICLE V - CONDITIONS TO INVESTORS' OBLIGATIONS...........................8
5.1 CONDITIONS TO CLOSING ON CLOSING DATE.............................8
ARTICLE VI - CONDITIONS TO THE COMPANY'S OBLIGATIONS.......................10
6.1 CONDITIONS TO CLOSING.............................................10
ARTICLE VII - COVENANTS OF THE COMPANY.....................................11
7.1 FURNISHING OF INFORMATION.........................................11
7.2 INFORMATION WITH RESPECT TO THE SECURITIES........................11
7.3 SHAREHOLDER APPROVAL..............................................11
7.4 LICENSE AGREEMENT.................................................11
7.5 INVESTOR'S RIGHTS.................................................11
ARTICLE VIII - SURVIVAL AND INDEMNIFICATION................................11
8.1 SURVIVAL..........................................................11
8.2 INDEMNIFICATION...................................................12
ARTICLE IX - MISCELLANEOUS.................................................13
9.1 NOTICES...........................................................13
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Securities Purchase Agreement ii
<PAGE>
9.2 ENTIRE AGREEMENT..................................................14
9.3 AMENDMENTS........................................................14
9.4 ASSIGNMENT........................................................14
9.5 BENEFIT...........................................................14
9.6 GOVERNING LAW.....................................................15
9.7 SEVERABILITY......................................................15
9.8 HEADINGS AND CAPTIONS.............................................15
9.9 NO WAIVER OF RIGHTS, POWERS AND REMEDIES..........................15
9.10 EXPENSES..........................................................15
9.11 BROKERS...........................................................15
9.12 CONFIDENTIALITY...................................................16
9.13 COUNTERPARTS......................................................16
9.14 FURTHER ASSURANCES................................................16
</TABLE>
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Securities Purchase Agreement iii
<PAGE>
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), is made as of
this 3rd day of February, 2000, by and among AMERICAN BIOGENETIC SCIENCES, INC.,
a Delaware corporation (the "Company") and the investors listed on EXHIBIT A
hereto (collectively, the "Investors", and the Investors, excluding Alfred J.
Roach, his heirs and assigns, the "BVF Investors").
W I T N E S S E T H:
WHEREAS, the Company intends to amend its Certificate of Incorporation
to authorize a class of Preferred Stock, par value $.001 per share (the
"Preferred Stock"), and to thereafter designate 7,000 shares of the Preferred
Stock as the Series A Convertible Preferred Stock, convertible into shares of
the Company's Class A Common Stock, par value $.001 per share (the "Common
Stock"), and otherwise having the designations, powers, preferences, and other
terms set forth on EXHIBIT B hereto (the "Preferred Shares");
WHEREAS, the Investors desire to invest $3,500,000 in the Company in
exchange for the Preferred Shares and the Company's common stock purchase
warrants substantially in the form of EXHIBIT C hereto (each, a "Warrant" and
collectively, the "Warrants") entitling the holders to purchase 7,000,000 shares
of the Common Stock (the "Warrant Shares");
WHEREAS, in connection with the transactions contemplated by this
Agreement, each of the BVF Investors has made a loan to the Company in a
principal amount equal to the purchase price of the Preferred Shares and
Warrants to be purchased by such BVF Investor hereunder and evidenced by
Promissory Notes, dated February 7, 2000, made by the Company and payable to the
order of (i) Biotechnology Value Fund, L.P. in the principal amount of
$1,050,000 (the "First Note"); (ii) Biotechnology Value Fund II, L.P. in the
principal amount of $1,800,000 (the "Second Note"); and (iii) to Investment 10
L.L.C. in the principal amount of $150,000 (the "Third Note", and collectively
with the First Note and the Second Note, the "Notes"); and
WHEREAS, the Company and the Investors desire to set forth certain
matters to which they have agreed relating to the Warrants and the Preferred
Shares.
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties agree as follows:
ARTICLE I. ISSUANCE AND TERMS OF WARRANTS AND PREFERRED SHARES
1.1 AUTHORIZATION OF SECURITIES.
Subject to the terms and conditions of this Agreement, the Company has
authorized, or prior to the Closing (as hereinafter defined) will have
authorized, the issuance of the Preferred Shares, the Common Stock and the
Warrants pursuant to this Agreement.
<PAGE>
1.2 PURCHASE AND SALE OF PREFERRED SHARES, WARRANTS AND COMMON STOCK.
Subject to the terms and conditions of this Agreement and in reliance
upon the representations and warranties of the Company contained herein, the
Investors agree to purchase from the Company and the Company agrees to sell to
the Investors on the Closing Date (as hereinafter defined) for an aggregate
purchase price of three million five hundred thousand dollars ($3,500,000) (i)
the number of Preferred Shares set forth opposite each Investor's name on
EXHIBIT A attached hereto, aggregating 7,000 Preferred Shares, or, upon the
occurrence of the event described in Section 1.3(b) or (d) hereof, the number of
shares of Common Stock described in such Sections, respectively; and (ii) the
number of Warrants set forth opposite each Investor's name on EXHIBIT A attached
hereto, aggregating Warrants to purchase 7,000,000 Warrant Shares.
1.3 PAYMENT.
(a) On the Closing Date, (i) the entire principal amount of the Notes
plus accrued interest shall become due and payable; (ii) the BVF Investors shall
accept the number of Preferred Shares and Warrants set forth opposite the BVF
Investors' names in EXHIBIT A attached hereto as payment in full of all the
Company's obligations under the Notes; (iii) the Company shall pay the entire
principal amount plus accrued interest under the Notes to the BVF Investors in
the form of such Preferred Shares and Warrants; and (iv) thereupon, the BVF
Investors shall have satisfied their obligations under Section 1.2 hereof and
the Company shall have satisfied all of its obligations under the Notes.
(b) In the event that the Closing Date shall not have occurred on or
prior to March 15, 2000 due to the Company's failure to satisfy any of the
conditions set forth in Article V hereof, then (i) the entire principal amount
of the Notes plus accrued interest shall become due and payable; (ii) the BVF
Investors shall accept the number of shares of Common Stock into which the
number of Preferred Shares set forth opposite the BVF Investors' names in
EXHIBIT A attached hereto would otherwise have been convertible and the number
of Warrants set forth opposite the BVF Investors' names in EXHIBIT A attached
hereto as payment in full of all the Company's obligations under the Notes;
(iii) the Company shall pay the entire principal amount plus accrued interest
under the Notes to the BVF Investors in the form of such Common Stock and
Warrants; and (iv) thereupon, the BVF Investors shall have satisfied their
obligations under Section 1.2 hereof and the Company shall have satisfied all of
its obligations under the Notes.
(c) On the Closing Date, (i) Alfred J. Roach shall accept the number of
Preferred Shares and Warrants set forth opposite his name on EXHIBIT A attached
hereto as payment of $500,000 of the Company's indebtedness to him; (ii) the
Company shall pay such indebtedness in the form of such Preferred Shares and
Warrants; and (iii) thereupon, Alfred J. Roach shall have satisfied his
obligations under Section 1.2 hereof and the Company shall have satisfied
$500,000 of such indebtedness.
(d) In the event that the Closing Date shall not have occurred on or
prior to March 15, 2000, then (i) Alfred J. Roach shall accept the number of
shares of Common Stock equal to the number of Preferred Shares set forth
opposite his name on EXHIBIT A attached hereto and the number of Warrants set
forth opposite his name in EXHIBIT A attached hereto as payment of
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Securities Purchase Agreement 2
<PAGE>
$500,000 of the Company's indebtedness to him; (ii) the Company shall pay such
indebtedness in the form of such Common Stock and Warrants; and (iii) thereupon,
Alfred J. Roach shall have satisfied his obligations under Section 1.2 hereof
and the Company shall have satisfied $500,000 of such indebtedness.
1.4 AGREEMENT REGARDING WARRANTS.
After the Closing, upon the request of the BVF Investors, the Company
and the BVF Investors agree to negotiate in good faith commercially reasonable
provisions permitting the "cashless exercise" of the Warrants, provided, that,
at such time each of such parties determines in good faith that the addition of
such provisions would be in such party's best interests.
ARTICLE II. CLOSING
2.1 CLOSING.
Subject to the satisfaction of the conditions set forth in Articles VI
and VII hereof, the closing (the "Closing") shall take place at a place and time
(the "Closing Date") mutually agreed by the Company and the Investors, but in
any event no later than March 15, 2000. At the Closing, (a) the Company shall
deliver to the Investors one or more stock certificates registered in their
names for an aggregate of 7,000 Preferred Shares, or the applicable number of
shares of Common Stock, as the case may be, against payment to the Company of
the purchase price therefor pursuant to Section 1.3, and (b) the Company shall
deliver to the Investors one or more Warrants registered in their names to
purchase the number of shares indicated therein.
2.2 LEGEND.
The certificates representing the Warrants and the Preferred Shares, or
the Common Stock, as the case may be, shall be subject to a legend restricting
transfer under the Securities Act of 1933, as amended (the "Securities Act"),
such legend to be substantially as follows:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THESE SECURITIES MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED BY ANY PERSON UNLESS (1) EITHER (A) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES SHALL BE
EFFECTIVE UNDER THE SECURITIES ACT OF 1933 ("ACT"), OR (B) THE
COMPANY SHALL HAVE REASONABLY REQUESTED AND RECEIVED AN OPINION
OF COUNSEL SATISFACTORY TO IT THAT AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS THEN AVAILABLE, AND (2) THERE
SHALL HAVE BEEN COMPLIANCE WITH ALL APPLICABLE STATE SECURITIES
LAWS."
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Securities Purchase Agreement 3
<PAGE>
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Investors that, as of
the date of this Agreement, the following are true and correct:
3.1 ORGANIZATION AND STANDING OF THE COMPANY.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. The Company has full
corporate power and authority to enter into, deliver, and perform its
obligations and undertakings under this Agreement. The Company is duly
authorized to conduct its business and is in good standing under the laws of
each jurisdiction where such qualification is required, except where the lack of
such qualification would not have a material adverse effect on the business,
financial condition, operations, results of operations, or future prospects of
the Company. The Company has full corporate power and authority to carry on the
business in which it is engaged and to own and use the properties owned and as
used by it.
3.2 CAPITALIZATION.
The Company's entire authorized capital stock consists of: (i)
100,000,000 shares of Class A Common Stock. par value $.001 per share, of which
39,708,907 shares are validly issued and outstanding; and (ii) 3,000,000 shares
of Class B Common Stock, par value $.001 per share (the "Class B Common Stock"),
all of which are validly issued and outstanding on the date hereof. On or before
the Closing, the Company's Restated Certificate of Incorporation will have been
amended to authorize 10,000,000 shares of the Preferred Stock and to designate
7,000 shares of the Preferred Stock as Series A Convertible Preferred Stock
having the preferences, voting powers, qualifications and special or relative
rights or privileges set forth in EXHIBIT B. The issuance of all presently
issued and outstanding shares was duly authorized and all such shares are fully
paid and non-assessable. All such issued and outstanding shares have the
preferences, voting powers, qualifications and special or relative rights or
privileges set forth in the Company's Restated Certificate of Incorporation, as
amended as in effect on the date hereof, and as of the Closing Date the
Preferred Stock will have the preferences, voting powers, qualifications and
special or relative rights or privileges set forth in EXHIBIT B. The Preferred
Shares will be senior in liquidation preference to all outstanding shares of the
Common Stock and the Class B Common Stock. Other than as indicated on SCHEDULE
3.2 hereto or in the SEC Reports (as hereinafter defined), the Company does not
have outstanding any option, warrant, purchase right, subscription right, stock
appreciation right, phantom stock right, profit participation right, agreement
or other commitment to issue or to acquire any shares of its capital stock, or
any securities or obligations convertible into or exchangeable for its capital
stock, and the Company has not given any person any right to acquire from the
Company or sell to the Company any shares of its capital stock. There are no
voting trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of the Company.
3.3 VALIDITY OF THIS AGREEMENT.
Subject to shareholder approval, the execution and delivery by the
Company of this Agreement and the performance by the Company of its obligations
under this Agreement, and
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Securities Purchase Agreement 4
<PAGE>
the issuance, sale and delivery of the Preferred Shares, the Common Stock
issuable upon conversion of the Preferred Shares, the Warrants, the Warrant
Shares, and the Common Stock, if any, issuable pursuant to Section 1.3, have
been duly authorized and approved by all necessary corporate action. This
Agreement has been duly executed and delivered by the Company and constitutes a
valid and binding obligation of the Company, enforceable in accordance with its
terms. The execution and delivery by the Company of this Agreement and the
performance by the Company of its obligations under this Agreement and the
issuance, sale and delivery of the Preferred Shares, the Common Stock issuable
upon conversion of the Preferred Shares, the Warrants, the Warrant Shares and
the Common Stock, if any, issuable pursuant to Section 1.3, will not (i)
conflict with, or result in any breach of any of the terms of, or constitute a
default under, the Restated Certificate of Incorporation when the same will have
been amended to designate the Preferred Shares, or By-laws of the Company, (ii)
conflict with, result in a breach of or violation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under, any agreement, instrument, covenant or other
restriction or arrangement to which the Company is a party or by which it or any
of its properties or assets is bound or any statute law, rule, regulation,
judgment, order or decree applicable to the Company or any of its subsidiaries
of any court, regulatory body, administrative agency, governmental body,
arbitrator or other authority having jurisdiction over the Company or any of its
subsidiaries or any of its or their properties.
3.4 GOVERNMENTAL CONSENT, ETC.
Except for filings, consents, permits, approvals and authorizations
which will be obtained by the Company prior to the Closing and which are set
forth in SCHEDULE 3.4, no consent, approval, authorization or other order of,
action by, filing with, or notification to any governmental authority is
required under existing law or regulation in connection with the execution,
delivery and performance of the Agreement or the offer, issuance, sale or
delivery of the Preferred Shares, the Common Stock issuable upon conversion of
the Preferred Shares, the Warrants, the Warrant Shares and the Common Stock
issuable pursuant to Section 1.3 pursuant to the Agreement or the consummation
of any other transactions contemplated thereby.
3.5 VALID ISSUANCE OF SECURITIES.
When issued and delivered against payment therefor in accordance with
the terms and conditions of this Agreement and EXHIBIT B hereto, the Preferred
Shares, the Common Stock issuable upon conversion of the Preferred Shares, the
Warrants, the Warrant Shares and the Common Stock, if any, issuable pursuant to
Section 1.3, shall be (i) duly authorized and validly issued, fully paid and
non-assessable and (ii) not subject to any preemptive rights, liens, claims or
encumbrances, or other restrictions on transfer or other agreements or
understandings with respect to the voting of the Common Stock or the Warrant
Shares, except as set forth in this Agreement or EXHIBIT B hereto.
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Securities Purchase Agreement 5
<PAGE>
3.6 FINANCIAL STATEMENTS.
The audited financial statements of the Company contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998,
including the notes relating thereto, and the unaudited financial statements of
the Company contained in the Company's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1999, June 30, 1999 and September 30, 1999, including
the notes thereto, disclose all material liabilities of the Company as of such
dates, except as set forth on SCHEDULE 3.6 hereto. Such financial statements,
including the notes relating thereto, have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved. Said financial statements and related notes fairly present the
financial position and the results of operations and cash flow of Company as of
the respective dates thereof and for the periods indicated.
3.7 ACCURACY AND COMPLETENESS OF INFORMATION.
The Common Stock is registered pursuant to Section 12(g) of Exchange
Act. Copies of all reports filed by the Company with the United States
Securities and Exchange Commission (the "Commission") pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act") during the period from
December 31, 1998 to the date of this Agreement (the "Furnished SEC Reports")
have been furnished to the Investors. Since January 1, 1997, the Company has
filed each statement, annual, quarterly, and other report, registration
statement and definitive proxy statement required to be filed (other than
preliminary material) by the Company with the Commission (the "SEC Reports"). As
of their respective filing dates, the SEC Reports complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and none of the SEC Reports contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
in which they were made, not misleading.
3.8 ADVERSE CHANGES.
Since September 30, 1999, except as set forth on SCHEDULE 3.8 hereto,
there has not been any Material Adverse Change. For purposes of this Agreement,
a "Material Adverse Change" means a material adverse change in the business,
earnings, financial condition, results of operations, assets, employee
relations, or customer or supplier relations (in each case whether or not
arising in the ordinary course of business) or presently foreseeable prospects
of the Company and its subsidiaries on an aggregate basis.
3.9 NO VIOLATION.
Neither the execution and delivery by the Company of this Agreement,
nor the consummation of the transactions contemplated hereby will violate any
constitution, statute, rule, injunction, judgment, order, decree, ruling, charge
or other restriction of any government, governmental agency, or court known to
the Company to which the Company is subject, or, after obtaining shareholder
approval and amending the Restated Certificate of Incorporation to designate the
Preferred Shares, any provision of its Restated Certificate of Incorporation or
By-Laws.
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Securities Purchase Agreement 6
<PAGE>
3.10 ALL NECESSARY PERMITS, ETC.
The Company and each subsidiary possesses such valid and current
certificates, authorizations or permits issued by the appropriate state, federal
or foreign regulatory agencies or bodies as are necessary to conduct their
respective businesses, and neither the Company nor any subsidiary has received
any notice of proceedings relating to the revocation or modification of, or
non-compliance with, any such certificate authorization or permit which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Change.
3.11 TITLE TO PROPERTIES.
The Company and each of its subsidiaries has good and marketable title
to all the properties and assets reflected as owned by it in the financial
statements referred to in Section 3.6 in each case free and clear of any
security interests, mortgages, liens, encumbrances, equities, claims and other
defects, except (i) as set forth on SCHEDULE 3.11, or (ii) such as do not
materially and adversely affect the value of such property and do not materially
interfere with the use made or proposed to be made of such property by the
Company or such subsidiary. The real property, improvements, equipment and
personal property held under lease by the Company or any subsidiary are held
under valid and enforceable leases, with such exceptions as are not material and
do not materially interfere with the use made or proposed to be made of such
real property, improvements, equipment or personal property by the Company or
such subsidiary.
3.12 SECURITIES LAWS.
All notices, filings, registrations or qualifications under state
securities or "blue sky" laws which are required in connection with the offer,
issue and delivery of the Preferred Shares, the Warrants, the Common Stock into
which such Preferred Shares and Warrants are convertible pursuant to this
Agreement and the Common Stock issuable pursuant to Section 1.3, if any, have
been or will be timely completed by the Company.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each of the Investors hereby acknowledges, represents, warrants and
agrees as follows:
4.1 AUTHORITY OF INVESTORS, VALIDITY OF THIS AGREEMENT.
Each of the Investors has all requisite power and authority to enter
into this Agreement and perform its obligations hereunder. The execution,
delivery and performance by each of the Investors of this Agreement, and the
purchase of the Warrants and the Preferred Shares pursuant hereto have been duly
authorized and approved by all necessary corporate action. This Agreement has
been duly executed and delivered and constitutes a valid and binding obligation
of each of the Investors, enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement and the purchase of the
Warrants and the Preferred Shares will not conflict with, or result in a
material breach of any of the terms of, or constitute a material default under,
any charter, by-law, agreement, instrument, covenant or other restriction to
which any of the Investors is a party or by which it or any of its properties or
assets is bound.
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Securities Purchase Agreement 7
<PAGE>
4.2 INVESTMENT REPRESENTATIONS.
Each of the Investors hereby acknowledges, represents, warrants and
agrees as follows:
(a) Each of the Investors has had the opportunity to review
the Furnished SEC Reports and the financial statements contained therein. Each
of the Investors acknowledges that the Company has made available to the
Investors documents and information that it has requested relating to the
Company and has provided answers to the Investors' questions concerning the
Company, the Preferred Shares and the Warrants.
(b) Each of the Investors is an "accredited investor" as
defined in Rule 501(a)(3) of the Securities Act.
(c) Each of the Investors understands that the offering of the
Warrants and the Preferred Shares has not been registered under the Securities
Act or the securities laws of any state or other jurisdiction and that such
Warrants and the Preferred Shares must be held indefinitely unless an exemption
from registration is available. Each of the Investors understands that the
offering and sale of the Warrants and the Preferred Shares is intended to be
exempt from registration under the Securities Act based, in part, upon the
representations, warranties and agreements of the Investors contained in this
Section 4.2, and the Company may rely on such representations, warranties and
agreements in connection therewith. Each of the Investors covenants that it will
not transfer the Warrants or the Preferred Shares in violation of the provisions
of any applicable Federal or state securities statute.
(d) Subject to the Investors' registration rights relating to
the Common Stock underlying the Warrants and Preferred Shares and the Common
Stock issuable pursuant to Section 1.3, in each case, pursuant to the terms of
the Registration Agreement referred to in Section 5.1(j) hereof, each of the
Investors is acquiring the Warrants and the Preferred Shares for investment, and
not with a view to the resale or distribution thereof; it has no present
intention of selling, negotiating, or otherwise disposing of the Warrants and
the Preferred Shares. Each of the Investors' financial condition and investments
are such that it is in a financial position to hold the Warrants and the
Preferred Shares for an indefinite period of time and to bear the economic risk
of, and withstand a complete loss of, such Warrants and the Preferred Shares. In
addition, by virtue of its expertise, the advice available to it, and its
previous investment experience, each of the Investors has sufficient knowledge
and experience in financial and business matters, investments, securities, and
private placements and the capability to evaluate the merits and risks of the
transactions contemplated by this Agreement.
ARTICLE V. CONDITIONS TO BVF INVESTORS' OBLIGATIONS
5.1 CONDITIONS TO CLOSING ON CLOSING DATE.
The obligation of the BVF Investors to purchase and pay for the
Warrants and the Preferred Shares and the Common Stock, if any, issuable
pursuant to Section 1.3, on the Closing Date is subject to the following:
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Securities Purchase Agreement 8
<PAGE>
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company made herein shall be true, correct and complete on and
as of the Closing Date with the same force and effect as if they had been made
on and as of the Closing Date.
(b) PERFORMANCE. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Company on
or prior to the Closing Date shall have been performed or complied with.
(c) OPINION OF COMPANY'S COUNSEL. The BVF Investors shall have
received an opinion of Brown, Rudnick, Freed & Gesmer, counsel for the Company,
in form and substance reasonably satisfactory to the BVF Investors.
(d) CORPORATE PROCEEDINGS, CONSENTS, ETC. All corporate and
other proceedings to be taken and all waivers and consents to be obtained in
connection with the transactions contemplated by this Agreement shall have been
taken or obtained and all documents incident thereto shall be reasonably
satisfactory in form and substance to the BVF Investors and their counsel, each
of whom shall have received all such originals or certified or other copies of
such documents as each may reasonably request.
(e) SHAREHOLDER APPROVAL. The Company shall have obtained the
approval of shareholders representing at least a majority of the votes by all
then outstanding shares of the Common Stock and the Class B Common Stock, voting
together as one class, to the authorization of the Preferred Stock.
(f) NO PROCEEDING. No action, suit, investigation or
proceeding shall be pending or threatened before any court or governmental
agency to restrain, prohibit, collect damages as a result of or otherwise
challenge this Agreement or any transaction contemplated hereby or thereby.
(g) NO LAW PROHIBITING OR RESTRICTING SUCH SALE. There shall
not be in effect any law, rule or regulation prohibiting or restricting such
sale, or requiring any consent or approval of any person which shall not have
been obtained to issue the Warrants, the Preferred Shares, the Common Stock into
which the Warrants and Preferred Shares are convertible and the Common Stock
issuable pursuant to Section 1.3.
(h) OFFICER'S CERTIFICATE DELIVERED BY COMPANY. The Company
shall have delivered to the Investors a certificate, dated the Closing Date and
signed by the Chief Executive Officer or the President of the Company, to the
effect that each of the conditions to be satisfied by the Company pursuant to
this Section 5.1 on or before the Closing Date has been duly satisfied.
(i) AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION. The
Company's Restated Certificate of Incorporation shall have been amended to
authorize the issuance of Preferred Stock, and either that amendment or a
separate Certificate of Designation establishing the Preferred Shares having the
terms set forth on EXHIBIT B hereto shall have been filed with the Secretary of
State of the State of Delaware.
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Securities Purchase Agreement 9
<PAGE>
(j) REGISTRATION AGREEMENT. The Company and the Investors
shall have executed and delivered a Registration Agreement in the form of
EXHIBIT D hereto.
(k) ABBOTT LICENSE AND INVESTMENT. The Company shall have
entered into the Exclusive License Agreement, dated as of January 27, 2000 (the
"License Agreement"), with Abbott Laboratories related to the marketing of the
Company's ABS-103 Compound and a Stock Purchase Agreement, dated as of January
27, 2000 (the "Stock Purchase Agreement), with Abbott Laboratories pursuant to
which Abbott Laboratories shall have purchased 2,782,931 shares of Class A
Common Stock of the Company for $1.5 million in cash in accordance with the
terms thereof. The License Agreement and the Stock Purchase Agreement are
attached hereto as EXHIBITS E and F, respectively.
(l) NO MATERIAL ADVERSE CHANGE. There shall have been no
Material Adverse Change in the Company since the date of signing of this
Agreement.
(m) LEGAL MATTERS. All material matters of a legal nature
which pertain to this Agreement and the transactions contemplated hereby shall
have been reasonably approved by counsel to the BVF Investors.
ARTICLE VI. CONDITIONS TO THE COMPANY'S OBLIGATIONS
6.1 CONDITIONS TO CLOSING.
The obligation of the Company to issue the Warrants and the Preferred
Shares, respectively, to the Investors on the Closing Date is subject to the
following:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Investors made herein shall be true, correct and complete in
all respects on and as of the Closing Date with the same force and effect as if
they had been made on and as of the Closing Date.
(b) NO PROCEEDING. No action, suit, investigation or
proceeding shall be pending or threatened before any court or governmental
agency to restrain, prohibit, collect damages as a result of or otherwise
challenge this Agreement or any transaction contemplated hereby or thereby.
(c) NO LAW PROHIBITING OR RESTRICTING SUCH SALE. There shall
not be in effect any law, rule or regulation prohibiting or restricting such
sale, or requiring any consent or approval of any person which shall not have
been obtained to issue the Warrants and the Preferred Shares.
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Securities Purchase Agreement 10
<PAGE>
ARTICLE VII. COVENANTS OF THE COMPANY
For so long as the BVF Investors continue to hold not less than 50% of
the Preferred Shares held by such Investors on the Closing Date, the Company
hereby covenants to such Investors as follows:
7.1 FURNISHING OF INFORMATION.
The Company covenants to timely file (or obtain extensions in respect
thereof) all reports required to be filed by the Company after the date hereof
pursuant to Section 13(a) or 15(d) of the Exchange Act and to promptly furnish
the Investors with true and complete copies of all such filings. If the Company
is not at the time required to file reports pursuant to such sections, it will
prepare and furnish to the Investors annual and quarterly reports comparable to
those required by Section 13(a) or 15(d) of the Exchange Act in the time period
that such filings would have been required to have been made under the Exchange
Act.
7.2 INFORMATION WITH RESPECT TO THE SECURITIES.
The Company covenants to provide such information as is reasonably
requested by any of the Investors related to the terms of the Preferred Shares,
the Common Stock, Warrants or Warrant Shares.
7.3 SHAREHOLDER APPROVAL.
The Company shall use its best efforts to obtain the shareholder
approval described in Section 5.1(e) hereof prior to the Closing Date.
7.4 LICENSE AGREEMENT.
The Company covenants that it will not reduce, assign, transfer or
otherwise convey all or any portion of the royalties under the License Agreement
without the consent of the BVF Investors; provided, that nothing in the
foregoing shall prohibit the Company from causing or permitting liens or
security interests upon such royalties in connection with a financing for
borrowed money from a financial institution.
7.5 INVESTOR'S RIGHTS.
Notwithstanding anything to the contrary in the foregoing, the
Investors shall be entitled to such information, privileges, rights and benefits
accorded to them as holders of the Preferred Shares under applicable law and
under the Company's Restated Articles of Incorporation, as amended, and By-laws.
ARTICLE VIII. SURVIVAL AND INDEMNIFICATION
8.1 SURVIVAL.
Notwithstanding any examination made by or on behalf of any party
hereto, the knowledge of any party or the acceptance by any party of any
certificate or opinion, each
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Securities Purchase Agreement 11
<PAGE>
representation, warranty contained herein shall survive the Closing for a period
of two years, and each covenant shall survive for the period indicated therein.
8.2 INDEMNIFICATION.
(a) The Company shall indemnify and hold harmless each Investor, its
shareholders, officers, directors, employees, agents and representatives against
any damage, claim, loss, liability and expense (including reasonable counsel
fees and expenses) which may be suffered or incurred by any of them as a result
of a breach of any representation or warranty or covenant made by the Company in
this Agreement, provided that, solely with respect to such representation or
warranty, a claim is asserted within the time provided in Section 8.1.
(b) The Investors, jointly and severally, agree to indemnify the
Company and its shareholders, officers, directors, employees, agents and
representatives against any damages, claims, losses, liabilities and expenses
(including reasonable counsel fees and other expenses) which may be suffered or
incurred by it as a result of any breach of any representation, warranty, or
covenant made by the Investors in this Agreement, provided that a claim is
asserted within the time provided in Section 8.1.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing of the occurrence of the facts and
circumstances giving rise to such claim. The failure of any person to deliver
the notice required by this Section 8.2(c) shall not in any way affect the
indemnifying party's indemnification obligation hereunder except and only to the
extent that the indemnifying party is actually prejudiced thereby. In case any
such proceeding shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party and
shall pay as incurred the fees and expenses of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel or pay its own expenses. Notwithstanding the
foregoing, the indemnifying party shall pay as incurred the fees and expenses of
the counsel retained by the indemnified party in the event (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel or (ii) the named parties to any such proceedings (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. The indemnifying
party shall not be liable for any settlement of any proceeding effected without
its written consent but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment and the indemnifying party shall obtain a full release of
the indemnified party.
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Securities Purchase Agreement 12
<PAGE>
ARTICLE IX. MISCELLANEOUS
9.1 NOTICES.
All notices, requests, consents and other communications hereunder
shall be in writing, shall be addressed to the receiving party's address set
forth below or to such other address as a party may designate by notice
hereunder, and shall be either (i) delivered by hand, (ii) made by telecopy or
facsimile transmission, (iii) sent by overnight courier, or (iv) sent by
registered mail, return receipt requested, postage prepaid.
If to the
BVF Investors: c/o BVF Partners, L.P.
One Sansome Street, 39th Floor
San Francisco, CA 94104
Attn: Mr. Mark Lampert
Fax: (415) 288-2394
With a copy to: Sidley & Austin
875 Third Avenue
New York, NY 10022
Attn: Paul K. Risko, Esq.
Fax: (212) 906-2021
If to Alfred J. Roach: c/o American Biogenetic Sciences, Inc.
1375 Akron Street
Copiague, New York 11726
Attn: Chief Executive Officer
Fax: (516) 789-1661
With a copy to Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, Massachusetts 02111
Attn: David H. Murphree, Esq.
Fax: (617) 856-8201
If to the Company: American Biogenetic Sciences, Inc.
1375 Akron Street
Copiague, New York 11726
Attn: Chief Executive Officer
Fax: (516) 789-1661
With a copy to Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, Massachusetts 02111
Attn: David H. Murphree, Esq.
Fax: (617) 856-8201
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Securities Purchase Agreement 13
<PAGE>
All notices, requests, consents and other communications hereunder shall be
deemed to have been given either (i) if by hand, at the time of the delivery
thereof to the receiving party at the address of such party set forth above,
(ii) if made by telecopy or facsimile transmission, one (1) day after the time
that receipt thereof has been acknowledged by electronic confirmation or
otherwise, (iii) if sent by overnight courier, on the next business day
following the day such notice is delivered to the courier service, or (iv) if
sent by registered mail, on the 5th business day following the day such mailing
is made.
9.2 ENTIRE AGREEMENT.
This Agreement, including exhibits, or other documents referred to
herein, embodies the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersedes all prior oral
or written agreements and understandings relating to the subject matter hereof.
No statement, representation, warranty, covenant or agreement of any kind not
expressly set forth in this Agreement shall affect, or be used to interpret,
change or restrict, the express terms and provisions of this Agreement.
9.3 AMENDMENTS.
The terms and provisions of the Agreement may be modified, amended or
waived, or consent for the departure therefrom granted, only by written consent
of the Company and Investors holding at least 50% of the Preferred Shares or 50%
of the shares of Common Stock issuable upon conversion of the Preferred Shares
or pursuant to Section 1.3(b) hereof. No such waiver or consent shall be deemed
to be or shall constitute a waiver or consent with respect to any other terms or
provisions of this Agreement, whether or not similar. Each such waiver or
consent shall be effective only in the specific instance and for the purpose for
which it was given, and shall not constitute a continuing waiver or consent.
9.4 ASSIGNMENT.
Neither this Agreement nor any or all of the rights and obligations of
a party hereunder shall be assigned, delegated, sold, transferred or otherwise
disposed of by operation of law or otherwise, to any third person without the
prior written consent of the other party, and any attempted assignment,
delegation, sale, transfer, or other disposition, by operation of law or
otherwise, of this Agreement or of any rights or obligations hereunder contrary
to this Section 9.4 shall be void and without force or effect. Each party shall
be responsible for the compliance by its Affiliates with the terms and
conditions of this Agreement.
9.5 BENEFIT.
All statements, representations, warranties, covenants and agreements
in this Agreement shall be binding on the parties hereto and shall inure to the
benefit of the respective successors and permitted assigns of each party hereto.
Nothing in this Agreement shall be construed to create any rights or obligations
except among the parties hereto, and no person or entity shall be regarded as a
third-party beneficiary of this Agreement.
- -------------------------------------------------------------------------------
Securities Purchase Agreement 14
<PAGE>
9.6 GOVERNING LAW.
This Agreement and the rights and obligations of the parties hereunder
shall be construed in accordance with and governed by the law of the State of
New York.
9.7 SEVERABILITY.
In the event that any court of competent jurisdiction shall determine
that any provision, or any portion thereof, contained in this Agreement shall be
unreasonable or unenforceable in any respect, then such provision shall be
deemed limited to the extent that such court deems it reasonable and
enforceable, and as so limited shall remain in full force and effect. In the
event that such court shall deem any such provision, or portion thereof, wholly
unenforceable, the remaining provisions of this Agreement shall be interpreted
as if such provision were so excluded and shall nevertheless remain in full
force and effect.
9.8 HEADINGS AND CAPTIONS.
The headings and captions of the various subdivisions of this Agreement
are for convenience of reference only and shall in no way modify, or affect the
meaning or construction of any of the terms or provisions hereof.
9.9 NO WAIVER OF RIGHTS, POWERS AND REMEDIES.
No failure or delay by a party hereto in exercising any right, power or
remedy under this Agreement, and no course of dealing between the parties
hereto, shall operate as a waiver of any such right, power or remedy of the
party. No single or partial exercise of any right, power or remedy under this
Agreement by a party hereto, nor any abandonment or discontinuance of steps to
enforce any such right, power or remedy, shall preclude such party from any
other or further exercise thereof or the exercise of any other right, power or
remedy hereunder. The election of any remedy by a party hereto shall not
constitute a waiver of the right of such party to pursue other available
remedies. No notice to or demand on a party not expressly required under this
Agreement shall entitle the party receiving such notice or demand to any other
or further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the party giving such notice or demand to any other or
further action in any circumstances without such notice or demand.
9.10 EXPENSES.
Except as provided in Section 8.2, each of the parties shall pay its
own fees and expenses (including the fees of any attorneys, accountants,
appraisers or others engaged by such party) in connection with this Agreement
and the transactions contemplated hereby whether or not the transactions
contemplated hereby are consummated; provided, that, the Company shall pay such
fees and expenses (including attorney's fees) of the BVF Investors up to $5,000.
9.11 BROKERS.
Each of the parties hereto represents and warrants to the other that no
broker, finder or financial consultant has acted on its behalf in connection
with this Agreement or the transactions
- -------------------------------------------------------------------------------
Securities Purchase Agreement 15
<PAGE>
contemplated hereby in such a way as to create any liability on the other. Each
of the parties hereto agrees to indemnify and save the other harmless from any
claim or demand for commission or other compensation by any other broker,
finder, financial consultant or similar agent claiming to have been employed by
or on behalf of such party and to bear the cost of legal expenses incurred in
defending against any such claim.
9.12 CONFIDENTIALITY.
The Investors acknowledge and agree that any information or data they
have acquired from the Company, which is clearly designated in writing as
confidential and is not otherwise properly in the public domain, was received in
confidence. Each of the Investors agrees not to divulge, communicate or
disclose, except as may be required by law or upon the advice of its accountants
or for the performance of this Agreement, or use to the detriment of the Company
or for the benefit of any other person or persons, or misuse in any way, any
confidential information of the Company.
9.13 COUNTERPARTS.
This Agreement may be executed in one or more counterparts, and by
different parties hereto on separate counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the same
instrument.
9.14 FURTHER ASSURANCES.
In case at any time after the Closing any further action is necessary
or desirable to carry out the purposes of this Agreement, the Company and the
Investors will take such further action as the other party may reasonably
request, all at the sole cost and expense of the requesting party (unless the
requesting party is entitled to indemnification therefor under Article VIII).
[REMAINDER OF PAGE IS INTENTIONALLY BLANK]
- -------------------------------------------------------------------------------
Securities Purchase Agreement 16
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Stock Purchase
Agreement as of this 3rd day of February, 2000.
<PAGE>
EXHIBIT A
TO
SECURITIES PURCHASE AGREEMENT
INVESTORS:
<TABLE>
<CAPTION>
NAME PREFERRED SHARES WARRANTS
- ---------------------------------- ------------------ -------------------
<S> <C> <C>
ALFRED J. ROACH 1,000 1,000,000
BIOTECHNOLOGY VALUE FUND, L.P. 2,100 2,100,000
BIOTECHNOLOGY VALUE FUND II, L.P. 3,600 3,600,000
INVESTMENT 10 L.L.C. 300 300,000
</TABLE>
- -------------------------------------------------------------------------------
Securities Purchase Agreement
<PAGE>
EXHIBIT 99C
PROMISSORY NOTES
<PAGE>
PROMISSORY NOTE
$1,050,000 Copiague, New York
February 7, 2000
FOR VALUE RECEIVED, the undersigned ("Maker"), hereby promises to pay
to the order of Biotechnology Value Fund, L.P. ("Holder") the sum of ONE MILLION
FIFTY THOUSAND DOLLARS ($1,050,000), together with interest on the unpaid
principal amount from time to time outstanding at a fluctuating rate per annum
equal to the Prime Rate.
Interest and fees shall be calculated on the basis of a 360-day year
for the actual days elapsed. The "Prime Rate" as used herein, shall mean the
prime rate of interest as published from time to time by THE WALL STREET
JOURNAL. Any change in rate resulting from a change in the Prime Rate shall
become effective as of the day on which such change in the Prime Rate becomes
effective.
Maker, Holder, Biotechnology Value Fund II, L.P., Investment 10 L.L.C.
and Alfred J. Roach are parties to that certain Securities Purchase Agreement,
dated as of February 3, 2000 (the "Purchase Agreement"). The principal amount of
this note, plus accrued interest, shall be due and payable as set forth in
Sections 1.3(a) and (b) of the Purchase Agreement.
Maker hereby waives presentment, demand, notice, protest, and all other
demands and notices in connection with the delivery, acceptance, performance and
enforcement of this note, and assent to extensions of the time of payment or
forbearance or other indulgence without notice. No delay or omission of Holder
in exercising any right or remedy hereunder shall constitute a waiver of any
such right or remedy. Acceptance by Holder of any payment after demand shall not
be deemed a waiver of such demand. A waiver on one occasion shall not operate as
a bar to or waiver of any such right or remedy on any future occasion.
This instrument shall be governed by the laws of the State of New York.
Executed as an instrument under seal as of the date first above
written.
MAKER: AMERICAN BIOGENETIC SCIENCES, INC.
By:
-------------------------------
Name:
Title:
<PAGE>
PROMISSORY NOTE
$1,800,000 Copiague, New York
February 7, 2000
FOR VALUE RECEIVED, the undersigned ("Maker"), hereby promises to pay
to the order of Biotechnology Value Fund II, L.P. ("Holder") the sum of ONE
MILLION EIGHT HUNDRED THOUSAND DOLLARS ($1,800,000), together with interest on
the unpaid principal amount from time to time outstanding at a fluctuating rate
per annum equal to the Prime Rate.
Interest and fees shall be calculated on the basis of a 360-day year
for the actual days elapsed. The "Prime Rate" as used herein, shall mean the
prime rate of interest as published from time to time by THE WALL STREET
JOURNAL. Any change in rate resulting from a change in the Prime Rate shall
become effective as of the day on which such change in the Prime Rate becomes
effective.
Maker, Holder, Biotechnology Value Fund L.P., Investment 10 L.L.C. and
Alfred J. Roach are parties to that certain Securities Purchase Agreement, dated
as of February 3, 2000 (the "Purchase Agreement"). The principal amount of this
note, plus accrued interest, shall be due and payable as set forth in Sections
1.3(a) and (b) of the Purchase Agreement.
Maker hereby waives presentment, demand, notice, protest, and all other
demands and notices in connection with the delivery, acceptance, performance and
enforcement of this note, and assent to extensions of the time of payment or
forbearance or other indulgence without notice. No delay or omission of Holder
in exercising any right or remedy hereunder shall constitute a waiver of any
such right or remedy. Acceptance by Holder of any payment after demand shall not
be deemed a waiver of such demand. A waiver on one occasion shall not operate as
a bar to or waiver of any such right or remedy on any future occasion.
This instrument shall be governed by the laws of the State of New York.
Executed as an instrument under seal as of the date first above
written.
MAKER: AMERICAN BIOGENETIC SCIENCES, INC.
By:
-------------------------------
Name:
Title:
2
<PAGE>
PROMISSORY NOTE
$150,000 Copiague, New York
February 7, 2000
FOR VALUE RECEIVED, the undersigned ("Maker"), hereby promises to pay
to the order of Investment 10 L.L.C. ("Holder") the sum of ONE HUNDRED FIFTY
THOUSAND DOLLARS ($150,000), together with interest on the unpaid principal
amount from time to time outstanding at a fluctuating rate per annum equal to
the Prime Rate.
Interest and fees shall be calculated on the basis of a 360-day year
for the actual days elapsed. The "Prime Rate" as used herein, shall mean the
prime rate of interest as published from time to time by THE WALL STREET
JOURNAL. Any change in rate resulting from a change in the Prime Rate shall
become effective as of the day on which such change in the Prime Rate becomes
effective.
Maker, Holder, Biotechnology Value Fund, L.P., Biotechnology Value Fund
II, L.P., and Alfred J. Roach are parties to that certain Securities Purchase
Agreement, dated as of February 3, 2000 (the "Purchase Agreement"). The
principal amount of this note, plus accrued interest, shall be due and payable
as set forth in Sections 1.3(a) and (b) of the Purchase Agreement.
Maker hereby waives presentment, demand, notice, protest, and all other
demands and notices in connection with the delivery, acceptance, performance and
enforcement of this note, and assent to extensions of the time of payment or
forbearance or other indulgence without notice. No delay or omission of Holder
in exercising any right or remedy hereunder shall constitute a waiver of any
such right or remedy. Acceptance by Holder of any payment after demand shall not
be deemed a waiver of such demand. A waiver on one occasion shall not operate as
a bar to or waiver of any such right or remedy on any future occasion.
This instrument shall be governed by the laws of the State of New York.
Executed as an instrument under seal as of the date first above
written.
MAKER: AMERICAN BIOGENETIC SCIENCES, INC.
By:
-------------------------------
Name:
Title:
3
<PAGE>
EXHIBIT 99D
WARRANT CERTIFICATE
<PAGE>
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THESE SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED BY ANY
PERSON UNLESS (1) EITHER (A) A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES SHALL BE EFFECTIVE UNDER THE SECURITIES ACT OF 1933, OR (B) THE
COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS THEN AVAILABLE, AND (2) THERE
SHALL HAVE BEEN COMPLIANCE WITH ALL APPLICABLE STATE SECURITIES LAWS.
WARRANT CERTIFICATE
DATED FEBRUARY 29, 2000
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF AMERICAN BIOGENETIC SCIENCES, INC.
No. ________ For the Purchase of _______ Shares of Class A Common Stock
AMERICAN BIOGENETIC SCIENCES, INC., a Delaware corporation (the
"Company"), hereby certifies that, for value received, _________________________
("Holder"), or its registered assigns, is the registered owner of a warrant (the
"Warrant") to purchase from the Company ___________ shares of the Class A Common
Stock, $.001 par value per share, of the Company (the "Common Stock"; each such
share being a "Warrant Share" and all such shares being the "Warrant Shares") at
a price of $1.00 per share (the "Exercise Price"), subject to adjustment from
time to time as provided in Section 6. Except as specified in Section 3(e)
hereof, this Warrant may be exercised at any time or from time to time until and
including the earliest to occur of (i) the date of the filing of a New Drug
Application with the United States Food and Drug Administration for the
Company's ABS-103 compound, (ii) February 28, 2005, and (iii) the 30th day after
the Company shall send notice of redemption pursuant to Section 8 hereof (the
"Expiration Date"), all subject to the following terms and conditions:
1. REGISTRATION OF WARRANTS.
The Company shall register each Warrant, upon records to be maintained
by the Company for that purpose, in the name of the record Holder of such
Warrant from time to time. The Company may deem and treat the registered Holder
of each Warrant as the absolute owner thereof for the purpose of any exercise
thereof or any distribution to the Holder thereof, and for all other purposes,
and the Company shall not be affected by any notice to the contrary.
2. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) Subject to Section 2(c) below, the Company shall register the
transfer of any Warrants upon records to be maintained by the Company for that
purpose, upon surrender of this Warrant Certificate, with the Form of Assignment
attached hereto duly completed and signed, to the Company at the office
specified in or pursuant to Section 3(c). Upon any such registration of
- -------------------------------------------------------------------------------
Warrant Certificate
<PAGE>
transfer, a new Warrant Certificate, in substantially the form of this Warrant
Certificate, evidencing the Warrants so transferred shall be issued to the
transferee and a new Warrant Certificate, in similar form, evidencing the
remaining Warrants not so transferred, if any, shall be issued to the then
registered Holder thereof.
(b) This Warrant Certificate is exchangeable, upon the surrender hereof
by the Holder hereof at the office of the Company specified in or pursuant to
Section 3(c), for new Warrant Certificates, in substantially the form of this
Warrant Certificate, evidencing in the aggregate the right to purchase the
number of Warrant Shares which may then be purchased hereunder, each of such new
Warrant Certificates to be dated the date of such exchange and to represent the
right to purchase such number of Warrant Shares as shall be designated by said
Holder hereof at the time of such surrender.
(c) Each Holder of this Warrant acknowledges that this Warrant is
subject to restrictions on transfer set forth in the Securities Purchase
Agreement, dated as of January __, 2000 (the "Securities Purchase Agreement"),
among the Company and the investors listed on Exhibit A thereto, and agrees to
be bound by the restrictions on the sale, pledge, assignment and transfer of
the Warrant contained therein. Each Holder of this Warrant acknowledges that
this Warrant and the Warrant Shares have not been registered under the
Securities Act of 1933, as now in force or hereafter amended, or any successor
legislation (the "Act"), and agrees not to sell, pledge, distribute, offer for
sale, transfer or otherwise dispose of this Warrant or any Warrant Shares
issued upon its exercise in the absence of (a) an effective registration
statement under the Act as to such Warrant Shares and registration or
qualification of such Warrant Shares under any applicable Blue Sky or state
securities law then in effect, or (b) an opinion of counsel, satisfactory to
the Company, that such registration and qualification are not required.
Without limiting the generality of the foregoing, the Company shall be
under no obligation to issue the shares covered by such exercise unless and
until the Holder shall have executed an investment letter in form and substance
satisfactory to the Company, including a warranty at the time of such exercise
that it is acquiring such shares for its own account, for investment and not
with a view to, or for sale in connection with, the distribution of any such
shares, in which event the Holder shall be bound by the provisions of the
following legend or a legend in substantially similar form which shall be
endorsed upon the certificate(s) evidencing the Warrant Shares issued pursuant
to such exercise:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THESE SECURITIES MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED BY ANY PERSON UNLESS (1) EITHER
(A) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES
SHALL BE EFFECTIVE UNDER THE SECURITIES ACT OF 1933, OR (B)
THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO IT THAT AN EXEMPTION FROM REGISTRATION UNDER
SUCH ACT IS THEN AVAILABLE, AND (2) THERE SHALL HAVE BEEN
COMPLIANCE WITH ALL APPLICABLE STATE SECURITIES LAWS."
- -------------------------------------------------------------------------------
Warrant Certificate 2
<PAGE>
In addition, without limiting the generality of the foregoing, the
Company may delay issuance of the Warrant Shares until completion of any action
or obtaining of any consent, which the Company deems necessary under any
applicable law (including without limitation state securities or "blue sky"
laws).
3. DURATION AND EXERCISE OF WARRANTS.
(a) Warrants shall be exercisable by the registered Holder thereof on
any business day before 5:00 P.M., New York time, at any time and from time to
time to and including the Expiration Date. At 5:00 P.M., New York time, on the
Expiration Date each Warrant not exercised prior thereto shall be and become
void and of no value.
(b) Subject to the limitations set forth in Section 3(c) and to the
other provisions of this Warrant Certificate, including adjustments to the
number of Warrant Shares issuable upon the exercise of each Warrant and to the
Exercise Price pursuant to Section 6, the Holder of each Warrant shall have the
right to purchase from the Company (and the Company shall be obligated to issue
and sell to such Holder of a Warrant) at the Exercise Price one fully paid
Warrant Share which is non-assessable.
(c) Subject to Sections 2(b), 2(c), 4 and 7, upon surrender of this
Warrant Certificate (with the Form of Election to Purchase attached hereto
duly completed and signed) to the Company at its office at 1375 Akron Street,
Copiague, New York 11726 Attention: Chief Financial Officer, or at such other
address as the Company may specify in writing to the then registered Holder of
the Warrants, and upon payment of the Exercise Price multiplied by the number
of Warrant Shares then issuable upon exercise of the Warrants being exercised
in lawful money of the United States of America, all as specified by the
Holder of this Warrant Certificate in the Form of Election to Purchase, the
Company shall promptly issue and cause to be delivered to or upon the written
order of the registered Holder of such Warrants, and in such name or names as
such registered Holder may designate, a certificate for the Warrant Shares
issued upon such exercise of such Warrants. Any person so designated to be
named therein shall be deemed have become Holder of record of such Warrant
Shares as of the Date of Exercise of such Warrants.
The "Date of Exercise" of any Warrant means the date on which the
Company shall have received (i) this Warrant Certificate, with the Form of
Election to Purchase attached hereto appropriately completed and duly signed,
and (ii) payment of the Exercise Price for such Warrant.
(d) The Warrants evidenced by this Warrant Certificate shall be
exercisable, either as an entirety or, from time to time, for part of the number
of Warrants evidenced by this Warrant Certificate. If less than all of the
Warrants evidenced by this Warrant Certificate are exercised at any time, the
Company shall issue, at its expense, a new Warrant Certificate, in substantially
the form of this Warrant Certificate, for the remaining number of Warrants
evidenced by this Warrant Certificate.
- -------------------------------------------------------------------------------
Warrant Certificate 3
<PAGE>
4. PAYMENT OF TAXES.
The Company will pay all documentary stamp taxes attributable to the
issuance of Warrant Shares upon the exercise of the Warrants represented by this
Certificate; provided, however, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
registration of any certificates for Warrant Shares in a name other than that of
the Holder, and the Company shall not be required to issue or deliver the
certificates for Warrant Shares unless or until the person or persons requesting
the issuance thereof shall have paid to the Company the amount of such tax or
shall have established to the satisfaction of the Company that such tax has been
paid. The Holder shall be responsible for all other tax liability that may arise
as a result of holding or transferring the Warrants represented by this
Certificate or receiving the Warrant Shares under this Warrant Certificate.
5. REPLACEMENT OF WARRANT.
If this Warrant is mutilated, lost, stolen or destroyed, the Company
may in its discretion issue in exchange and substitution for and upon
cancellation hereof, or in lieu of and substitution for this Warrant, a new
Warrant of like tenor, but only upon receipt of evidence reasonably satisfactory
to the Company of such loss, theft or destruction and indemnity, if requested,
satisfactory to it. Applicants for a substitute Warrant certificate also shall
comply with such other reasonable regulations and pay such other reasonable
charges as the Company may prescribe.
6. ADJUSTMENT TO THE NUMBER OF WARRANT SHARES ISSUABLE.
The number of Warrant Shares issuable upon the exercise of this Warrant
is subject to adjustment from time to time as set forth in this Section 6. Upon
each such adjustment of the Exercise Price pursuant to this Section 6, the
Holder shall thereafter prior to the Expiration Date be entitled to purchase, at
the Exercise Price resulting from such adjustment, the number of Warrant Shares
obtained by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Shares issuable upon exercise of this
Warrant immediately prior to such adjustment and dividing the product thereof by
the Exercise Price resulting from such adjustment. In the event the Company and
the Holders of Warrants disagree as to any adjustment to the Exercise Price
hereunder, an Appraiser (as defined below) selected by the Holders of a majority
in interest of the Warrants shall give its opinion as to the adjustment, if any
(not inconsistent with the standards established in this Section 6), of the
Exercise Price; provided, however, that the Company, after receipt of the
determination by such Appraiser, shall have the right to promptly select an
additional Appraiser, in which case the adjustment shall be equal to the average
of the adjustments recommended by each such Appraiser. The Board of Directors
shall make the adjustment recommended forthwith upon the receipt of such opinion
or opinions; provided, however, that no such adjustment of the Exercise Price
shall be made which in the opinion of the Appraiser(s) giving the aforesaid
opinion or opinions would result in an increase of the Exercise Price to more
than the Exercise Price then in effect.
(a) If the Company, at any time while this Warrant is outstanding, (i)
shall pay a stock dividend or otherwise make a distribution or distributions on
shares of its Common Stock payable in shares of its Common Stock, (ii) subdivide
outstanding shares of Common Stock into a larger number of shares, (iii) combine
outstanding shares of Common Stock into a smaller
- -------------------------------------------------------------------------------
Warrant Certificate 4
<PAGE>
number of shares, or (iv) issue by reclassification of shares of Common Stock
any shares of capital stock of the Company, the Exercise Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding before such event and of which the denominator shall be
the number of shares of Common Stock outstanding after such event. Any
adjustment made pursuant to this Section 6(a) shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
(b) If the Company, at any time while this Warrant is outstanding,
shall issue rights or warrants to all holders of Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share less than
the lesser of the Average Market Price or the Exercise Price ("Minimum Price")
at the record date mentioned below, the Exercise Price shall be multiplied by a
fraction, of which the denominator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding on the date of issuance of such
rights or warrants plus the number of additional shares of Common Stock offered
for subscription or purchase, and of which the numerator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding on the
date of issuance of such rights or warrants plus the number of shares which the
aggregate offering price of the total number of shares so offered would purchase
at such Minimum Price. Such adjustment shall be made whenever such rights or
warrants are issued, and shall become effective immediately after the record
date for the determination of stockholders entitled to receive such rights or
warrants. However, upon the expiration of any right or warrant to purchase
Common Stock the issuance of which resulted in an adjustment in the Exercise
Price pursuant to this Section 6(b), if any such right or warrant shall expire
and shall not have been exercised, the Exercise Price shall immediately upon
such expiration be recomputed and effective immediately upon such expiration be
increased to the price which it would have been (but reflecting any other
adjustments in the Exercise Price made pursuant to the provisions of this
Section 6 after the issuance of such rights or warrants) had the adjustment of
the Exercise Price made upon the issuance of such rights or warrants been made
on the basis of offering for subscription or purchase only that number of shares
of Common Stock actually purchased upon the exercise of such rights or warrants
actually exercised.
(c) If the Company, at any time while this Warrant is outstanding,
shall distribute to all Holders of Common Stock (and not to the Holder)
evidences of its indebtedness or assets, then in each such case the Exercise
Price for which the Warrant Shares shall be purchased shall be determined by
multiplying the Exercise Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the Exercise Price determined as of
such record date, and of which the numerator shall be the Exercise Price on such
record date less the then fair market value at such record date of the portion
of such assets or evidence of indebtedness so distributed applicable to one
outstanding share of Common Stock as determined by the Board of Directors of the
Company (the "Board of Directors") in good faith; provided, however, that in the
event of a distribution exceeding 10% of the net assets of the Company, such
fair market value shall be determined by a nationally recognized or major
regional investment banking firm or firm of independent certified public
accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company) (an "Appraiser") selected in
good faith by the Holders of a majority of the Warrants that are then
outstanding; and further provided,
- -------------------------------------------------------------------------------
Warrant Certificate 5
<PAGE>
however, that the Company, after receipt of the determination by such Appraiser
shall have the right to select an additional Appraiser, in which case the fair
market value shall be equal to the average of the determinations by each such
Appraiser. In either case the adjustments shall be described in a statement
provided to the Holder and all other Holders of Warrants of the portion of
assets or evidences of indebtedness so distributed or such subscription rights
applicable to one share of Common Stock. Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately after the
record date mentioned above.
(d) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person, the sale or
transfer of all or substantially all of the assets of the Company or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, then the Holder shall have the right
thereafter to exercise this Warrant only for the shares of stock and other
securities and property receivable upon or deemed to be held by Holders of
Common Stock following such reclassification, consolidation, merger, sale,
transfer or share exchange, and the Holder shall be entitled upon such event to
receive such amount of securities or property as the shares of the Common Stock
into which this Warrant could have been converted immediately prior to such
reclassification, consolidation, merger, sale, transfer or share exchange would
have been entitled. The terms of any such consolidation, merger, sale, transfer
or share exchange shall include such terms so as to continue to give to the
Holder the right to receive the securities or property set forth in this Section
6(d) upon any exercise following such consolidation, merger, sale, transfer or
share exchange. This provision shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or share exchanges.
(e) If:
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(ii) the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
(iii) the Company shall authorize the granting to all Holders
of the Common Stock of rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any
rights; or
(iv) the approval of any stockholders of the Company shall be
required in connection with any reclassification of the Common
Stock of the Company (other than a subdivision or combination
of the outstanding shares of Common Stock), any consolidation
or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the
Company, or any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or property; or
(v) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding-up of the affairs of the
Company;
- -------------------------------------------------------------------------------
Warrant Certificate 6
<PAGE>
then the Company shall cause to be filed at each
office or agency maintained for the purpose of exercise of
this Warrant, and shall cause to be mailed to the Holder in
accordance with Section 10 hereof, at least thirty (30) days
prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is
to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be
taken, the date as of which the Holders of Common Stock of
record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined, or (y)
the date on which such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution,
liquidation or winding-up is expected to become effective, and
the date as of which it is expected that Holders of Common
Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer,
share exchange, dissolution, liquidation or winding-up;
provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the
validity of the corporate action required to be specified in
such notice.
(f) In any case in which this Section 6 shall require that an
adjustment be made effective as of the record date for a specified event, the
Company may elect to defer until occurrence of such event (A) if this Warrant is
exercised after such record date, issuing to the Holder, the Warrant Shares and
other capital stock of the Company, if any, issuable upon such exercise until
such time as it has issued the Warrant Shares and other capital stock of the
Company, if any, issuable upon such exercise on the basis of the Exercise Price
prior to adjustment and (B) paying to the Holder any amount in cash in lieu of a
fractional share pursuant to Section 8 hereof; provided, however, that the
Company shall deliver to the Holder a due bill or other appropriate instrument
evidencing the Holder's right to receive such additional Warrant Shares, other
capital stock and/or cash upon the occurrence of the event requiring such
adjustment.
(g) Any determination that the Company or the Board of Directors must
make pursuant to this Section 6 shall be conclusive if made in good faith.
7. REDEMPTION.
In the event that at any time while this Warrant is outstanding the
Average Market Price at any time exceeds $5.00, the Company may, at its option,
redeem this Warrant upon 30 days written notice to the Holder. The redemption
price for this Warrant shall be $.01 per Warrant Share for which this Warrant
may be exercised, subject to adjustment as would be applied to the Exercise
Price as set forth in Section 6 hereof (the "Redemption Price"). The Company
shall pay the Redemption Price of this Warrant to registered holder hereof.
Unless previously exercised, on or prior to the thirtieth day following receipt
of written notice of the Company's intent to redeem this Warrant, the Holder
shall surrender this Warrant certificate to the Company and this Warrant shall
be cancelled and retired. Regardless of the surrender of this Warrant
certificate, upon payment of the Redemption Price this Warrant will be void and
of no value.
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Warrant Certificate 7
<PAGE>
8. FRACTIONAL SHARES.
The Company shall not be required to issue fractional Warrant Shares on
the exercise of this Warrant. The number of full Warrant Shares which shall be
issuable upon the exercise of this Warrant shall be computed on the basis of the
aggregate number of Warrant Shares purchasable on exercise of this Warrant so
presented. If any fraction of a Warrant Share would, except for the provisions
of this Section 8, be issuable on the exercise of this Warrant, the Company
shall pay an amount in cash equal to the Exercise Price multiplied by such
fraction.
9. WARRANT AGENT.
(a) The Company shall serve as warrant agent under this Warrant. Upon
thirty (30) days' notice to the Holder, the Company and the Holder may appoint a
new warrant agent. After acceptance in writing of such appointment by the new
warrant agent, it shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as the warrant agent,
without any further assurance, conveyance, act or deed, but if for any reason it
shall be necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the Company
and shall be legally and validly executed and delivered by the Company.
(b) Any corporation into which the Company or any new warrant agent may
be merged or any corporation resulting from any consolidation to which the
Company or any new warrant agent shall be a party or any corporation to which
the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the register maintained the warrant agent pursuant to this
Warrant.
10. NOTICES.
All notices or other communications hereunder shall be given, and shall be
deemed duly given and received if given, by facsimile and by mail, postage
prepaid: (1) if to the Company, addressed as follows: AMERICAN BIOGENETIC
SCIENCES, INC 1375 Akron Street Copiague, N.Y. 11726, Attention: Chief Financial
Officer, or to facsimile no. (516) 789-1661; or (ii) if to the Holder, addressed
to the Holder at the facsimile telephone number and address of the Holder
appearing on the Warrant Register or such other address or facsimile number as
the Holder may provide to the Company in accordance with this Section 11. Any
such notice shall be deemed given and effective upon the earliest to occur of
(i) receipt of such facsimile at the facsimile telephone number specified in
this Section 11, (ii) five (5) Business Days after deposit in the United States
mails or (iii) upon actual receipt by the party to whom such notice is required
to be given.
11. MARKET PRICE.
(a) As used in this Warrant, the term "Market Price" means on any
particular date (a) if the Common Stock is then principally traded on any
national securities exchange or the Nasdaq National Market, the closing sale
price per share of the Common Stock on such date on
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Warrant Certificate 8
<PAGE>
the principal market on which the Common Stock is then traded, or if there is
no such sale price on such date then the closing sale price on the date nearest
preceding such date, or (b) if the Common Stock is not listed on a national
securities exchange or the Nasdaq National Market, the average of the bid and
asked price for a share of Common Stock on the Nasdaq SmallCap Market or in the
over-the-counter market as reported by the Nasdaq Bulletin Board or National
Quotation Bureau Incorporated (or similar organization or agency succeeding to
its functions of reporting prices), or (c) if the Common Stock is not publicly
traded, the fair market value of a share of Common Stock as determined by an
Appraiser (which shall conduct a good faith appraisal) selected by the Holders
of a majority in interest of the shares of the Series A Preferred Stock;
provided, however, that the Company, after receipt of the determination by such
Appraiser, shall have the right to select an additional Appraiser (which shall
conduct a good faith appraisal), in which case, the fair market value shall be
equal to the average of the determinations by each such Appraiser.
(b) As used in this Warrant, the term "Average Market Price" means the
arithmetic average (rounded to the nearest cent) of the Market Price per share
of the Class A Common Stock for the twenty (20) consecutive trading days ending
on the second trading day prior to the date of determination.
12. MISCELLANEOUS.
(a) This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
(b) Nothing in this Warrant shall be construed to give to any person or
corporation other than the Company, the Holder and any registered Holder of
Warrant Shares any legal or equitable right, remedy or cause under this Warrant;
this Warrant shall be for the sole and exclusive benefit of the Company, the
Holder and any other registered Holder of Warrant Shares.
(c) This Warrant shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York without regard to the
principles of conflicts of law thereof.
(d) The headings herein are for convenience only, do not constitute a
part of this Warrant and shall not be deemed to limit or affect any of the
provisions hereof.
(e) In case any one or more of the provisions of this Warrant shall be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Warrant shall not in any way be affected
or impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
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Warrant Certificate 9
<PAGE>
EXHIBIT 99E
CERTIFICATE OF DESIGNATION
<PAGE>
CERTIFICATE OF DESIGNATION
Of the 10,000,000 shares of Preferred Stock authorized under the
Certificate of Incorporation, 7,000 shares are hereby designated as Series A
Convertible Preferred Stock (the "Series A Preferred Stock") with the voting
powers, preferences and relative participating, optional or other special
rights, and qualifications, limitations or restrictions as set forth below:
SECTION 1. DEFINITIONS. For the purposes hereof, the following
definitions shall apply:
"Average Market Price" means the arithmetic average (rounded to the
nearest cent) of the Market Price per share of the Class A Common Stock for the
twenty (20) consecutive trading days ending on the second trading day prior to
the date of determination.
"Board of Directors" means the Board of Directors of the Corporation.
"Common Stock" means the Class A Common Stock or the Class B Common
Stock of the Corporation.
"Conversion Price" means the amount set forth in Section 4(a), as
adjusted pursuant to Section 4.
"Convertible Securities" means any evidences of indebtedness, stock
(other than Common Stock or the Series A Preferred Stock) or other securities
convertible into or exchangeable for Common Stock.
"Corporation" means American Biogenetic Sciences, Inc., a Delaware
corporation.
"Junior Shares" means all shares of Common Stock of the Corporation or
any other stock ranking junior to the Series A Preferred Stock in dividends or
liquidation rights.
"Market Price" means on any particular date (a) if the Common Stock is
then principally traded on any national securities exchange or the Nasdaq
National Market, the closing sale price per share of the Common Stock on such
date on the principal market on which the Common Stock is then traded, or if
there is no such sale price on such date then the closing sale price on the date
nearest preceding such date, or (b) if the Common Stock is not then listed on a
national securities exchange or the Nasdaq National Market, the average of the
bid and asked price for a share of Common Stock on the Nasdaq SmallCap Market or
in the over-the-counter market as reported by the Nasdaq Bulletin Board or
National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices), or (c) if the Common Stock is
not publicly traded, the fair market value of a share of Common Stock as
determined by an appraiser (which shall conduct a good faith appraisal) selected
by the holders of a majority in interest of the shares of the Series A Preferred
Stock; provided, however, that the Corporation, after receipt of the
determination by such appraiser, shall have the right to select an additional
appraiser (which shall conduct a good faith appraisal), in which case, the fair
market value shall be equal to the average of the determinations by each such
appraiser.
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Certificate of Designations
<PAGE>
"Options" means rights, options or warrants to subscribe for, purchase
or otherwise acquire either Common Stock or Convertible Securities.
"Original Issue Date" means the date on which a share of Series A
Preferred Stock is first issued.
"Subsidiary" means any corporation at least 50% of whose outstanding
voting shares shall at the time be owned directly or indirectly by the
Corporation or by one or more subsidiaries, or by the Corporation and one or
more subsidiaries.
SECTION 2. DIVIDEND RIGHTS. In each fiscal year of the Corporation, the
holders of shares of Series A Preferred Stock shall be entitled to receive,
before any cash dividends shall be declared and paid upon or set aside for the
Junior Shares in such fiscal year, when and as declared by the Board of
Directors of the Corporation out of the funds legally available for that
purpose, dividends payable in cash in an amount per share for such fiscal year
at least equal to the product of (i) the per share amount, if any, of the cash
dividend declared, paid or set aside for the Class A Common Stock during such
fiscal year, multiplied by (ii) the number of whole shares of Class A Common
Stock into which each such share of Series A Preferred Stock is then
convertible.
SECTION 3. LIQUIDATION PREFERENCE.
(a) PREFERENCE. In the event of any liquidation, dissolution or winding
up of the affairs of the Corporation, voluntarily or involuntarily, the holders
of each share of Series A Preferred Stock, prior to any distribution to the
holders of Junior Shares, shall be entitled to receive PRO RATA a preferential
amount equal to $500 per share (adjusted to reflect any stock split, stock
dividend, combination, recapitalization or reorganization) of Series A Preferred
Stock held by them (the "Series A Preferred Stock Liquidation Preference") plus
any declared and unpaid dividends. After payment or setting apart for payment of
the Series A Preferred Stock Liquidation Preference, the remaining assets of the
Corporation, if any, shall be distributed among the holders of the Junior
Shares. If, upon such liquidation, dissolution or winding up, the assets of the
Corporation are insufficient (after payment of the liquidation preference of any
class of preferred stock ranking senior on liquidation to the Series A Preferred
Stock) to provide for the payment of the Series A Preferred Stock Liquidation
Preference for each share of Series A Preferred Stock outstanding, such assets
as are available shall be paid out PRO RATA among the shares of Series A
Preferred Stock.
(b) MERGER OR ACQUISITION. A merger or consolidation of the Corporation
with or into another corporation or entity (whether or not the Corporation is
the surviving entity if, after the merger or consolidation, more than 50% of the
voting stock of the surviving corporation is owned by persons who were not
holders of voting stock of the Corporation prior to the merger or
consolidation), or the sale of all or substantially all the assets of the
Corporation, shall be deemed to be a liquidation, dissolution or winding up the
Corporation for purposes of this Section 3 if the holders of at least a majority
of the then outstanding shares of Series A Preferred Stock so elect by giving
written notice thereof to the Corporation at least three days before the
effective date of such event. If no such notice is given, the provisions of
Section 4(c) shall apply. The amount deemed distributed to the holders of Series
A Preferred Stock upon any such merger or
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Certificate of Designations 2
<PAGE>
consolidation shall be the cash or the value of the property, rights or other
securities received in the merger or consolidation which shall be determined in
good faith by the Board of Directors of the Corporation.
SECTION 4. CONVERSION OF SERIES A PREFERRED STOCK.
The holders of the Series A Preferred Stock shall have conversion
rights in accordance with the following provisions:
(a) RIGHT TO CONVERT AND CONVERSION PRICE. If the holders of at least a
majority of Series A Preferred Stock so elect at any time after the Original
Issue Date, all shares Series A Preferred Stock shall be converted, at the
office of the Corporation or any transfer agent for the Series A Preferred
Stock, into such number of fully paid and non-assessable shares of Class A
Common Stock as is determined by dividing $500 by the Conversion Price,
determined and adjusted as hereafter provided, in effect at the time of
conversion. The initial Conversion Price shall be $0.50 per share, and it shall
be subject to adjustment upon certain events as provided in this Section 4.
(b) MANDATORY CONVERSION. The Corporation at its option may elect to
have all the shares of Series A Preferred Stock automatically converted into
shares of Class A Common Stock at the then effective Conversion Price if the
Average Market Price at any time exceeds $5.00. All holders of record of shares
of Series A Preferred Stock will be given at least 20 days' prior written notice
of the date fixed and place designated for such mandatory conversion of the
Series A Preferred Stock. Such notice shall be sent by certified mail, postage
prepaid, to each record holder of Series A Preferred Stock at such holder's
address appearing on the stock register of the Corporation. On or before the
date so fixed for conversion, each holder of shares of Series A Preferred Stock
shall surrender such holder's certificate or certificates for all such shares to
the Corporation at the place designated in exchange for the number of shares of
Class A Common Stock to which such holder is entitled. The mechanics for
conversion and other provisions relating to conversion of Series A Preferred
Stock into Class A Common Stock and payments in lieu of fractions set forth
elsewhere in this Section 4 shall apply to the mandatory conversion of the
Series A Preferred Stock.
(c) EFFECT OF ACQUISITION ON SERIES A PREFERRED STOCK. In the event of
a merger or consolidation of the Corporation with or into another corporation or
entity or a sale by the Corporation of all or substantially all of its assets,
and in the case of successive such mergers, consolidations or sales except for
any such transactions as are treated as a liquidation under Section 3(b) hereof,
thereafter the shares of Series A Preferred Stock then outstanding shall be
convertible into the number and kind of securities of the acquiring or surviving
corporation (or such other entity whose securities are delivered in exchange for
the Class A Common Stock of the Corporation) to which the holders of the Series
A Preferred Stock would have been entitled if such holders had converted their
Series A Preferred Stock into Class A Common Stock or the common stock of any
successor to the Corporation upon the consummation of such sale, merger or
consolidation; and, in such case, appropriate adjustment (as determined in good
faith by the Board of Directors) shall be made in the application of the
provisions in this Section 4 and Section 5 with respect to the rights and
interest thereafter of the holders of the Series A Preferred Stock,
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Certificate of Designations 3
<PAGE>
to the end that the provisions set forth in this Section 4 and Section 5
(including provisions with respect to changes in and other adjustments of the
Conversion Price) shall thereafter be applicable, as nearly as reasonably may
be, in relation to any shares of stock or other property thereafter deliverable
upon the conversion of the Series A Preferred Stock.
(d) MECHANICS OF CONVERSION. No fractional shares of Class A Common
Stock shall be issued upon conversion of Series A Preferred Stock. In lieu of
any fractional share to which a holder of Series A Preferred Stock would
otherwise be entitled, the Corporation shall pay cash equal to such fraction
multiplied by the then effective Conversion Price. Before any holder of Series A
Preferred Stock shall be entitled to convert the same into full shares of Class
A Common Stock, the holder shall surrender the certificate or certificates
therefor, duly endorsed for transfer, at the office of the Corporation or of any
transfer agent for the Series A Preferred Stock, and shall give written notice
to the Corporation at such office that he elects to convert the same. The
Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Series A Preferred Stock a certificate or certificates
for the number of shares of Class A Common Stock to which such holder shall be
entitled as aforesaid and a check payable to the holder in the amount of any
cash amounts payable in order to avoid a conversion into fractional shares of
Class A Common Stock. Except as provided in paragraphs (b) and (c), such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Series A Preferred Stock
to be converted, and the person or persons entitled to receive the shares of
Class A Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Class A Common Stock
on such date.
(e) NO IMPAIRMENT. The Corporation will not, by amendment of its
Restated Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation, but
will at all times in good faith assist in the carrying out of all the provisions
of this Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Series A Preferred Stock against impairment.
(f) NOTICES OF RECORD DATE, ETC. In the event that the Corporation
shall propose at any time:
(i) to declare any dividend or distribution upon its
Common Stock, whether in cash, property, stock or
other securities, whether or not a regular cash
dividend and whether or not out of earnings or earned
surplus;
(ii) to offer for subscription pro rata to the holders of
any class of its stock any additional shares of stock
of any class or other rights;
(iii) to subdivide or combine its outstanding Common
Stock;
(iv) to effect any reclassification or recapitalization of
its Common Stock outstanding involving a change in
the Common Stock; or
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Certificate of Designations 4
<PAGE>
(v) to merge or consolidate with or into any other
entity, or sell, lease or convey all or substantially
all its property or business, or to liquidate,
dissolve or wind up;
then, in connection with each such event, the Corporation shall send to the
holders of the Series A Preferred Stock:
(A) at least 20 days' prior written notice of
the date on which a record shall be taken
for such dividend, distribution,
subscription rights, subdivision or
combination (and specifying the date on
which the holders of Common Stock shall be
entitled thereto) or for determining rights
to vote in respect of the matters referred
to in clauses (iv) and (v) above; and
(B) in the case of the matters referred to in
clauses (iv) and (v) above, at least 20
days' prior written notice of the date when
the same shall take place (specifying the
date on which the holders of Common Stock
shall be entitled to exchange their Common
Stock for securities or other property
deliverable upon the occurrence of such
event).
Each such written notice shall be given by certified mail, postage
prepaid, addressed to the holders of Series A Preferred Stock at the address for
each such holder as shown on the books of the Corporation.
(g) ADJUSTMENT FOR COMBINATION OR CONSOLIDATION OF COMMON STOCK. In the
event the outstanding shares of Class A Common Stock shall be combined or
consolidated, by reclassification, reverse stock split or otherwise, into a
lesser number of shares of Class A Common Stock, the Conversion Price in effect
immediately prior to such combination or consolidation shall, concurrently with
the effectiveness of such combination or consolidation, be proportionately
increased.
(h) ADJUSTMENT FOR STOCK DIVIDEND OR SUBDIVISION. In the event the
Corporation at any time or from time to time after the Original Issue Date shall
declare or pay any dividend on the Common Stock payable in Class A Common Stock,
or effect a subdivision of the outstanding shares of Class A Common Stock into a
greater number of shares of Class A Common Stock by reclassification, stock
split or otherwise than by payment of a dividend in Class A Common Stock, then
and in any such event, the Conversion Price in effect immediately prior to such
subdivision or stock dividend shall forthwith be proportionately reduced.
(i) RESERVATION OF COMMON STOCK. The Corporation shall, at all times
when the Series A Preferred Stock shall be outstanding, reserve and keep
available out of its authorized but unissued stock, for the purpose of effecting
the conversion of the Series A Preferred Stock, such number of its duly
authorized shares of Class A Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding Series A Preferred Stock.
Before taking any action which would cause an adjustment reducing the Conversion
Price below the then par value
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Certificate of Designations 5
<PAGE>
of the shares of Class A Common Stock issuable upon conversion of the Series A
Preferred Stock, the Corporation will take any corporate action which may, in
the opinion of its counsel, be necessary in order that the Corporation may
validly and legally issue fully paid and nonassessable shares of such Class A
Common Stock at such adjusted Conversion Price.
(j) CANCELLATION OF SERIES A PREFERRED STOCK. All shares of Series A
Preferred Stock which shall have been surrendered for conversion as herein
provided shall no longer be deemed to be outstanding and all rights with respect
to such shares, including the rights, if any, to receive notices and to vote,
shall forthwith cease and terminate except only the right of the holders thereof
to receive shares of Class A Common Stock in exchange therefor and payment of
any accrued and unpaid dividends thereon. Any shares of Series A Preferred Stock
so converted shall be retired and cancelled, and shall not be reissued, and the
Corporation may from time to time take such appropriate action as may be
necessary to reduce the authorized Series A Preferred Stock accordingly.
SECTION 5. VOTING RIGHTS OF SERIES A PREFERRED STOCK.
(a) GENERAL. Except as expressly set forth in this Section and except
as otherwise required by law, the Series A Preferred Stock shall have no voting
rights.
(b) MATTERS AFFECTING SERIES A PREFERRED STOCK. So long as any Series A
Preferred Stock shall be outstanding, the Corporation shall not, without first
obtaining the affirmative vote or written consent of the holders of not less
than a majority of the outstanding shares of Series A Preferred Stock, take any
of the following actions:
(i) amend or repeal any provision of, or add any
provision to, the Corporation's Restated Certificate
of Incorporation or By-laws if such action would
alter or change the preferences, rights, privileges
or powers of, or the restrictions provided for the
benefit of, such Series A Preferred Stock; or
(ii) authorize or issue shares of any class of stock
having any preference or priority as to dividends or
assets superior to or on a parity with any such
preference or priority of the Series A Preferred
Stock; or
(iii) reclassify any Junior Shares into shares having any
preference or priority as to dividends or assets
superior to or on a parity with any such preference
or priority of the Series A Preferred Stock.
(iv) declare any dividend or distribution upon any class
of its stock (other than a stock split or reverse
stock split of the Series A Common Stock into a
greater or lesser number of shares of the same
class), whether in cash, property, stock or other
securities, whether or not a regular cash dividend
and whether or not out of earnings or earned surplus;
or
(v) repurchase or redeem any class of its stock.
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Certificate of Designations 6
<PAGE>
(c) SPECIAL VOTE FOR LIQUIDATIONS. The Corporation may not liquidate,
dissolve or wind up if the assets of the Corporation then available for
distribution to its stockholders shall be insufficient to pay the holders of
shares of Series A Preferred Stock the full amount to which they shall be
entitled upon such liquidation, dissolution or winding up under Section 3(a)
without the prior written approval of the holders of a majority of the then
outstanding shares of Series A Preferred Stock. In the event such approval has
been obtained, and the amount distributed to holders of Series A Preferred Stock
shall be less than the full amount provided under Section 3(a), the holders of
Series A Preferred Stock shall share ratably in any distribution of assets
according to the respective amounts which would be payable with respect to the
shares held by them upon such distribution if all amounts payable on or with
respect to such shares were paid in full.
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Certificate of Designations 7
